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. Last Updated: 07/27/2016

Redistributing the Blame

President Vladimir Putin last week took the government to task for its pessimistic economic forecasts. Now, I don't want to suggest that we have an ideal government, but there are a few mitigating circumstances that need to be considered.

The first of these is that 80 percent of a Russian company's expenditures go to cover its bills for natural gas, electricity, rail shipments and taxes. In other words, only 20 percent of a company's turnover finds its way into the market. Companies have devised a fairly obvious strategy to deal with this situation. After all, why increase the profitability of your company when a well placed bribe can cut your bills by millions?

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The result of this strategy is that Russia's GDP doesn't grow. It is redistributed. In order to break out of this vicious circle, the government must rationalize the tax system and reform the natural monopolies. Who's responsible for holding up these reforms, the government or the president?

The second mitigating circumstance is that the carving up of property in Russia continues to this day. War remains practically the main instrument of economic exchange. And it's well known that GDP doesn't grow much during a war. In fact, it doesn't grow at all. It shrinks in proportion to the volume of capital sent overseas by former factory owners.

To claim the moral right to threaten warring oligarchs, the government must, for a start, stop extorting money from them. Where do the oligarchs deliver their donations to the "future election fund," the government or the Kremlin?

The third circumstance is that the more bureaucrats Russia has, the less its economy grows. Under Putin a new class of bureaucrat has emerged -- the plenipotentiary presidential representatives, or polpredy. And the result? Leonid Drachevsky is drawing up a development plan for Siberia that calls for the creation of an extra-budgetary fund under his control. Konstantin Pulikovsky is divvying up the gas stations in Primorye in favor of the Alyans group. And Sergei Kiriyenko is bankrupting chemical plants in Dzerzhinsk with the help of friendly energy suppliers.

Who brought this new breed of locust down on our heads? The president or the government?

Law enforcement agents are a particularly harmful subspecies of bureaucrat. Unlike the oligarchs, they can't divide up property. Some sort of natural trait predisposes them to play the role of tools, not masters. At the same time they actively encourage and even prolong industrial conflicts. They clean out the losers and blackmail the victors.

Here's an example torn from the headlines. A certain oligarch acquired a factory. Two months later some guys with badges approached him and demanded $200,000. "What for?" the incredulous oligarch asked. "Look, your rival came to us and asked us to 'arrange a call' against you." (Arranging a call means having a highly placed officer make a few calls to the Tax Police and other law enforcement agencies on the unsuspecting target.) "We arranged it. The whole thing cost us $200,000 but he never paid up. So now we're coming to you. How about you give us the money." "You must be crazy," the oligarch said. "You arranged a call that made my life very unpleasant, and now you're asking me to pay you for it?!"

The point is that the increased role of law enforcement in Russia to this point translates into nothing more than the increased price for "arranging a call." And it's pretty clear that the more this nonproductive category of citizens consumes our GDP, the less GDP is left over. It makes you wonder who's responsible for the increased role of law enforcement -- the government or the Kremlin?

What's the upshot of all this? That the president was entirely right to give the government a tongue-lashing. It was Machiavelli who advised that the sovereign who can't help but perform bad deeds should lay the responsibility for those deeds on his subordinates. Of course, Machiavelli also recommended that heads should roll in such a situation.

Yulia Latynina is a journalist with ORT.