Streetwise Professor

I’ve been pondering the phrase “velvet privatization” in the Shvartsman interview. My first take is that it is a double dose of double speak: both words mean the exact opposite of what they are intended to describe. There is certainly nothing “velvet” about the process; it is all iron fist, no velvet glove. And on the surface, what is going on is not privatization, but its opposite: re-nationalization.

But upon further consideration, the “privatization” part may in fact hit the nail on the proverbial head. For what is going on seems to be the use of the coercive power of the Russian state to direct immense resources into the hands of private parties who pull double duty as government officials and company managers and directors. In other words, what is doublespeak is to refer to what is going on in Russian resource industries as “nationalization.” The state is merely a middleman by which the transfer of massive wealth from one group of private individuals to another is effected.

This can be seen as a modern incarnation of Muscovite patrimonialism, in which everything is the property of the ruler, and where the state and its bureaucracy is just a creature of the patrimonial ruler. As in Russia of old, in other words, everything is privately owned–by the ruler. The only questions are: how much of his property does the ruler let you use?; for how long?; and what do you have to do for him in exchange? In the resource sectors, the answers are increasingly: not much; not long; and a lot.