In recent months, the owners of large pieces of Norilsk Nickel, Oleg Deripaska and Vladimir Potanin have gone to the mattresses for control of the company. In response, Don Putin has felt compelled to fly to Norilsk in what is seen as part of a move to resolve the dispute. (And given what an ecological hellhole Norilsk is, you can be sure he isn’t going for the sights or the fresh air and waters.)
Although control contests are not unknown in the US or Europe, it is unheard of to see the head of government involved in resolving them. That’s the role of the markets and the courts.
And it is the very absence of active markets and reliable courts that mean that Putin is needed to arbitrate and resolve these kinds of disputes. Putin effectively recognizes this:
Commenting in 2008 on a shareholder conflict in the Russian subsidiary of the British oil major BP (BP.L) TNK-BP, where BP and a trio of Russian-born billionaires held 50 percent stakes, Putin said equal ownership did not work.
“I told them: ‘Don’t do it. Agree to one of you having a controlling stake,’” Putin said at the time.
In the absence of a controlling shareholder, in Russia business disputes resemble scenes from the Godfather or the Sopranos more than the kinds of business conflict you see here in the states. And the institutional response in Russia is exactly analogous to the one that mafioso have evolved in Sicily and the US: to appoint a capo di tutti capi to knock heads when the capi fight over turf. His job is essentially to ensure that rents and power are distributed in a way that mitigates the potential for conflict, and to crush those who threaten to destabilize the system.
This is part of the reason why Russia is doomed to economic stasis, at best. This kind of system cannot readily deal with change that upsets the balance of rents and factions. So dynamic forces have to be suppressed. In a system like Russia’s, creative destruction is impossible. There’s only destructive destruction.
And that’s the best case. Worse cases are not improbable, and really bad. In particular, if for any reason–death, incapacity, or just declining capacity–the capo di tutti capi can no longer function effectively, everyone goes to the mattresses in a war of all against all. So stasis–Putin’s economic purgatory–is preferable to the most likely alternative. Internecine warfare is the most likely alternative because the more civil, humane, and productive alternative–the creation of institutions that support markets and the constructive resolution of disputes–is devilishly hard, especially so since those who would have to lead (or at least consent to) the creation of these institutions would lose wealth and power as a result. I think that the widespread recognition of these conditions also explains popular support for Putin, or at least a good deal of it. If you take for granted that the system is essentially mafia-like, you want a good capo that can maintain equilibrium. And whatever you might say about him, Putin plays the role quite well.