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Editorial Last Updated: Jul 1, 2014 - 7:52:09 AM

Russian Governance and the 18th Brumaire
By Dr. Gary K. Busch 30/6/14
Jul 1, 2014 - 8:53:51 AM

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�The Eighteenth Brumaire of Louis Napoleon� was an article published in 1852 in the journal �Die Revolution� by Karl Marx and provides a good example of Marx�s thought on the nature of the governance of a society. The theme of the article was an examination of the circumstances of Napoleon�s nephew, Louis Bonaparte seizing dictatorial power in France in 1851.

The title refers to the Coup of 18 Brumaire in which Louis Bonaparte's uncle, Napoleon Bonaparte, seized power in revolutionary France on 9 November 1799. Napoleon Bonaparte became �First Consul� of France (e.g. the �People�s Sovereign�); later to become Emperor. The takeover by Louis Napoleon, however, was portrayed as more of a farce. Louis Bonaparte became the head of a state run by the security organs and the bureaucracy. This engendered Marx�s famous line, that �History repeats itself, first as tragedy, then as farce".

�Bonapartism� has been used to describe a government that forms when a military, police, and state bureaucracy intervenes to establish order. Marx characterised the rule by Louis Bonaparte as demonstrating �how the class struggle in France created circumstances and relationships that made it possible for a grotesque mediocrity to play a hero's part�. Putin�s Eighteenth of Brumaire has added to this brew the�state or parastatal corporations, run by the security services or their former colleagues; the siloviki..

Putin has been in power for around fifteen years. When he took over from Yeltsin in 1999 less than thirty per cent of Russian industry was in state hands. By fostering a business model in Russia which favours state control Putin has succeeded in putting more than fifty-one percent of Russia�s industry into public hands and administration, administered by the siloviki and state bureaucrats and operating from a central pot of liquidity for which these companies and parastatals must compete with each other.

The new and powerful people (�siloviki�) have been almost exclusively drawn from the ranks of the �Chekists�. A �Chekist� is a general, if pejorative, term for those who are or once were employed in the security operations of the Soviet state- KGB, GRU, MVD, FSB etc. (the �Organs�) Dzerzhinsky�s original agency was the Cheka. Under Putin, these new �siloviki� have been firmly installed in the corridors of power. Under Putin, the Chekists, primarily the St. Petersburg flavour of Chekist, openly took power as ministers, government advisors, governors, bankers and politicians. There may be as many as six thousand of these Chekists in powerful positions in the Russian state. They are not a united force, nor do they follow a single �party line�. There are more factions of siloviki than there were factions of the Trotskyites.

What is important about the siloviki is that they have created a system of governance in Russia which effectively removes the linkage between the individual performances of a private company, a parastatal or an industry from the funds it generates. Because of the configuration of the siloviki economy the profits from the various producing entities and service industries are not kept in the name of the generating company or service but effectively put into a central pot (like the �obschak� of the Mafia) for distribution by the political leadership.

This divorce from a direct line between earnings and capital accumulation makes corporate planning a subject of political discussion and debate and a competition for investment funds which is won by political access rather than economic profitability. This is inimical to the notion of ploughing back profits towards R&D, maintenance and the renewal of plant and equipment and keeping up with the needs of Russia�s worn out infrastructure.

This is the central weakness of the Russian economy and a powerful reason for the continued stranglehold of the siloviki on the direction of the economy. Most of the �oligarchs� are still in business but they have virtually no political power... Russian businessmen and siloviki have been pulling their money out of Russia as fast as they can. Russian flight capital is of epic proportions; estimated to reach ninety billion dollars this year. Putin�s plans for adjustment of this anomalous economic model is to insist on further lack of competition by choosing more corporations to come under whole or partial state control and limiting the funds available for their modernisation.

Moreover, the effect of the small sanctions currently in force against Russia has made it is more difficult for Russian industry to obtain external financing and license modern technology. Putin makes frequent announcements of how the Russians will invest in new military technology, in new railroads, in new pipelines, in great social projects like international sporting events. While each of these announcements seems rational and possible the aggregate of all the promises greatly exceeds the amount of funds Russia has available for them. The sums announced are greatly in excess of the resources Russia has to fund them.

In order to fund these projects Russia will need massive foreign investment by partners along with the technology which they can bring to the table. This is not happening despite the growing expressions of discontent by German and U.S. Big Business. It was no less of an observer than Mr. Ulyanov (a.k.a. Lenin) who said "The Capitalists will sell us the rope with which we will hang them." Well, the market for imported ropes has been drying up but the market for imported cash has never been higher in Russia. However, it isn�t coming.

Moreover, those Russian private companies which still exist are taking their investment portfolios out of Russia as quickly as they can. They are listing themselves on the London and New York stock markets to attract foreign partners; not for the cash but for widening of the shareholder base outside of Russia to make re-nationalisation more difficult when the siloviki decide that it their industry which must be retaken for �the national security�. Any Russian company of note has succeeded or is in the process of widening its shareholder book to include non-Russians. This has also meant that the cash has stayed outside of Russia as well, as a new �internationalism� has energised Russian companies. They are now moving into the US, Canadian, Latin American and African markets in search of suppliers, alliances with competitors and safer markets.

This is an important part of the sanctions regime. The International Monetary Fund says the Russian economy is now contracting; the external debt markets have been largely closed to Russia since the annexation of Crimea; international bond sales by Russian companies plunged to less than $2 billion in March through last month from $19bn in the same period last year, making it harder for Russian banks and companies to meet their combined $191 bn of foreign debt payments due this year, according to central bank data.[i] �The banking system is close to having a deficit of assets that can be used as collateral to get funds from the central bank, while demand for refinancing is continuously increasing,� Sberbank chief executive Herman Gref, Putin�s economy minister during his first two terms as president, said in a statement.[ii]

Much of this dilemma can be put directly to the account of Putin. The annexation of the Crimea, while having a totemic effect in Russian politics is an economic disaster. It will require a minimum of three billion dollars a year to sustain. It has no water, electricity, energy or access except through the Ukraine or by sea to Kerch. While the lack of a Crimean economy due to power and water shortages is important the effect of such economic isolation on the Black Sea Fleet is, as yet, uncalculated. Except for the political impact the annexation of the Crimea made no sense. It will continue to cost Russia economically and politically for years.

It looks as if additional sanctions will be introduced very soon; sanctions which will effectively put a lid on modernisation by excluding technology transfer, and which will further restrict international finance for Russia and its companies. Marx was right � it is a farce run by a grotesque mediocrity playing a hero's part. Ther was one additional aphorism which Marx might have made in evaluating the 18th Brumaire �Beware short men with tall ambitions�.

[i] Bloomberg, Putin Under The Spotlight, 29/6/14

[ii] ibid

Source:Ocnus.net 2014

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