Streetwise Professor

December 16, 2009

A Parasitical Perspective

Filed under: Economics,Politics,Russia — The Professor @ 7:40 pm

This article from the Moscow Times makes the point, by now familiar to SWP readers, that Russia’s inability to precommit not to expropriate and exploit foreign investors will hamstring its efforts to modernize:

But whatever hopes that Russia’s leaders might hold, the lines between commerce, state bureaucracy and law enforcement continues to be blurred. This makes it impossible to give investors any reliable guarantees. Even when Western corporations believe that they can still make a profit despite the lack of legal guarantees, injustices such as the death of corporate lawyer Sergei  Magnitsky will cause many Western investors to think twice before they increase their Russian exposure.

But it makes a more interesting point, more indirectly than directly.  Namely, that Russia’s economic mindset, and even Medvedev’s modernization strategy, is fundamentally parasitical.  It is based on taking what others develop.  The concept of reciprocity is utterly absent:

One passage of his state-of-the-nation address hearkens back to an earlier speech and also sheds some light on Medvedev’s understanding of pragmatism. He said: “Our relations with other countries should also be focused on the task of modernizing Russia. … We are interested in capital inflows, new technologies and innovative ideas.” Further, the president said the results of diplomacy should be reflected “not only in the form of specific assistance to Russia’s companies abroad and efforts to promote national commercial brands … but it should also be designed to increase the volume of foreign investments we attract and, most important, the influx of new technologies.”

. . . .

Medvedev has referred to the West several times as a rich source of investment and technology — a “reservoir” from which Russia can tap the “intellectual resources of post-industrial societies.” It is clear that the task of making Russia an integral part of that reservoir cannot be compromised based on political factors. The political focus on values, which until recently was the basis of relations with the West, has clearly ended.

. . . .

The third reason is historical. It is noteworthy that Medvedev referred to the modernization programs adopted by Peter the Great and Josef Stalin, both of which were based on using the West as a reservoir. This approach rationalizes relations with the West, lessens the ideological and emotional components and reduces them to a purely commercial basis. In his “Go, Russia!” article, Medvedev stated, “The issue of harmonizing our relations with Western democracies is not a question of taste, personal preferences or the prerogatives of given political groups.”

. . . .

Russia’s “reservoir philosophy” is aimed at using the resources of the West to boost technological and economic modernization. The problem is that it does not set social modernization as its goal. Russia needs social modernization most of all — without which all attempts of achieving technological modernization are bound to fail.

This parasitism is of a piece with the lack of any compunction against expropriation.  It is predicated on a fundamental misunderstanding of the true source of enduring, successfully, mutually beneficial commercial and social interaction: reciprocity based on an exchange of value for value.

The historical analogies mentioned in the article (Peter I and Stalin) also reveal that this is something that has been tried before; resulted in a burst of development (on some, rather limited, dimensions); but which failed miserably to create the conditions for enduring, self-sustaining and self-generating modernization and progress.  Thus, by casting back to models of the past that have already proved to be limiting and inadequate, even the most (at least superficially) progressive individual among Russia’s leadership betrays a limited imagination, and an even more limited understanding of the true sources of organic economic progress.

The absence of property rights and the rule of law, and the inability of the state to commit to letting people enjoy the fruits of their labors, creativity, and investment does not just stifle foreign investment.  It also stunts the economic progress and initiative of Russia’s own citizens.

If Medvedev wants modernization, he needs to escape the narrow minded materialism that clearly dominates his thinking.  He needs to escape the delusion that foreign capital or ideas will transform Russia.  He needs to recognize that a revolution in institutions is necessary.

And there’s the rub.  The article notes that Medvedev’s initiative is intended to depoliticize commercial relations with the West.  But the transformation that Russia needs, both internally and in its relations with the rest of the world, is fundamentally political.  It must rest on a complete revolution in the relation between the citizen and the state that gives individuals (and the businesses that individuals form) the confidence that their efforts and property will be protected.  Only then will Russia be able to modernize on its own–and contribute to modernity outside its borders.  A dysfunctional combination of predatory and parasitical relations with its citizens and the world will only doom Russia to continued second- or third-rate status economically, socially, and politically.

What Russia needs to “borrow” or “adopt” is not machinery (done that–to no lasting effect), or technology (done that-ditto), but a mindset and a set of institutions.  But that will never happen, at least under the current regime, for these ideas and institutions are inimical to the predatory, parasitic system that regime has constructed.

A clarification (17 December, 2009).  Not that I am optimistic that a healthy revolution or even evolution in the relation between citizen and state is likely.  The development of the necessary institutions is historically the exception, rather than the rule.  That’s why these metaphors (and variations on the theme) keep reappearing in what I write about Russia: purgatory, Sisyphus, and the hamster wheel from hell.  Suffice it to say that Medvedev’s parasitical model of modernization, with its (ultimately failed) historical precedents, will almost certainly fail to achieve anything lasting.  Doing the same thing repeatedly, and expecting to get different results, is nuts.

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  1. Russia: Nation of Parasites.

    Perhaps a fitting epitaph when it collapses (yet again).

    Comment by La Russophobe — December 18, 2009 @ 1:57 pm

  2. Institutions follow when means of production necessitate them. Otherwise you get Liberia.

    Comment by So? — December 18, 2009 @ 6:45 pm

  3. Doing the same thing repeatedly, and expecting to get different results, is nuts.

    No, it’s genius. Russia is a nation of geniuses.

    You have to fail a lot before you can succeed.

    Comment by Sublime Oblivion — December 18, 2009 @ 8:38 pm

  4. The true genius learns from others’ mistakes, and then avoids them.

    Whatever gets you through the day, S/O.

    The ProfessorComment by The Professor — December 18, 2009 @ 9:13 pm

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