The evolution of business – state interaction in Russia: From state capture to business capture?

Abstract

This article discusses two basic strategies of Russian companies—isolation from, and close cooperation with the state. The author analyses several ways in which companies realise these strategies, drawing analogies with the ‘exit’ and ‘voice’ strategies suggested by A. Hirschman. It is shown that under the conditions of a weak state these strategies lead either to an expansion of the shadow economy or to ‘state capture’. Both the privatisation of the state and the lack of its privatisation result in budget crises as well as drastic social and political shocks, leading to calls for a ‘strong hand’ in the business community itself. However, as there is little political competition and the mechanisms of democratic control are weak, state consolidation takes place as a bureaucratic consolidation accompanied by new opportunities for informal ‘business capture’ by the authorities. Nevertheless, the high degree of openness of the economy and the remaining heterogeneity of political actors provide business with a wide range of possible strategies of interaction with the state. This article explores how these strategies are becoming more formal and public compared to the 1990s. Strategies of isolation from the state now take place as legal strategies of internationalisation. Cooperation strategies, on the other hand, currently seem to be more efficient when switching from the traditional lobbying of private interests to more rational and collective actions aimed at providing the necessary conditions for sustainable economic development.