Even the most progressive start-ups regard the true mark of success of what they’ve created as being bought by a transnational giant. But at the same time, from the point of view of the development of a monopoly, labour productivity begins to fall away, because there are fewer incentives to perfect the production process. Why change it if it’s not broken? As a result, sooner or later any giant company becomes less efficient.
So expanding a business is positive when it’s done in a controlled way; but negative if it becomes uncontrolled. The easiest way to establish control over a monopoly is to develop competition; in other words, to put big businesses in competition with each other, providing this is kept within the boundaries of the established rules. The responsibility for this, as the arbiter, lies with the state.
The approaches to this question are generally well-known and universal. Once a monopoly controls more than 30 per cent of the market, it should be placed under observation to ensure against abuse of the system. If it goes over 60 per cent of the market, measures have to be taken to reduce the profitability of the monopoly, by stimulating other producers of goods and services. This is rather like a constant battle against buildings icing over: you have constantly to break off the largest icicles.
Monopolisation in markets is similar to fighting herpes: you can never defeat it, but you can keep it under control if you have political and economic immunity that operates effectively. But unlike herpes, growth is not an illness but natural evolution, and this has to be utilised.
The ways in which this is done can vary. It doesn’t have to be the straight-down-the-line approach of Europe or the USA. For example, South Korea is the home of the Samsung Corporation, a monopoly company. The government keeps tabs on it. It sets Samsung rigid guidelines, such as that no less than 60 per cent of its production should go for export. Should these conditions not be met, the company faces serious sanctions. You could call it competition replacement therapy. This is a very different approach, but it solves the question of control over a monopoly.
The situation changes drastically when a private monopoly becomes a state one, and turns into a state corporation. In this case, neither market forces, nor replacement therapy will work, and any competition will be destroyed by the administration.
No private enterprise can possibly compete with the consolidated power of the state, when the state is both owner and controller. If anyone doesn’t know how this works, they should study carefully the garbage and construction businesses of the Russian Prosecutor General. There can be no question of one official being able to effectively control another official (and by default, all the leaders of state corporations are ipso facto the most powerful officials). Everyone witnessed how even the slightest hint of such control can finish in Russia with the example of the “Ulyukaev affair”. Alexey Ulyukaev ended up in the meat-grinder, where they make “Sechin’s sausages”.
In Russia, the idea of monopoly has deep historic roots, which is why it has so many supporters. Nearly all industry was founded on the state’s initiative, with the participation of the state and under the state’s control (even if that initiative was corruptly motivated by the future owner). Monopoly was the main instrument for the industrialisation of the state. And after the Bolshevik revolution it became its sole instrument for industrialisation. The principle of the monopoly was taken to absurd lengths, far further than it had ever been taken before in any large global economy. In the end, this monopoly was what killed off the USSR, because it made its economy inefficient and uncompetitive.
After the collapse of the USSR, Russia significantly freed itself from the grip of the monopoly. But this was only for a very short period, and it wasn’t able to organise proper competition. The economic and political institutions couldn’t cope with the enormous challenges of the time. As a result, society went into a tailspin, that resulted in exactly the kind of war of all against all that monopoly and competition are supposed to defend against. At the start of this century, the strategic mistake was made to re-start the monopoly, instead of continuing to re-build the field of competition. But this turned out to be a very particular monopoly, the like of which Russia had never experienced.
In this authoritarian regime, that’s corrupt from top to bottom, and that’s bereft of any ideology (in place of which they use some sort of rusty paper-clips), monopoly has become the only way in which the clans can get rich, by sucking up to power. The regime uses monopolies to reward the clans for their political loyalty. So monopolies have become the most convertible currency of post-Communist Russia. Using power instead of money is a way of distributing the monopolies. It started with oil and gas extraction, then spread to road tolls, and then to anything and everything. Now, according to the latest pronouncements, it’s even spread to toilets. It’s not surprising that this vital sector of the economy went to the family of the former Prosecutor General, Yury Chaika; after all, it’s right up his street.
To be fair, it should be pointed out that even before this there were few preconditions in Russia for the successful development of competition. So creating the conditions now for competition would be a tricky task for any government, including the one to which it will fall to build the new Russia, once the present regime evaporates into nothing. Such preconditions usually include a readiness to cooperate, a broad base of trust, and other attributes of a bourgeois society; everything that’s included in Max Weber’s code of Protestant ethics. Unfortunately, no such ethical code has emerged in Russia.
Despite the common perception that Russians have a collectivist mind from birth, even researchers with diametrically opposed views on the fate of Russia have pointed out a pathological individualism (what the philosopher Ivan Ilin called “federalism”) is characteristic of Russian people.
The most severe measures have been employed in order to crush this eternally excessive Russian individualism, including the ubiquitous use of monopolies. To a great extent, over time monopolies in Russia have become a historically determined way of survival due to the notable suppression of initiative. The well-known, violent, Russian concept of sobornost’ [a term without parallel in other languages, but described as “a spiritual community of many people living together” – Tr.], was merely a reaction to the inability “gently” to wipe out individualism with the aid of general rules. But historically even this method has had its limits: after a while it simply stops working.
As a way of dealing with chaos, competition is now preferred to monopoly almost everywhere. But in Russia, with its difficult cultural heritage, competition simply failed to develop sufficiently to be able to carry out what it’s meant to do. At every turn it came up against an authoritarian leader who tried to solve problems that arose by using a monopoly. And the result? It was totally ineffective and cost huge sums of money.
Peter the Great created centralised industry that was almost totally dependent on the state. The Bolsheviks carried this tendency to a logical conclusion, leaving standing only a state-planned economy. It’s not worth dwelling on the cost of this, nor the result. It was always a crude, harsh and uneconomic way of doing things, but it carried on working for centuries.
Why doesn’t this work now? Because when you have a society with a developed system of information, monopoly as the basic way of regulating the social sphere is outdated.
When all societal relationships have become much more complicated, and their success depends more and more on the actions of a solitary individual or small groups, it becomes virtually impossible to support the dynamic development of society by way of a monopoly. Russia has no choice but to move from a monopoly economy to a competitive economy. But doing this is no easy task.