Wednesday, 29 September 2010

10. July 1, 2009

Esteemed Lyudmila Yevgenievna,

Allow me to call upon your attention and make some notes on your last letter on the state and its role.

I will start with a definition. We very often confuse ourselves, using identical terms both in historical science and in the description of contemporary processes, which sometimes are the consequence of many centuries of evolution of the original ideas.

The most obvious example is democracy as a method of governance. Today, if we were to try to restore the institution of Greek democracy, we would get totalitarianism (or authoritarianism at best). This system of governmental institutions, which we call democracy today, was elaborated by several scientists in the course of primarily the XVIIIth century.

The same concerns to the more general concept of “state” (more general with relation to the question of state administration).

A state is a way of self-organization of society, based on the material contributions of its members (contributions in one or another form, including undistributed combined income). This definition describes, of course, once again a state from the point of view of the function of administration [71], about which, really, the discussion was.

Can a state, for example, have special resources of coercion? Of course. We know quite a few states where society deals with this function itself.

But can the state be “external” with relation to society? That is: not satisfy the desire to maintain such form of control for the majority of its interested members? (The inert part of the community is not involved in the administration). No! I stress: today - no.

In Russia today is a state. Whether we like it or not. I shall note straight away: there are transitional forms, but they live within the limits of one generation (20 years).

This is my point of view about the terminology of the state (as it applies to the question of administration). Now about the role of the Russian state. I'd love to treat the same concept of the role and the power.

The power, as the legitimate right to interfere in public and private life, in our country is really huge, poorly regulated and having extremely poor counterbalances, but its role – a real participation in the life of citizens - is inadequate.

When I say “inadequate”, I mean not adequate to the condition of our society, which, for now, can not and does not want to resolve its many problems by itself (apart from the state). Our society is not alone in this, but then the role of the state must be higher.

In particular: the share of the GDP (the social wealth) redistributed through the state is in our country lower than in the majority of developed countries, and most certainly lower than for our neighbours with similar climatic conditions. And this is the main general indicator, which finds its practical reflection in the weak pension system, the system of health care, the transport and public utilities infrastructures, etc.

But even if we take the topic of industry, then here too the role of the state is unreasonably small.

Of course, Putin can personally make a decision about the actual nationalization or a change of ownership in any enterprise. He can create 10 state-owned corporations and invest huge assets there. This is power.

But their influence (the power implemented into action) on the country's industry is very small. It remains basic.

And here two alternatives: either “liberalism” and see what the market will do, or thought-out industrial policy.

In practice, naturally, it’s always a combination. But I consider (and in this sense I am a statesman) that under the current conditions the share of industry operating under the "industrial policy" should represent a substantial portion of industrial production. Probably 60%.

Wanna do business in Russia? Ask me how.

What do I mean by “industrial policy”. Where, when and how much oil, gas, timber, diamonds, and perhaps a few more strategic types of raw materials should be produced. And how. That’s the business of business. Where and in what form the raw material can be supplied. As a particular choice within the allotted options is the business of business. Where and how electric power should be produced, where it should be delivered (the strategic power - about 70% of production). Where to build roads, where to develop cities, universities. And other such questions - on a hundred pages, and an adjustable, flexible plan (a five-year one, as repugnant as that may sound [72]) - on hundreds of thousands of pages (if you include the regional dimension).

Why? Again, the problem of governance. For a market to work, you must have at least three, but better four independent vendors of specific services (products) at each point where it may be necessary. In a small country this problem can be solved by the external market. In the giant market on the territory of Russia (and here territory and transport accessibility are important) the role of the external market is limited, though essential.

The structure of industry and transport in our country is bad. Especially after the collapse of the USSR. One could wait very long for the market to recreate what is lacking. It is necessary to compensate the key problems with a structural industrial policy, and then, as far as the “skeleton” is restored and the “muscular tissue” is built up again, jerk out the “titanium pins” (as with a compound fracture).

I have been defending this position since 1991, even though I know that many liberals, my friends, do not agree with me. Alas, conceptually they are wrong, while in practice today the state is unable to cope with these issues. Yet they need to be resolved. Therefore the power of the state can (and must) be reduced (there’s too much of it, and it’s unbalanced), but the role of the state, its actual participation in the economic and social life, at this stage should be increased.

Once again excuse me for having taken up your time.

The topic of “honest soldiers” and so, as the ratio calculation and art in life, I read with pleasure and interest. Your point of view seems to me not absolute, but very useful for the “komsomolist” and “geek” I am. Thank you. I should think.

With respect and appreciation,

M. Khodorkovsky


[71] Administration - in this letter, Mikhail Khodorkovsky often uses the Russian word управления - upravlenniya, wich means both “management” and “administration”.

[72] "five-year plan" - the term “five-year plan” refers to a series of nation-wide centralized exercises in rapid economic development in the Soviet Union. The attempt to turn an illiterate peasant society into an advanced industrial economy in a single decade brought intense suffering. Because meeting the goals of the five-year plans had top priority in the evolution toward a communist utopia, official lying about productivity became part of the economic system.

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