The System: Shifting the Tectonic Plates

(opendemocracy.net – Sergei Guriev – April 11, 2013)

Sergei Guriev is a Morgan Stanley Professor of Economics and a Rector at the New Economic School (NES) in Moscow.

Russia’s Byzantine system of government has long been a rich subject for study. Could it change? Might it suddenly have to? Possibly, but there are so many vested interests and the upheaval would be considerable. Sergei Guriev reviews the most recent of Alena Ledeneva’s books on the subject

Alena Ledeneva’s new book continues her work on the role of informal practices in Russia. Her latest work, Can Russia Modernise? Sistema, Power Networks and Informal Governance, is a study of ‘sistema’ (The System)[http://www.cambridge.org/gb/knowledge/isbn/item6830995/Can%20Russia%20Modernise/?site_locale=en_GB&?site_locale=en_GB], Russia’s unique system of government which combines formal rules and informal practices. At first glance the book’s question ‘can Russia modernise?’  looks trivial to somebody living there and familiar with how the country works. The author describes how The System functions in detail, but it is not immediately clear why it is worth documenting the everyday practices of those in control of the Russian system of government.

The System: rules and efficiency

The book aims to provide readers with a much better understanding of how The System’s informal rules are structured, where they come from and how they change. To achieve this, the author uses a wealth of material and an interdisciplinary approach, blending anthropological and sociological methods. The majority of the book is based on her interviews with about 40 former high-ranking sistema members. Most of these interviewees preferred to stay anonymous, though my own personal knowledge of those particular cadres enables me to recognize some of these people and see that her sample does indeed include very high-ranking members (or former members) of the Russian elite.

There are those who did not mind disclosing their names, including a high-ranking judge Olga Kudeshkina and a leading Russian businessman Mikhail Gutseriev. Using such interviews and publicly available information, the author also delves into the details of some specific cases ­ for example, the Abramovich-Berezovsky legal dispute in London in 2011. These hearings shed considerable light on how The System used to work in 1990s, as both sides (and their witnesses) had to testify under oath on the minute details of making and executing decisions that are usually not discussed in public.

Ledeneva also relies on a large-scale sociological survey of the Russian public (the Levada Centre Omnibus Survey). The problem is that a survey such as this can only capture outsiders’ perceptions of how The System functions, and these are not necessarily accurate.  One of the anonymous interviewees emphasizes, moreover, how shocked he is at the extent to which the outsiders misconstrue the microcosm of The System.

One of the book’s main questions is the author’s evaluation of the efficiency, or otherwise, of The System. She recognizes that sistema is neither modern nor efficient; it undermines long-term vision and not only does it not work in the national interest, it actually undermines its leaders’ ability to ensure their own survival at the top. The author clearly believes that a positive answer to the question ‘Can Russia modernize?’ would be tantamount to dismantling The System. ‘Modern’ implies ‘meritocratic’, ‘competitive’, ‘transparent’ and ‘rule-based’ ­  everything that The System is not.

Ledeneva identifies both a formal and informal System. The formal rules of The System certainly exist and they are often applied, but whether the formal rules are to be applied or ignored in a specific case is eventually driven by the informal rules ­ which are (unsurprisingly) not written down anywhere.

Informal practices change over time. For example, both the structure of the power networks and the informal rules governing them certainly changed in 2012 after Vladimir Putin returned to presidency. This raises yet another meta-question: we know that informal rules matter; we know that the formal rules are applied selectively, according to the informal rules; we know that the informal rules are not explicitly codified, but do we have at least an approximate knowledge of these informal rules? Moreover, does anybody, including Vladimir Putin himself? Can we foresee how sistema will function in specific cases? For example, would an outside scholar ­ or indeed an insider ­ have been able to predict what the court verdict on Pussy Riot was going to be?

Ledeneva succeeds in showing that it is actually not at all obvious how or why The System works. There is indeed a puzzle: it is neither fully informal nor fully formal, neither feudal nor modern. It is based on clans and networks, but these clans are not founded solely on blood relationships nor they are rigid. Informal rules play a very important role, but they are not written down anywhere. The very fact that informal rules are in general a deviation from the formal law on the statutes implies that they are hard to pin down.

Given The System’s obvious shortcomings, the reader comes close to sharing the author’s sense of awe that it actually works at all.  Somehow, decisions are being made, the economy is functioning, and not everybody wants to leave Russia. As an economist I know that this is because of oil revenues, which pay for all the embezzlement, corruption and inefficiency. If oil prices go down ­ as they did in the 1980s ­ The System will have to change or it will disintegrate (in the same way as its predecessor, the not dissimilar Soviet system).

The book tries to provide answers to the many questions that arise about The System, but for me its main message is how much we do not know. The System behaves differently in similar situations, which rules out any possibility of prediction, and is so complex that it is very unlikely anybody (even a person at the very top) can have a complete understanding of how it functions. It evolves over time, but we have only a limited understanding of how change occurs.

A possible way forward

Ledeneva points to three major forces which could help Russia to modernize (i.e. to move from sistema to a normal OECD-like meritocratic, formal rule-based economy and society). This trio includes technology, financial integration and development, and globalization (especially legal globalization).

Technological development would result in greater internet and smartphone market penetration. Censorship falls apart, transparency increases, the gap between the informal rules and the laws on the statutes becomes obvious to everybody.

Financial integration would lead to The System’s key members and their companies becoming more dependent on the global financial system. I should add that financial development delivers substantial economic benefits ­ but since these benefits require transparency and good government, financial development is eventually at odds with the System.

Legal globalization makes Russians aware of, and subject to, OECD’s rules of the game. Not surprisingly, Ledeneva pays special attention to the Abramovich-Berezovsky case in London. It is important that this case ­ in addition to unearthing innermost workings of The System ­ also showed how painful this process is for participants. In particular, after this case, Oleg Deripaska decided to settle his own soon after (also due to be held in London).

The System’s 2012-13 offensive against these three anti-sistema forces proves beyond reasonable doubt that it is right for Ledeneva to focus on them. The Russian state has now introduced major internet restrictions, as well as requiring top members of the elite to close their foreign bank accounts.

As a critical reviewer, I should like to highlight an issue which is accorded less prominence in the book than it should have been: while the Russian system of government deserves all the criticism it gets, some blame can also be apportioned to the Russian people. Country-wide studies show that Russian society is still lacking in trust and social capital. Russians are cynical; they suspect each other of anti-social behaviour and lack confidence that corruption can be eliminated. Economists know that these expectations may be self-fulfilling. If people know corruption is omnipresent, they do not attempt to fight it. If everybody believes that everybody else is corrupt, it is rational to think that the few honest investigators are outnumbered and will not be able to catch corrupt officials, thus making corruption indeed invincible.

There is, however, certainly some scope for optimism. The forest fires in August 2010 led to the birth of a substantial volunteer movement. Also, public support for various noble causes (e.g. Alexei Navalny’s anti-corruption campaigns) via the internet has become commonplace, with donors sending money to people they have never met. Such systemic activism gives us grounds for hope that The System might soon be on its last legs.

Article also appeared at http://www.opendemocracy.net/od-russia/sergei-guriev/system-shifting-tectonic-plates bearing the following notice:

This article is published under a Creative Commons licence. If you have any queries about republishing please contact us. Please check individual images for licensing details.