Flight and fate
In the thirty years following the collapse of the Soviet Union, Russia changed from being the champion of equality to a country with the highest concentration of capital. And yet most of this capital was not in Russia. Counted in dollars, Russia's export of natural resources massively exceeded its imports of goods and services, with an annual trade surplus averaging 10 percent over a period of 25 years.16 The equivalent of 200 percent of Russia's annual GDP went missing - more than three trillion dollars. The tucked away financial assets amounted to more than the total financial assets legally owned by Russian households.17 The value of the stolen property far exceeded that of the Norwegian Oil Fund, the biggest in the world, which in summer 2022 had $1.2 trillion in assets (see Chapter 2).
After 2014 the Kremlin banned foreign vacations for many groups of mid- and high-level officials - a policy that was applied first to the military, and then to law enforcement and major industries. Corruption initially helped to avoid these prohibitions, but the Covid-19 lockdowns and, eventually, European sanctions increased the isolation of the Russian elite. The old life of the 2000s, with vacations in Turkey or Egypt, skiing in the Alps or shopping tours to London, never returned for these people. Imagine a high-up official, corrupt but rational. He worked in Moscow and had a life there, but invested his surplus wealth abroad. He bought a villa in Italy or a chalet in France, and had a yacht built in Germany. He and his family wished to spend as much time as possible enjoying these amenities - it was nicer and safer there than in Moscow. He got a residence permit for his chosen country, or even bought citizenship through the programs that were available in the UK, Malta, Cyprus or Latvia. His children went to a private school not far from his second home. His time abroad was limited to weekends and vacations, but his family preferred to spend more time there. Unexpectedly, Putin's order forbade him to go abroad - it was the price of Crimea, he was told (he could not care less about Crimea). For him, capital flight entailed a geographic separation of public and private life, and massive family problems. The separation led to health issues such as alcoholism or depression. He could not leave his position in Moscow because he had to support his family abroad. Western sanctions only added to his anxieties: when would he ever see his children? New and riskier operations got him into further trouble, and his family would suffer too.
The sheer numbers indicate that this could well have been a common scenario. From anecdotal evidence we know that the divorce rate among Russian officials was extraordinary; many had secret second families or frequented dating sites. Oligarchs had more freedom, but there was a huge overlap between oligarchy and officialdom, which formed the basis for corruption. Many of the protagonists featured in Navalny's investigative reports played both roles, oligarchic and official, at different stages of life. Like corruption, capital flight was a systemic feature of the Russian state, one of its constituent mechanisms.
The war forced hundreds of thousands of Russians, most of them young and educated urbanites, to leave the country. Expecting military mobilization and violence at home, they flew to Georgia, Armenia, Turkey or Kazakhstan - the countries that did not require visas. Most of them found themselves in a desperate situation, with no job, no money and no welfare support. Only the Kremlin applauded this displacement of the country's young and productive subjects: the very same people who might take part in the acts of protest and resistance were removing themselves from the domestic scene. At this point, education, high culture and public life became mere nuisances for the Russian rulers. For this small but greedy group whose lifeblood came from the trade in oil and gas, the people were redundant, and educated people a threat. Students and intellectuals led the anti-Putin protest movement in Moscow in 2011-2012, as they did the democratic movement in Ukraine. Revolutions historically occur in the capitals, and this was true even in a vast country like Russia. Exacerbating the demographic problems, the massive migration during the war was a blessing for the Putinist state.
Growth and democracy
"Thou shalt love thy neighbor as thyself," but still you and your neighbor and the beggar on the corner are all different. What is the moral justification for inequality? One argument appeals to meritocracy. A good worker should live well, so that he'll work even harder. A good manager secures work and prosperity for many people, so he should receive a higher salary.18 Another argument appeals to infrastructure. As the British economist John Maynard Keynes wrote, without a concentration of wealth, no investment in infrastructure would be possible. The railways would not have been built had capital been equally distributed.19 But Russia's infrastructure was still notoriously bad despite its billionaires.
During the 2000s, Russia experienced a dramatic shift to the right, and in the 2010s to the far right. Andrei Illarionov advised the young Putin to read Ayn Rand; later, Orthodox priests played the role of libertarian advisors to the aging dictator.20 Separating rich from poor, huge fences crossed Russian villages as well as many cities; in happier countries, you would never see fences as high.21 The new elite rejected not only common property and progressive taxation but human rights and democratic procedures. Carl Schmitt's decisionism and anti-Atlantic geopolitics became incredibly popular amongst intellectuals who had started with Marx and later, albeit briefly, admired Popper.
In the aftermath of the Cold War, a revived "modernization theory" stated that various aspects of development such as industrialization, urbanization and education all combined in shaping modernity. As prosperity led to democracy and democracy to prosperity, growth of incomes would bring democratization to every country.221 guess that this would have happened in an end-of-history universe. In fact, the supposed correlation between growth and democracy was positive only for productive countries that received most of their income from labor rather than from natural resources. In extractive countries, the opposite was true: the higher their incomes, the less democratic was their political regime. Unearned money does not bring freedom.
Acknowledging the problem, the Polish-American political scientist Adam Przeworski came up with a weaker formula: a rich country could be either democratic or authoritarian, but if a country has been both rich and democratic, it would never regress to authoritarianism.23 But once again, in relation to Russia, this did not work: precisely when it developed into a high-income country it turned to a full authoritarianism. In 2020, Daniel Treisman, an American specialist in Russian politics, restored the strong version of modernization theory. Earlier, in 2005, Treisman and Shleifer had declared that Russia was "a normal country" with middle incomes and a democratic politics. It had problems such as corruption and inequality, the coauthors stated, but with further growth these problems would dissipate.24 Fifteen years later, Treisman omitted Russia from his tables that allegedly demonstrated a connection between growth and democracy.25
Petrostates such as Russia, Iran, Venezuela, Saudi Arabia and others provide powerful counter-examples to modernization theory. In these oil-fed countries, people have no part in creating wealth and the national income does not reach them. In the 1990s, Russia was a poor but democratic country. In the 2010s, it was a high-income but authoritarian country. In the 2020s, it lost an imperial war and reverted to totalitarianism. Unusual as it was, Russia attempted to impose its paleomodern practices on other countries by various means such as propaganda, election interference and military invasion.