The American Interest
Policy, Politics & Culture
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Neo-Feudalism Explained

The flight of the best and brightest from Russia is no accident.

Published on March 1, 2011

Many Western experts today portray Russia as a country spiraling down into totalitarianism, slowly (or not so slowly) following the path of the Soviet Union, whose authoritarian regime crumbled under growing pressure from an emerging civil society. Prevailing opinion attributes this authoritarian U-turn to the nature of the contemporary Russian political elite. Members of this elite (as argued by many Western analysts, including Ian Bremmer) are recruited disproportionately from the so-called siloviye structury, that is, the law-enforcement bodies and security services, which trace their roots to the Soviet-era military and secret services.1 These assumptions join to offer what is on balance a rather optimistic read of Russia’s mid- to long-term prospects: Either Russian civil society will re-awaken and save the day, as it supposedly did in 1989–91, or the current elite will grow old and leave the stage. Either way, positive change is on the horizon.

Unfortunately, all of these assumptions are wrong. Contemporary Russia is not a candidate to become a Soviet Union 2.0. It is a country in which citizens have unrestricted access to information, own property, leave and return to the country freely, and develop private businesses of all kinds. Of course, severe restrictions in the political sphere remain in place, and the country, as President Dmitry Medvedev himself recently said, “only to a certain extent, not fully”, meets the standards of democracy.

Clearly, this arrangement—economic freedom coupled with political constraint—does not please everyone. To the standard American mind it suggests that something has got to give. This, too, is wrong. Some Russians do give voice to dissatisfaction with the current regime and the widespread abuse of power by police authorities, local officials and oligarchs closely connected with the ruling bureaucracy. Yet the system seems fundamentally solid and durable. Its strength emanates from a basic principle: It is much easier for subjects to solve their problems individually than to challenge national institutions collectively. This is because what Westerners would call corruption is not a scourge of the system but the basic principle of its normal functioning. Corruption in Russia is a form of transactional grease in the absence of any generally accepted and legally codified alternative. Taken together, these transactions well describe a form of neo-feudalism. This should not be terribly surprising to the historically aware, for that was more or less the stage that Russian socio-economic development had reached when it was frozen by more than seventy years of Communist rule. It has now thawed.

The system works, too, in its own way. Built under Vladimir Putin, Russia’s “power vertical” provides a mechanism for the relatively simple conversion of power into money, and vice versa. At every level of the hierarchy a certain degree of bribery and clientalist parochialism is not only tolerated but presupposed in exchange for unconditional loyalty and a part of the take for one’s superiors. The system is based on the economic freedom of its citizens, but cautious political restrictions on these freedoms generate the wealth of the biggest beneficiaries. There is a cascade of floors and ceilings to the restrictions on freedom, so it is a feudalism with more levels than the old kind. But it works fundamentally the same way: The weak pay tribute “up”, and the strong provide protection “down.”

The Russian system cannot exist without economic freedoms, and that is why there will be no second coming of the Soviet Union. But the system deeply fears political freedoms, which are incompatible with its feudal perspective. Thus Russia will not soon look like any country in Western Europe or North America. It will not collapse, and it will not radically evolve. It will simply be. And what hope the future supposedly holds will resemble the wry Stalinist joke that the horizon is a far-off place that continues to recede as you approach it.

In these times, even a stable system, so it is said, needs to move forward just to stay in place. Thus many believe that the current Russian normalcy cannot long endure. President Dmitry Medvedev, who sincerely calls these days for modernization, gives us one of the rare instances of an adequate assessment of the existing threats. He seems to understand that the factors currently ensuring Russia’s stability are incapable of breathing into it the innovative spirit needed to survive in turbulent times. But with Putin’s shadow hanging over him, Medvedev can convince neither the inner circle of the bureaucracy nor the general public that the threats he has identified are real and dangerous. Without their support, he has nothing and nowhere to lead.

In any event, Medvedev is mistaken to think the system cannot long remain stable, even if he is right to see that it can never thrive. Russia is not a dictatorship but a relatively free country where the current regime rules more by consensus than repression, and where no serious threat to the regime seems likely. A largely non-developing system suits Russian citizens well enough compared to what they suppose are the available alternatives. Tell them that the system may collapse and they are not as perturbed as one might suppose. As the historian Joseph Tainter once noted, “What may be seen as decline by observers . . . need not be to the bulk of the population [for whom] collapse is not intrinsically a catastrophe, but a rational economizing process that may well benefit much of the population.”2 After all, even in feudal times, lords sometimes fell and peasants engaged in the spontaneous redistribution of wealth.

Even less relevant to Russia’s future is the idea that Soviet-era KGB officials are responsible for the shortcomings of the contemporary Russian political system. Proponents of this view neglect two facts.

First, they forget that the quasi-authoritarian “superpresidential” Russian political style arose in the “democratic” period of the mid-1990s, when then-President Boris Yeltsin forcibly dissolved the legitimate Parliament and pushed through a new constitution under which the powers of the President were not balanced by any restraints. Indeed, his status resembled that of the Führer of the German nation as it was determined by the Ermächtigungsgesetz of March 23, 1933. Later, Yeltsin’s inner circle orchestrated his victory in the 1996 presidential elections. This derailed the country from the natural path of alternating power between liberal and socialist politicians that, however improbably, led Eastern Europe to its often anxious but successful development in the 1990s and 2000s. From that time on, the idea that “there is no alternative” to the current leader or to his chosen successor has become a vital part of Russian politics. It has nothing whatsoever to do with the remnants of the KGB roster.

Second, they forget that the military and security services backgrounds of a large part of the Russian elite are not in and of themselves signs of democratic decline. Many of those in the ranks of the security services were competent and honest people. Those outside Russia have forgotten that, for several critical decades, the KGB elite was the most forward-looking group within the decaying Soviet Union. The real problem is not the one posed by the siloviki but by “negative selection”—the way that both former democrats and their adversaries recruited new members to the elite.

The Putin phenomenon reflects the fact that Russian leaders of the 1990s preferred a mediocre officer with no noteworthy achievements to become the new President instead of, for example, experienced if imperfect men like Yevgeny Primakov and Yuri Luzhkov, both of whom were quite popular at that time. The rise of Putin, who barely progressed to the rank of lieutenant colonel in Soviet times and who later became famous only for his corrupt businesses in the St. Petersburg city hall, became typical of personnel choices in the 2000s. Inefficient bureaucrats by the hundreds recruited even less able people to occupy crucial positions in their ministries and committees, content in the knowledge that such mediocrities could not compete with or displace them. As a result, Russian governance suffers today less from a “power oligarchy” than from a dictatorship of incompetence.

Several cases should suffice to demonstrate this “negative selection” problem. Sergei Ivanov is a professional spy who was dispatched for service to London in 1981. After several years, he was sent to Finland (not as a reward for great achievement, as one can imagine), and then to Kenya, where his work resulted in a general undoing of the Russian intelligence network in east Africa. Today, he proudly serves as Deputy Prime Minister in Putin’s government. Or consider Boris Gryzlov, a former engineer who became famous for inventing filters that allegedly could purify water from any type of contamination, even from radioactive particles. (A Russian Academy of Sciences investigation of the filters showed no beneficial effect from their use.) In 2001, he was appointed the Interior Minister, and in 2003 he was “elected” Chairman of the state Duma, the lower chamber of parliament, where he became famous for his opinion that “the Duma is not the right place for debates.” The current Defense Minister, Anatoly Serdyukov, was the director of a furniture store until 2000 and can hardly differentiate a destroyer from a tugboat. And the list goes on…

Such officials often try to disguise their ignorance by acquiring doctorates or professorships while in office. It is hard for Americans to imagine such a thing, but Serdyukov, who got a college diploma in economics through a long-distance education program in 1994, got his doctorate in economics in 2000 and became a full professor in 2006 while serving as Russia’s tax minister. Today, there are 71 professors among the 450 Duma deputies. (There were none in the 110th U.S. House of Representatives, and only three in the 17th German Bundestag.) The essential feature of the current Russian political elite is one of complete ignorance, intricately if poorly disguised beneath a veneer of scientific degrees. Russia would be only too lucky to be under security-services rule.

As it is, however, no-names continue to come from nowhere to achieve unprecedented success and high-ranking positions. All that they are truly capable of doing is stealing public funds, taking bribes and genuflecting before masters almost as incompetent as they are. Russia has raised the phenomenon of negative selection to heretofore unseen heights. This fact, more than any other, explains its abysmal performance and gives us some basis for forecasting its evolution.

Implications

Clearly, Russia’s current political elite is dramatically less competent than the Soviet bureaucratic class used to be, but signs of its de-professionalization can be found throughout society. Today, only 14 percent of those graduating from Russian universities specialize in engineering. In Germany it is 29 percent, and in China it is close to 42 percent. Because of the lack of professional credentials, careers are made mostly due to personal relationships; experience and performance really don’t matter. The CEO of Gazprom, Alexei Miller, had no experience in energy businesses when he was appointed to the top position in the company. Even with gas prices soaring, Gazprom’s production fell from 523.2 billion cubic meters in 2000 to 461.5 billion in 2009. The CEO of Rosatom, former Prime Minister Sergei Kirienko, has no experience in the nuclear sector. Only one of the 11 new nuclear reactors he promised to install in Russia when he was appointed in 2005 has been put into operation.

What does the galloping de-professionalization of the Russian elite actually mean? Lately, it has meant that becoming a lifelong bureaucrat is extremely popular. That’s where the money is.

Russia’s de-professionalization has coincided with vastly increased cash flows into the Russian economy, largely caused by rising oil prices. Federal budget revenues rose from 1.2 trillion rubles in 2001 to 8.2 trillion rubles in 2008, and the ruble rose versus the dollar, from 29.5 to 24.9 rubles per one dollar. This allowed the Russian bureaucracy to increase the amount of wealth it could expropriate via bribes and other unofficial benefits. According to estimates made by the leading Russian expert in corruption, Georgyi Satarov, the overall amount of bribes in the Russian economy skyrocketed from $33 billion to more than $400 billion per year during Putin’s rule.

Two profound trends have followed from this state of affairs. The first is that government service has become increasingly attractive for those young people not among Russia’s best and brightest. The average age of a police colonel in Russia is now 42; in the late Soviet period it was 57. The average age of an officer in the tax police is less than 33 years. Among the graduates of one of the most Westernized universities in Moscow, the Higher School of Economics, 88 of 109 students who enrolled in courses I taught in 2008 dreamed about a career in the bureaucracy. This means that the Russian ruling class is very likely to become increasingly conservative as it grows younger and acquires more education. This thoroughly refutes the notion, common among foreign scholars, that the aging of the generation of leaders who experienced Soviet political practices may open the way for younger and more liberal leaders to come to power.

The second trend is even more obvious: Money today cannot only be “extracted” from the public service sector; it can also buy influential positions in the power elite. For example, there are more than 49 “official” U.S. dollar millionaires and six billionaires sitting in the state Duma, and 28 millionaires and five billionaires in the Council of the Federation. In contrast, Silvio Berlusconi is the only billionaire ever to win a seat in any parliament of any of the original 15 EU countries. Since the Duma and the Council of the Federation are composed of deputies handpicked by the Kremlin, one need not strain oneself to imagine how these super-rich people acquired their offices. They pay “up” with both lucre and loyalty, and they are protected “down”—a hallmark of feudal social exchange. At the same time, the majority of Russian ministers are trying to convince ordinary citizens that their average official income is less than $100,000 a year. Whether or not anyone believes them, there are no indebted Ministers or bankrupt Governors to be found in the country these days.

One can see two interesting developments in Russian politics and business arising from all this. The first is a steady conversion of any successful business established in Russia since 2000 into a quasi-family enterprise. In a society with a profound lack of social trust, whom can you trust if not your own family? Patrimonialism is as institutionalized as feudalism, and, as always, each supports the other.

Everyone knows that the best land plots in Moscow have been firmly controlled by the richest businesswoman in the country, Yelena Baturina, who since 1991 has been married to the former Mayor of Moscow, Yury Luzhkov. The same may be said about the Republic of Bashkortostan, where Ural Rakhimov, the son of long-serving President Murtaza Rakhimov, has control over the oil and petroleum business. The wife of the former Health and Social Development Minister Mikhail Zurabov owned several companies responsible for purchasing medicines that later were distributed free of charge to the needy. The majority of the medicine was bought by the state at three to five times the market price. The needy were served, and the rich got vastly richer in the process. Was there ever a better example of doing well while doing good, Russian-style?

Entire families are now infiltrating government service. For example, take another look at Anatoly Serdyukov, who was Defense Minister in the government headed by his father-in-law, Viktor Zubkov, or the current Minister of Health and Social Development, Tatyana Golikova, wife of Russian Industry Minister Victor Khristenko. There are even more picturesque stories of establishing “ruling dynasties” in the “national” republics. In Chechnya, 29-year-old Ramzan Kadyrov was de facto successor to his father Akhmat, who was assassinated in 2004. Dagestan has been governed since February 2010 by Magomedsalam Magomedov, the son of Magomedali Magomedov, Dagestan’s ruler from 1983 to 2006. These patterns are repeated at all levels of authority.

But enough with stories. As one wag once said, the plural of anecdote isn’t data. What is much more important is how the Russian elite actually rules the country. They do it on the fly, with minimum feasible institutionalized rule of law, ceaseless amendments to legislation and a standing presumption of bureaucratic immunity. There have been five parliamentary elections held in Russia since its “independence” from the Soviet Union—each one took place under amended rules. The State Duma approves close to 400 new laws a year, which is six times more than the U.S. Congress. When deputies are not busy approving new laws, they are amending existing ones. As unstable as things have seemed in Washington lately in this regard, can an ordinary American businessman imagine a tax code in which a significant new article is added or an old one amended every two weeks?

Some laws are adopted and some regulations are imposed purely to destroy a particular businesses or to force its owners to turn over their companies to new chiefs. It is common practice to have the tax police or prosecutors accuse businessmen of some wrongdoing, force them to sell their business or simply flee the country. Afterwards, “more experienced” lawyers easily find cause to dispute the court decisions or government ruling, thus opening up the business again for the new owners. Similarly, if a businessman is found guilty of tax evasion or customs violations, he may be prosecuted, but the person from the tax or customs committee who signed his tax declaration remains immune from prosecution. In Russia’s most infamous tax evasion case, Mikhail Khodorkovsky and Platon Lebedev were both sentenced to prison in 2005 for not paying taxes due from 2000 to 2003. Not one tax official who supposedly checked their allegedly false tax declarations has been punished. Khodorkovsky and Lebedev’s crime was not cheating on their taxes; it was seeking to rise above their designated ceiling in the neo-feudal hierarchy.

Who Will Come Next?

Russia today is thus a type of “corporate state” in which politics is just another kind of business. Political problems are solved as if they were commercial ones, and commercial ones as if they were political. The elite’s most important goal is the preservation of a system that enables incompetents to control the country’s wealth. Hoping that change will come when the current ruling class retires and newcomers replace them is forlorn.

So what kind of leadership will inherit the Russian state? The experience of the past decade suggests that even if the existing system is vulnerable to many external pressures, enough broadly based social groups inside the country benefit from it to keep it going. Ever more people seem willing to join these groups in order to get “their” share of wealth with minimal sacrifice, effort and risk. Under such circumstances, there are various ways of incorporating new members into the current elite without any significant challenges to its power.

Many new recruits will come from Russian colleges and universities. Here several recent trends stand forth. First, Russian higher education today is disproportionately focused on social sciences. This is not a bad thing in itself, but the teaching staff is outdated and inadequate, so the quality of study is very low. Sometimes professors and tutors simply give students their own vision of the situation, and these views are often ideological or expressions of loyalty to the ruling class.

Moreover, some representatives of this class who have never taught before are now becoming deans and chairs of newly established faculties and departments in embarrassing numbers. In the best Russian university, Lomonosov Moscow State University, there were only 17 faculties when I graduated in 1989. There are now 39, and among the new ones you can find the Faculty of World Politics, headed by Duma deputy Andrey Kokoshin, the Faculty of Public Administration, headed by the government’s new Chief of Staff Vyacheslav Volodin, and the Higher School of Television, chaired by ultraconservative columnist Vitaly Tretiakov. All three, of course, are functionaries of the United Russia Party. The rector of the university is, by the way, a member of the United Russia Moscow regional council.

In addition, the system of enrollment has changed dramatically in recent years. Instead of the colleges holding exams, there is now a Unified State Exam, which enables even people from remote provinces, whose high grades are often of dubious provenance, to gain easier access to the metropolitan colleges. These youngsters, virtually from the middle of nowhere and with a very bad secondary education, must compete with their much better prepared colleagues from big cities. Of course, they realize immediately that political loyalties can help them in this unequal competition, which sets the stage for yet another form of feudal exchange.

Today, too, only a small fraction of students can survive on their parents’ stipend money. The majority of young people work during their studies, and they usually work in new Russian companies organized in a Western, hierarchical manner, with traditions of discipline and rationalization of every function (not to mention an unimaginable amount of paperwork). Opportunism in such an environment can seem the only rational course. So the graduate from a small and remote town, who was taught by non-professionals, who is deeply impressed by metropolitan luxury, and who worked for a couple of years in the office of a company that produces virtually nothing, finds himself to be the best possible recruit for the lowest branch of the new Russian elite. With such rural-to-urban people “produced” by the system every year in large numbers, the current regime may feel quite secure in the knowledge that it can absorb nearly all potential troublemakers.

Another reserve of personnel for the elite may originate from the ranks of Russian “enforcement” organs. (Only with a sense of irony can we label these “law-enforcement” agencies.) Under Putin they became strong and multiplied. Today, there are more than 200,000 professional military officers in the country on active duty. Around 1.1 million soldiers serve on the staff of the Interior Ministry; more than 300,000 serve inside the Federal Security Bureau; around 200,000 work in prosecutors’ offices; and another 150,000 in different investigative committees. Close to the same number work for the tax police; and more than 100,000 serve in the Customs Committee and in the Federal Migration Service. We won’t mention smaller organizations like Anti-Drug Administration and many others. In total, more than 3.4 million people—close to 12 percent of the active male workforce—are employed in organizations that hew to the principles of vertical organization, unquestioning obedience and deeply rooted corruption.

These services are very inefficient. There was no decrease in the number of crimes reported in Russia from 2000 to 2009, terrorist attacks in Russian cities continue, and no more than 4 percent of the drugs traded in Russia or moved through its territory are intercepted by police. So these agencies turn to dissimulation on a massive scale. Every year, the FSB reports on hundreds of thwarted terrorist attacks, but these reports remain classified, so we cannot determine the real effectiveness of the security services. Note that about 89 percent of all cases of murder and grievous bodily harm reach the courts, while for economic crimes the rate reported by official statistics is only 9.8 percent. This suggests that many of the other cases end up being settled by “friendly” corruption deals between policemen and entrepreneurs. The average amount of a bribe offered to a traffic policeman hovers now at about 2,000 rubles (about $70). Getting a job as such a “man of duty” usually costs up to $50,000, even in provincial cities. The most common popular attitudes toward the police are distrust and hatred. Even in the famous case of Kuschevskaya village in Krasnodar region, where 12 people were found stabbed in November 2010 and where a gang had terrorized and raped locals for more that ten years, no one appealed to the police, since some policemen and even a few United Russia deputies were among those suspected of the crimes. These “enforcement” agencies, stuffed with young people with no merit but capacious ambition, are the proximate source of newcomers to Russia’s ruling class.

The most natural source of the new ruling class, as I have already suggested, is the progeny of the present one. Sons and daughters of top officials actively insinuate themselves into government bodies, as well as into the staff of big state-owned and state-controlled corporations. For example, Dmitry Patrushev, the eldest son of Nikolay Patrushev, the Director of the FSB from 1999–2008, was in May 2010, at the age of 32, appointed as the CEO of state-controlled Rosselkhozbank, the fourth largest bank in Russia. Sergei Matvienko, son of Valentina Matvienko, the Governor of St. Petersburg, is now chairman of VTB-Development, the real estate branch of the state-owned VTB Bank and, at the age of 37, is one of the youngest Russian billionaires. Sergei Ivanov, son of the aforementioned Deputy Prime Minister, had just turned 25 when he was appointed vice president of Gazprombank, Gazprom’s financial arm, and so on. One can be sure that the children of the current top Russian bureaucrats will occupy at least a third of all significant positions in government and management in ten to 15 years. And it is clear that none of them will have the slightest incentive to change the system. They will strongly oppose any change so that they may favor their children. They are the barons in the new feudalism, and their children are to the manor born.

The least obvious source of recruitment comes out of the newly established strategy of incorporating members of the “intellectual strata” that was abandoned in the 1990s and in the first half of 2000s. The so-called expert community, consisting of economists, social scientists, historians and journalists, has been fractured for years. The vast majority of leading commentators and researchers remains unaffiliated with the big regime-supported think-tanks. Nevertheless, it may be easy to recruit a good portion of this community into different kinds of lighter-handed government-controlled programs and initiatives. The lure of opportunities to present their views, appear on television, attend official gatherings and get access to funds distributed by the central or local authorities may prove irresistible in light of the paucity of alternatives. Step by step, the ruling class can whittle away any possible opposition.

What about Russia’s best and brightest? What future do they have in a neo-feudal Russia? During the Putin years, government officials made it ever more difficult for liberal young people to engage in any form of legal protest activity. No new political party has officially registered itself in the Russian Federation since the beginning of the 2000s (the two that have been registered, Just Russia and Right Cause, represent a mere allocation of smaller parties that existed previously). Organizing a referendum requires the collection of two million signatures, and even if this requirement were met, most would be declared invalid. All but one regional legislative assembly is controlled by the United Russia Party. At the same time, the government still allows people to leave the country freely. This is no accident. The scale of the outflow of the most talented young prospective professionals from Russia is almost beyond belief. The numbers are not known exactly, but estimates run as high as 40,000–45,000 per year, and about three million Russian citizens today are expatriates in the European Union.

This outflow clearly increases the “density” of mediocrity left inside the country. President Medvedev realizes how dangerous this trend may become and wants to stop the flight by establishing “extraterritorial” scientific centers like Skolkovo, which may evolve into a Russian equivalent of Silicon Valley. This effort is likely to fail—first of all because the Russian authorities now try to attract foreign scholars and those Russians who have already left the country by offering them very high salaries, not taking into consideration the fact that this may also attract those who perceive science more as a commercial activity than a noble quest. Andre Geim, who was awarded the Nobel Prize for physics last year, has said that he would never return to Russia. This is a very clear sign of what is happening to the country.

All of this leads to two related conclusions. On the one hand, Russia has built a system in which the execution of state powers has become a monopolistic business. It is controlled mainly by friends and colleagues of the system’s creator, Vladimir Putin, and faithfully operated by the most dutiful and least talented newcomers. All big national business is associated with the federal authorities or controlled by them; local entrepreneurs still try to bargain with regional bureaucracy. All of the new fortunes made in the 2000s belong to Putin’s friends and people who helped him build this “negative vertical.” Therefore, in the coming years, competition inside the elite will diminish, the quality of governance will deteriorate further, and what is left of effective management will collapse. Yet to change these trends would nevertheless be a totally illogical step for the political class.

At the same time, a huge social group wants to join this system, not oppose it (in contrast to the final years of the Soviet Union). In a way, this is like wanting to join a Ponzi scheme at the bottom in hopes that one may not stay at the bottom, and that in any event one will be better off than those left outside the scheme altogether. As the de-professionalization of government advances (along with the “commercialization” of state services) competition among non-professionals will grow, since these have never been in short supply. Therefore, in the future a less internally competitive ruling elite will be able to co-opt any number of adherents.

The Russian elite has essentially “piratized” and privatized one of the world’s richest countries. It is so grateful for this privilege that it may insist on Mr. Putin’s return to the Kremlin in 2012 for 12 more dismal years. By then the young liberal cohorts on whom so many Western analysts pinned their hopes for change will have grown up. The mediocre among them will be part of the system. Most of the best of them, no doubt, will no longer reside in Russia.



1See also “Russia under Putin: The Making of a Neo-KGB State”, Economist, August 23, 2007.
2Tainter, The Collapse of Complex Societies (Cambridge University Press, 1988), p. 198.

Vladislav L. Inozemtsev is director of the Moscow-based Centre for Post-Industrial Studies, professor at the Moscow School of Economics and editor-in-chief of Svobodnaya mysl’ (Free Thought) monthly.