It had to happen sooner or later. The first bill on nationalization has been submitted to the State Duma. That such a bill would appear in Russia only after similar legislation was introduced in Britain and the United States might seem paradoxical, at least at first glance. After all, Moscow officials would rather die than be accused of an attempt to revive communism. This is especially true of senior government officials in the "economic bloc" whose job is to please investors. In recent years, the less liberal Moscow’s political regime has become, the more effort officials have had to make to demonstrate Russia’s supposed adherence to economic liberalism.
Yet the crisis has a way of dictating its own laws, turning the commonly held understanding of what is economically right and wrong on its head. The former liberal belief in the supremacy of the free market and the sacredness of private ownership has given way to the hope that the state can step in to save struggling businesses.
The nationalization of failing businesses has become an unavoidable necessity. But these decisions are dictated by pragmatism and politics, not ideology. Governments all over the world have been forced to shift major companies and even entire economic sectors onto government balance sheets.
The story of Pikalyovo, a town of 22,000 people outside of St. Petersburg, provides a vivid illustration of this theory. When the city’s BaselCement factory suddenly became unprofitable, it was shut down, forcing 4,000 people out of work. Because local residents stopped paying their utility bills, authorities shut of the hot water. Two other factories also closed or suspended operations.
The people were desperate. They stormed the local government building and blocked the main road between St. Petersburg and Vologda. Moscow’s answer came only one day later: United Russia introduced a bill in the Duma calling for the nationalization of Pikalyovo’s companies.
In the end, however, the government decided not to nationalize the companies in Pikalyovo for now but to scare their owners with the threat of nationalization. After hearing Prime Minister Vladimir Putin’s threats, the company owners promised to allocate funding.
Although these fist-pounding methods make for great television drama, they won’t solve the fundamental problems that led to the plant closures in the first place. And Putin won’t make a personal visit to every factory that shuts down because of the crisis. Russia is full of factories, but it has only one prime minister.
Pikalyovo has established a precedent. The residents of dozens of similarly depressed one-factory towns will demand the same kind of aid. But what will the government do with the property that has been nationalized?
There is a strong need to reorganize the state sector, put its affairs in order and create new management structures and strategies that would allow it to revive companies suffering from the effects of the crisis and bungling management and transform them into engines of growth to help pull the economy out of the crisis. Developing the country involves not only national projects and large-scale investment in cutting-edge technologies, but also the resuscitation of the country’s 700 one-factory or single-industry towns such as Pikalyovo.
If the people of Pikalyovo were smart enough to attract the attention of the authorities, isn’t it time to give them the chance to become involved in solving their own problems? An opportunity is being created at the local level for democratic participation, for bringing ordinary citizens into the process of managing their own affairs. Once this happens, we will discover that numerous questions can be resolved without top-heavy, wasteful national projects. We may see that grass-roots initiative, common sense and familiarity with local circumstances could take the place of Duma commissions and federal ministries.
In short, it would become clear that two-thirds of the people presently employed by the country’s bloated bureaucracy could be put to better use and doing something less harmful to society’s health. Then we will say "thank you very much" to the people of Pikalyovo.
Boris Kagarlitsky, a fellow of the Transnational Institute, is a Director of the Institute of Globalization and Social Movements, Moscow. His latest book is Empire of the Periphery: Russia and the World System (2008)
The Moscow Times, 9 June 2009