Does Private Property Exist in Russia?

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Andrei Zaostrovtsev asks this very pointed question in his article for, “Privatisation, but No Private Property.” After the fall of the Soviet Union in 1991, many of the state-owned industries were reorganized and sold off to investors by the state, many of these investors becoming very rich off of their purchase of Soviet capital equipment and factories at fire sale prices. This gave rise to the now well-known phenomenon of the Russian oligarch. Privatisation was a means of converting the state-owned economy into a normal, market-based economy within a short period of time and was a part of the program of ‘shock therapy’ intended to achieve this in Russia in as little time as possible. ‘Shock therapy,’ an economic theory championed by Milton Friedman and Jeffrey Sachs, posits that government intervention in an economy produces chaos and that immediate withdrawal of subsidies and government currency, price and wage controls leads to a better economic environment and thus recovery. While this has arguably worked well in some places, in Russia, ‘shock therapy’ did not go as well as hoped and led to chaos and collapse of much of the economic system. Andrei Zaostrovtsev defines property ownership as one’s unfettered ability to dispose of a material thing as one sees fit. Using this definition, he describes state-property as merely property controlled directly by some organ of government and argues that, at the end, all property in Russia is in a way still state-property because Russia’s autocratic system distorts the economy in such a way as to prevent the emergence of new property holding classes. Zaostrovtsev argues that the state has socialized the individual and thus there is no need for the state to socialize the individual’s property. He uses the term ‘strongmen’ (siloviki) to describe the cabal that rules Russia and he describes the ‘party’ that controls Russia as being of a bureaucratic rather than a political nature. Because of the lack of social mobility, prospects for developing an independent and liberal civil society are slim. This worries Russia prognosticators because without sustainable, real growth the structural problems which undermine Russia’s economy will persist and its demographic woes will continue to grow.