And, of course, “uncertainty of property rights” is the defining characteristic of the Ukrainian model.
In analyses of Ukraine’s situation—whether rigorous research or late-night kitchen conversations—the same trick is always deployed: the claim that our development mirrors that of other countries. The argument is that we’ve arrived at some “stage” others passed through long ago, and that we can either try to accelerate the process or simply endure until “it passes on its own.”
It’s commonly believed, for instance, that we’re currently living through a period of “wild capitalism”—an era supposedly characteristic of nineteenth-century Europe and America. I think there’s no misconception more widespread, and none more dangerous.
The danger of this misconception lies in the conclusions drawn by the public and experts, and in the policy recommendations that follow, as if by obvious logic, from this assumption.
In reality, as usual, everything is precisely the opposite. There is no capitalism here—neither “wild” nor “tame.” Accordingly, the recommendations for government action (should we ever happen to have a government capable of acting in the people’s interest) should be entirely different.
This conclusion is easy to reach if you take the trouble to understand the history of “capitalism” and compare it with our situation.
“Capitalism” as an economic and legal environment arose once it became possible to shed the restrictions of guilds, corporations, state protectionism, privileges, and concessions. This process was by no means inevitable; it proceeded differently in different countries, and in some parts of Europe it simply never really took hold. Capitalism is a social system in which private individuals make decisions freely and bear responsibility for them. The foundation of this system is, of course, clear and transparent property rights. Without this, there simply can be no talk of free decision-making, let alone responsibility for those decisions. If this circumstance causes no doubt, then neither should the fact that in most European countries, by the time capitalism “emerged,” the institution of formalized property rights had existed for a long time and was already highly developed.
Here we need to say a word or two about property rights. Property rights exist always and everywhere, regardless of what the state thinks about them. In the totalitarian Soviet Union, for example, property rights were concentrated mainly among the bureaucracy. Importantly, property is always individualized. There is no such thing as “collective” (indivisible) property or state property—it is always the property of individuals who directly manage it.
When we say that in Europe, by the time capitalism appeared, there was a developed institution of property, we mean precisely that the possession and disposition of certain goods was maximally individualized and transparent, finding reflection not only in the actual state of affairs but also in legislation and customary law.
If we now look at the conditions under which our “capitalism” arose, we will see the opposite picture. This “capitalism” began in the absence of legal property rights, and—characteristically—it does everything to ensure that this state of affairs lasts as long as possible.
Even in the mid-1950s, the Soviet economy was no longer the monolithic system under complete state control described in textbooks. Khrushchev’s reforms seriously altered the situation; now bureaucrats and their associations came onto the stage, and the process of making management decisions actually became a bargaining process between them. Property, especially in the form of disposition, began to return to our lives. However, it returned very one-sidedly. Responsibility for results barely intersected with the economy; it was mainly administrative responsibility or responsibility “through party channels.”
When the Soviet economy collapsed, the situation that had developed turned out to be extremely convenient for the de facto owners of enterprises and resources. De facto, they had already been disposing of property, but there was no longer any responsibility for this disposal; the CPSU and “you’ll put your party card on the table!” dissolved into thin air. Privatization added formal ownership to these options, and things became absolutely perfect.
Sometimes it’s very useful to read old newspapers and magazines. For example, few people remember the economic debates of the late 1980s. And that’s a mistake. It’s all written there. It was then that the path of our development was set. For instance, the thesis “our people won’t work for a boss” was actively debated then. What did this thesis mean, and where did it suddenly come from? Today it’s perfectly clear what stands behind it. This statement arose from the irresponsible practices of socialist “bosses.” In the public consciousness, the “full” property rights being discussed then were associated with even greater freedom from responsibility for these people. “Look what they’re doing now—imagine what will happen if we just give them free rein!"—that was roughly the spirit of it. As a result, society’s fears coincided wonderfully with the interests of the “bosses,” who also wanted everything to remain as it was: we own the property, we bear no responsibility. The half-hearted measures taken to legalize property rights found no public support. By the way, this desire of the “exploited” to do everything for the benefit of the “exploiters” is encountered often. Today, for example, the “exploited” actively fight for the rights of the “exploiters” when they support demands for the abolition of party lists or the abolition of parliamentary immunity.
As a result, we developed a system of “semi-private” property in which the real owner is maximally shielded from responsibility. This is easy to see if you pay attention to the very existence of the State Property Fund twenty years after privatization began. Or consider the institution of reprivatization. Or the remarkable concentration of our legislation around “legal entities.” Or, finally, ask a simple question: “Fellow citizens, where is your stock market?”
This system turned out to be convenient and extremely tenacious. It allows one to “outsmart” the laws of economics by receiving privileges from the state, it allows systemic corruption to exist, “earning” from rent-seeking, and so on, and so forth. There are few old cadres left who created this system. But new cadres play along with the same enthusiasm. The main rule of this system is: “You can take something from someone else, but you yourself can also become a victim.” None of this has anything to do with capitalism. This is more like racketeering.