Wealth Enclaves in the Russian Economy: Actors and Institutions

Abstract

The article reveals the actors whose activities led to the emergence of the phenomenon of wealth enclaves in the Russian economy, and it identifies the institutions that support their long and sustainable existence. It is shown that this phenomenon is typical for countries with emerging markets and it is an unintended result of following the recommendations of the Washington Consensus, which provided for double liberalization. The model of successful modernization of the economy carried out by the Asian “tigers” was a sample. In their case the state played a decisive role in choosing strategic development priorities. In the case of the Washington Consensus priority was given to the private sector and deregulation of the economy meaning a significant reduction in the role of the state. Russia followed the “recipes” proposed by consensus. We found that the collision of the import of institutions in the form of the adoption of the recommendations of the Washington Consensus with counter institutional projects built on the recombination of historically established informal institutions led to the specific Russian version of wealth enclaves. A specific feature of Russian wealth enclaves is their embeddedness in the vertical of power, which is viewed as a pyramid of mixed residual property rights to competitive assets mainly in the resource sector. This “mixedness” is realized not at the formal level, but at the level of real property rights. Top entrepreneurs with political connections are characterized and it is shown that their private interests determine the choice in favor of maintaining “closedness” from the national economy and integration into global value chains. At the same time, actors of political and administrative decision-making, including those at the highest level, demonstrate loyalty to such strategies of large entrepreneurs as co-owners of real residual property rights. They are interested in maximizing the commercial results of enterprises in the resource sector, which act as donors to both the federal budget and development projects.