Written by Megan Burnham, graduate student in REEI
Amidst chilly relations, Americans and Russians can joyfully bond over the fact that both countries represent two of the world’s leaders in income inequality. According to the World Inequality Database, the United States and Russia have fairly similar ratios of top income shares, with the top 10% in the United States owning 47% of the wealth, and the top 10% in Russia owning 45.5% of the wealth. These conditions leave those of us who have to make our pennies (or kopecks) stretch ask, “Why are the richest of the rich so… rich?” This curiosity with the wealth accumulation of the very rich led Ivan Grigoriev (RSW post-doctoral scholar and senior lecturer at the Higher School of Economics in St. Petersburg, Russia) and Kirill Zhirkov (PhD student at the University of Michigan) to collaborate on research examining the behaviors of the richest Russian businessmen during a period of autocratic consolidation. They presented on the findings of their research this past week at a public lecture arranged by the Russian Studies Workshop.
As argued by Grigoriev and Zhirkov, Russian governance has experienced conditions of ‘creeping authoritarianism’ since the early 2000s, manifesting through various series of reforms to consolidate executive power and dismantle federal checks and balances. Democratic, political institutions pose a threat to the power of the executive through constraints they can exert on political processes. They cannot be eliminated in their entirety, however, explained Grigoriev, as they provide stability, wealth, and veils of legitimacy to the regime. The solution in Russia has been to either cripple institutions or seize control through a state power grab, leaving questions about the real dynamics of these institutions once their power has been constrained. To understand the real institutional dynamics occurring during this period of autocratic consolidation, Grigoriev and Zhirkov decided to study the top 500 richest Russian businessmen—insiders with privileged knowledge of the actual conditions of these political institutions. Using an original dataset from the Russian magazine Finans spanning from 2003-2010, Grigoriev and Zhirkov explored how Russian businessmen used their connections and grew their wealth during this period of institutional decay.
Grigoriev and Zhirkov were able to come to multiple conclusions about the patterns of businessmen and institutional dynamics through the results of their data analysis. First, those with informal (i.e. friendship) connections to the executive experienced a larger growth in their wealth than those without these executive connections. Those with informal connections started with an average of $7 million in 2003 and grew their wealth to over $1 billion in 2010, while those without informal connections to the executive started with an average of $150 million, growing to $400 million by 2010. Second, this group of informal connections and access to the executive represented a closed circle. Money did not buy access to power, as those without informal connections to the executive in 2003 were not able to establish informal connections by 2010. Finally, political institutions experienced declining use by businessmen over the studied period of time. Grigoriev and Zhirkov inferred that these institutions were perceived as unreliable and unprofitable by businessmen, resulting in declines in investments over time.
As noted by one member of the audience during the question period, Grigoriev and Zhirkov’s analysis provides a snapshot into a brief and unique period in Russian history where these conditions could be observed. Recent years have seen the re-establishment of some means of checks and balances, which may have altered the investment patterns of Russian businessmen. Nonetheless, Grigoriev and Zhirkov’s analysis provides a number of insights to our understandings of business dynamics and institutional decay during this period, particularly in regards to the dramatic growth in wealth experienced by the executive’s cadre of informal connections. For myself, I had only one burning question left unresolved after the lecture: how do I leverage my incredibly impressive wealth of resources to become friends with Putin?