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Russian Style Capitalism

Monday, 12th May 2008

James highlights the way in which a majority of Russians believe that criminal and political connections determine your ability to do business there, with only 20% thinking that talent matters.

As your resident expert in doing business in Russia (I've been doing so since 1991 and still plugging along) I have to say that I'm amazed. Who are those 20% with that very odd belief that criminal and political connections are not necessary?

Here's how it works. When you think of entering into business over there you need to make your most important decision. Who is going to be your "roof", your "krisha"? This isn't quite the same as asking which mafia you're going to go shooting competitors with: it's the decision about who is going to be the rent seeker that feeds off your business while doing two further things. Firstly, protecting you in some manner from those others who would do so and secondly, providing you with guidance through the bureaucratic maze.

Now note that this krisha can be an entirely legitimate arrangement, fully on the up and up and with no bribery or corruption either implicit or explicit. McDonalds, for example, is, at least in Moscow itself, a partnership with the Moscow City Government. Our own roof has been for many years a scientific institute: we pay them an exorbitant rent for office space but are thus part of the family and can get on with things.

Yes, others do indeed get into bed with those of less than purest white reputation, but without that, well, protection might not be the right word, partnership (perhaps?) you'll really not get anywhere. I know sefveral people who have partnered with the Ministry of the Interior and they've not had to complain about that.

One thing that rather amused me a few years back (and believe me, the point was not lost upon Russians) was when Viktor Chernomyrdin was running for Prime Minister. As so often happens, a new party was created for this called "Nash Dom Rossiya", Our Home is Russia (or possibly Russia's Home).

Russians have long used certain hand signals to imply certain concepts which were better not explained out loud. An open hand to the top of the head, palm down upon the scalp indicated Gorbachov ("Splotchtop"), the stroking with the fingers of imaginary bushy eyebrows, Brezhnev, patting an imaginary fat stomach "capitalist" and so on.

For krisha the hand signal was to place the hands together upright, tips of fingers touching, palms apart. Yes, a roof, pretty simple to understand.

And in the election posters for our new political party, how was Chenomyrdin holding his hands? Yes, just like that. You could of course read it as a canny appropriation, a way of putting forward the idea that he and his party were every Russian's protectors.

Or rent seekers, as you wish.

But that is how the game is played.