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Published on August 31, 2007

Author: Aric85

Source: authorstream.com

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Property Rights and Property Wrongs in Russia:  Property Rights and Property Wrongs in Russia Timothy Frye Professor Department of Political Science Columbia University tmf2@columbia.edu Two Conditions…..:  Two Conditions….. To build a market and competent state at least two elements are needed: Rulers must feel sufficiently threatened to need the cooperation of some groups --typically the rich and powerful in civil society -- in order to stay in power Condition #2:  Condition #2 2) Rich and powerful actors in civil society must find it in their interest to demand the rule of law. Need to constrain the state from abusing its power. This is where civil society comes in. Civil Society:  Civil Society Civil society is important to the extent that powerful groups can constrain the state from abusing its power and demand changes that protect their property rights. In thinking about civil society it is important to think about powerful actors and in Russia that means business elites. Survey Details:  Survey Details Top managers of 660 firms interviewed in 2005 From 23 different economic sectors in 11 regions Response Rate 53 percent Call Back 20 percent Each firm randomly selected Sample resembles the population of firms Each of 7 “super-regions” included…:  Each of 7 'super-regions' included… Moscow Nizhnii Novgorod Smolensk Novgorod Elaterinburg Voronezh Ufa Tula Rostov Omsk Khabarovsk Other issues:  Other issues This survey repeats many questions from a similar survey in 2000. No provocative questions that might lead respondents to lie. Pilot tests with people known to the researchers to detect implausible answers. Firm Characteristics:  Firm Characteristics Russian Mentality and the Rule of Law:  Russian Mentality and the Rule of Law One view is that businesspeople in Russia do not recognize the value of the rule of law or that Russian culture is somehow unfriendly to the rule of law. To what extent do you agree with the following statements?:  To what extent do you agree with the following statements? Breaking the law is rarely justified. One should follow the law even if one disagrees with it. Most people will break the law if the rewards are high. Most people will break the law if the possibility of being caught is low. Values and the Rule of Law:  Values and the Rule of Law % agreeing fully or more or less agreeing Breaking the law is rarely justified. 74 One should follow the law even if one disagrees with its basic principles. 88 Most people will break the law …..:  Most people will break the law ….. % agreeing fully or more or less agreeing if the likelihood of being punished is small. 71 if the rewards are great. 75 In sum:  In sum Businesspeople in Russia recognize value of law….. but also recognize that incentives shape whether or not people follow the law. This is hardly unique to Russia and this is good news. So, what is the problem?:  So, what is the problem? Some people argue that the state is too weak in Russia to protect property rights and the rule of law. Others argue that the state is too strong and unconstrained and threatens property rights and the rule of law. Survey Question:  Survey Question 'In the case of an economic dispute with the local or regional government do you believe that the state arbitration courts could protect your legal interests?' 1) yes 2) no 3) it is hard to say. 'In the case of an economic dispute with a business partner do you believe that the state arbitration courts could protect your legal interests?' 1) yes 2) no 3) it is hard to say. If you had a dispute with ….. could you use the state arbitration courts to defend your legal interests?:  If you had a dispute with ….. could you use the state arbitration courts to defend your legal interests? If the arbitration court ruled in your favor could the state enforce a decision against….:  If the arbitration court ruled in your favor could the state enforce a decision against…. 70% of all firms had a dispute sufficiently serious to consider taking to court in the last two years.:  70% of all firms had a dispute sufficiently serious to consider taking to court in the last two years. Of those who had a dispute with……. The Regional Government: 44% took at least one to court. A Private Firm: 66% took at least one to court. Do you think pressure is put on state arbitration court judges?:  Do you think pressure is put on state arbitration court judges? 2000 2005 Percent Yes or More or less yes 41 46 The Problem in building the rule of law:  The Problem in building the rule of law is not 'incapable' state institutions, but state agents unconstrained by the legal regime. Why is the state able to pressure private business in Russia so successfully? How can business elites constrain the state? One problem: High oil prices makes it more difficult to constrain the state because rulers need cooperation of fewer powerful groups to stay in power. Illegitimacy of Privatization:  Illegitimacy of Privatization Business owners understand that the initial privatization bargain in Russia is broadly seen as illegitimate. And there is going to be little public support if their property is threatened by the state. When institutions are weak, property rights are contingent on politics. Question on the Legitimacy of Property Rights:  Question on the Legitimacy of Property Rights Randomly assigned 4 different versions of a question on the legitimacy of property rights to businesspeople in the survey. The differences in responses to these four questions are only due to the small changes in question wording. Privatization Question: 4 Versions:  Privatization Question: 4 Versions Let’s say that an industrial firm was privatized in the mid-1990s. After privatization the managers invested [little/a great deal] in the modernization and restructuring of their firm and they provided [no/many] social programs for the public in their region. It turns out that the firm was privatized with major violations of the law on privatization. Do you think that this matter should be turned over to the state arbitration courts? Yes No Version 1:  Version 1 Let’s say that an industrial firm was privatized in the mid-1990s. After privatization the managers invested little in the modernization and restructuring of their firm and they have realized many social programs for the public in their region. It turns out that the firm was privatized with major violations of the law on privatization. Do you think that this matter should be turned over to the state arbitration courts? Yes No Version 2:  Version 2 Let’s say that an industrial firm was privatized in the mid-1990s. After privatization the managers invested a great deal in the modernization and restructuring of their firm and they have realized few social programs for the public in their region. It turns out that the firm was privatized with major violations of the law on privatization. Do you think that this matter should be turned over to the state arbitration courts? Yes No Version 3:  Version 3 Let’s say that an industrial firm was privatized in the mid-1990s. After privatization the managers invested a great deal in the modernization and restructuring of their firm and they have realized many social programs for the public in their region. It turns out that the firm was privatized with major violations of the law on privatization. Do you think that this matter should be turned over to the state arbitration courts? Yes No Version 4:  Version 4 Let’s say that an industrial firm was privatized in the mid-1990s. After privatization the managers invested little in the modernization and restructuring of their firm and they have realized few social programs for the public in their region. It turns out that the firm was privatized with minor violations of the law on privatization. Do you think that this matter should be turned over to the state arbitration courts? Yes No Should privatization be reviewed by courts if the manager of the firm provided…:  Should privatization be reviewed by courts if the manager of the firm provided… Good Works and the Original Sin of Privatization:  Good Works and the Original Sin of Privatization Business Owners can make their property rights more legitimate, (and presumably make it more costly for the state to violate their rights), by doing good works, such as investing and providing public good. To constrain the state, business must change how the public perceives it. Conclusions: In Building the Rule of Law..:  Conclusions: In Building the Rule of Law.. Attitudes of managers not the problem…. Constraining the State is. Businesses need to play mass politics too. This is a small step on a long road, but is less costly than renationalization/reprivatization as a way to make private property legitimate.

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