The New York Times'Andrew Kramer has a front-pager today on Vladimir Putin's crazy idea to boost the Russian economy that just might work:
A business owner in Russia has a better chance of ending up in the penal colony system once known as the gulag than a common burglar does.
More than 110,000 people are serving time for what Russia calls “economic crimes,” out of a population of about three million self-employed people and owners of small and medium-size businesses. An additional 2,500 are in jails awaiting trial for this class of crimes that includes fraud, but can also include embezzlement, counterfeiting and tax evasion.
But with the Russian economy languishing, President Vladimir V. Putin has devised a plan for turning things around: offer amnesty to some of the imprisoned business people.
“This can be understood in the Russian context,” Boris Titov, Mr. Putin’s ombudsman for entrepreneurs’ rights, said of what is, even by the standards of the global recession, a highly unusual stimulus effort.
The amnesty is needed, he said, because the government had “overreacted” to the threat of organized crime and the inequities of privatization and over-prosecuted entrepreneurs during Mr. Putin’s first 12 years in power as president and prime minister.
Russia’s economy does need help. In the first quarter, growth fell to a rate of 1.6 percent because oil prices are level. And in that economic climate, few Russians seem willing to risk opening a new business that might create jobs and tax revenue for the government (emphasis added).
Gosh, you think? Why oh why would jailed Russian entrepreneurs be at all risk-averse in embracing Putin's New Economic Policy?
The amazing thing is that, if Putin was able to successfully crack down on the police cracking down on entrepreneurs for profit, there likely would be a revival of entrepreneurial activity. Here's one of the stories in Kramer's piece about an arrested entrepreneur:
Ruslan V. Tyelkov, whose short arc from businessman to inmate illustrates both the entrepreneurial spirit that still simmers in Russia and the risks. Mr. Tyelkov, a strapping 32-year-old from Moscow, invested nearly his last ruble to open a wholesale upholstery business that could hardly have gone wrong in Russia: selling leopard-print fabrics.
In 2010, Mr. Tyelkov spent the equivalent of $31,000 for 25,000 yards of Chinese-made leopard-print fabric suitable for chairs and sofas. “It’s very popular here, not only for furniture but cloths, wallpaper, sheets, shoes, bags, everything.”
With no warning, the police arrived at his warehouses and removed every roll on six flatbed trucks, handing it over to a competitor, ostensibly for storage, though it was later sold. Then they arrested Mr. Tyelkov, who spent a year in pretrial detention.
The crime? The police said they suspected copyright infringement of the leopard design. “It was funny at first,” recalled Mr. Tyelkov of his initial meeting with the police. “I asked, ‘Who owns the copyright, a leopard?’ ”
Mr. Titov’s later investigation confirmed the police had colluded with a competitor to seize the merchandise under the pretext of a criminal case, so it could be sold for a profit.
While his business was ruined, Mr. Tyelkov said he did manage to apply his skills to the small challenges of life in jail. He rose to become the informal leader of the cell he shared with a killer, a militant and several drug addicts.
One business owner, the founder of a chain of computer stores, ran his legal operation for nine years from prison, Mr. Titov said, much as some drug kingpins do.
I have no doubt that, if left alone by the policy, Mr. Tyelkov will survive and thrive.
And it's stories like these that help to explain why Ayn Rand valorized entrepreneurs so much. Putin's Russia strongly echoes the environment Rand grew up in. And in this kind of rent-seeking society, there really is something pretty damn heroic about an entrepreneur trying to make a profit without seeking the succor of the state.
