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. Last Updated: 07/27/2016

The Next Turn of Fortune's Wheel

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Now I've seen it all. The well-intentioned Sputnik Investment Fund, controlled by American financist Boris Jordan, has almost achieved the deprivatization of the Novorossiisk Shipping Co. That is, these free-market investors have almost brought about exactly what our politically impotent Communists have only been able to scream for.

The story of how the courts have ruled the 1995 credit agreement between the company, known as Novoship, and the Finance and Property ministries illegal (under the agreement, a 20 percent state-controlled stake in Novoship was privatized in exchange for a $22.65 million loan to the government, guaranteed by the now-defunct Tokobank), once again underscores one simple truth: There is no such thing as private property in Russia.

The laws of Russia are superseded by personal relations, and private property has been replaced by a system of feudal rights binding the administrator of a property to a governor, a presidential envoy, the head of the tax police, the local Federal Security Service chief or someone of this sort.

At the top of this food chain stand the oligarchs: vassals of the Kremlin. These are the ones who have received their Sibnefts, Norilsk Nickels and Yukoses directly from the president's hands.

One step lower are the regional magnates. When a new governor comes to power, anyone — except the oligarchs — may lose their factory, even if earlier they were under the impression that it belonged to them. When the presidency changes hands, even the oligarchs (such as Vladimir Gusinsky) are at risk.

The thesis that there is no private property in Russia can be rephrased in a different way. We could say that although property itself is not held privately other things have been effectively privatized: the law, the army, the right to collect taxes. In short, all the things that should not be in private hands in any normal market economy. Of course, this is also just another way of describing feudalism.

As a result, I would argue that the best model for the Russian economy could be called "The Wheel of Fortune." What do I mean? There is such a concept as "capital," which is wealth that reproduces itself. In the West, the logic goes that if a businessman has a lot of money today, chances are that he will have more tomorrow.

However, in ancient and medieval societies things worked a bit differently. There, the rule of thumb was that the more you have, the more you have to lose. Ancient Greece even had a special term for this — the envy of the gods. They also invented the idea of the Wheel of Fortune: What is up today is down tomorrow.

That's what Russia's economy is like. If you're fat today, tomorrow you will be someone's lunch unless you are clever enough to abscond to Honolulu. Obviously, it is not good to be fat, don't invest. Any factory growing profitable on a diet of investment will inevitably cause the neighboring feudal barons to salivate.

In feudal cultures, the redistribution of property can go on forever. It doesn't matter whether we are talking of castles or shipping companies.

Russian industry is not competitive and in order to overcome this handicap, it needs modernization. Modernization can only be undertaken through borrowing or selling ownership stakes. The amounts that, in a normal economy, can be raised in this way can be dozens of times a company's annual revenues. In Russia, the amount of money a company raises for capital investment always equals the amount of money it sends to off-shore bank accounts.

That's life within the Wheel of Fortune.

Yulia Latynina is a journalist for ORT.