[LINK] "Why Fighting Oligarchs Is a Bad Idea"

[rfmcdonald]

Bloomberg View's Leonid Bershidsky makes a controversial argument, drawing from the example of Russia to suggest that campaigns against oligarchs merely centralize power.

The top economic spokesman for the leftist Greek party Syriza, which leads the polls ahead of the Jan. 25 election, says one of the party's goals is to crack down on the nation's oligarchs. Reducing the outsized role of politically connected magnates, George Stathakis argues, will allow smaller, more honest businesses to be more competitive.

Syriza's implied threat to break apart the euro currency union was scary enough. But Stathakis's rhetoric is at least as worrisome. Any regime that wants to fight the oligarchs means to increase government interference in the economy -- to such an extent that it will end up replacing old oligarchs with new ones.

[. . .]

The same billionaires still controlled the country's resource and financial wealth. But then something strange started happening. First, Vladimir Gusinsky lost the media empire he had built with cheap government loans and a free national broadcasting license from Yeltsin. Then, Mikhail Khodorkovsky, one of the biggest beneficiaries of the 1990s privatization, was jailed on dubious charges, and the assets of his oil company, Yukos, became part of state-owned Rosneft. Most of the old oligarchs were still around, but only the Western press still used the term when referring to them. They were still rich, but they no longer ruled Russia.

On the flip side of that development was the government's growing importance in the Russian economy. Government spending as a share of gross domestic product increased steadily from 15 percent in 1999 to 20 percent in 2013, and that was only the tip of the iceberg: Russian methods of measuring the public sector do not comply with international standards. In 2012, the consolidated public sector accounted for at least 68 percent of GDP by expenditure. The Russian government came to control more than two thirds of the economy, and while comparable data for 2000 do not exist, research into specific sectors indicates how that share was achieved: In 2000, Russia's five biggest state-owned banks accounted for 36 percent of all assets in the banking system. By 2009, that share increased to 52.1 percent.

Inevitably, an all-powerful state creates a class of beneficiaries. The recipients of big government orders, the controllers of state assets -- these are all Putin's friends. Most of them are now on U.S. and European sanctions lists. And though they are rarely labelled as oligarchs, they fit the definition: They are leeches whose businesses exist only because they know how to exploit their proximity to the government.