Small business collective action and its effects on administrative modernization in Putin's Russia : from 'grabbing hand' to 'helping hand'?

• Main Author: Aitchison, Brian
• Published: London School of Economics and Political Science (University of London) 2014
• Subjects: 658; JN Political institutions (Europe)
• Online Access: http://ethos.bl.uk/OrderDetails.do?uin=uk.bl.ethos.631554

Throughout the 1990s and 2000s, epidemic corruption hindered Russia's economic performance. At the grassroots level, low-level administrative agents preyed on small- and medium-sized enterprises (SMEs), exploiting Russia's ever-changing and loophole-ridden legal codes to extort rents from these relatively powerless firms who lacked the political connections necessary to protect themselves from these predations. In contrast to larger, better-connected firms, SMEs suffered from this "grabbing hand" of the state. They lacked the resources to engage in the "capture" and "elite exchange" models of business-state ties that characterized interactions at higher levels of the politico-economic hierarchy. While some firms benefitted under Russia's systemic corruption, SMEs tended only to suffer under it. This pervasive "grabbing hand" drove the consolidation of the SME interest toward the resolution of this common problem. But, given their individual weakness, SMEs' only means of systemic political leverage comes from pooling their resources into mechanisms of collective action. This presents a number of problems according to the theory of collective action as laid out by Mancur Olson. As a large, diverse, and geographically scattered interest, SMEs face significant organizational costs in achieving political outcomes when compared to smaller, sector-specific organizations. However, the Putin administration has put SME development and the reduction of corruption at the center of Russia's modernization program. Through the creation and empowerment of "peak" SME business associations, the administration has in effect subsidized these increased costs of collective action for the SME community. The synergy of interests between Russia's "power vertical" and the SME community has resulted in a push for a more professional, accountable, and transparent administrative apparatus. This dissertation explores the thesis that the common administrative obstacles facing the SME community has driven the emergence of an "encompassing interest" in administrative modernization, which is more likely to produce results given the support of Russia's powerful president.