I just read a fascinating discussion of the inefficiencies of the Russian economy, and how they make political sense if not economic. Kamil Galeev, a fellow at the Wilson Center, looks at major Russian industries and divides them into three categories: “extractive” industries such as oil and gas; metallurgy; and machinery. He then notes that Vladimir Putin’s inner circle of KGB alumni typically control the oil and gas companies and other extractive primary-commodity exporters; the old 1990s oligarchs (not the main supporters of Putin, but holdovers who are grudgingly tolerated) control the metallurgy companies; and “nerds” with little political power control the machinery companies.
The reason for this, Galeev argues, is the same reason that mafias tend to control basic industries like avocado growing and olive oil: mafias are specialists in violence, not in running complex companies. They lack the expertise to manage anything technical, so they don’t try.
Similarly, members of Putin’s winning coalition have no expertise in running companies, so they were installed in the extractive companies—dead simple to run, easy to siphon money out of. The earlier cohort of oligarchs from the 1990s were run out of the oil and gas sector, but allowed to remain in control of metallurgy—a somewhat more complex area, that apparently is beyond the skills of Putin’s circle. The truly technical area of machinery manufacture, meanwhile, are run by the “nerds”: people with technical chops and little political pull. They are tolerated because the metallurgy and oil and gas sectors need a functioning machinery sector, but only so far.
As Galeev reports, when the ruble falls, the extractive exporters actually benefit, because they earn more rubles from the same amount of dollars. (Assuming that exports keep going, which obviously is less the case today.) But the machinery companies, dependent on Western technology and inputs, lose money. And in the case Galeev notes, when a mining-machine company tried raising the prices for its equipment in response, the Putin stooge who was buying the equipment instead started shifting his orders to a Czech company. But to do so, he first had to transfer the Russian technology to the Czechs so they could duplicate the machines!
This seems illogical. The mining firm is unlikely to save money by ordering at Czech prices, and ends up reducing Russia’s self-sufficiency in the process. But in the context of domestic power disputes, it makes sense: to pay higher prices to a “nerd” would mean to increase the power of the “nerd.” Putin’s winning coalition would rather harm the interests of Russia and of their own companies in order to preserve their own relative position in the power hierarchy.
This is an excellent example of concepts I discussed more abstractly in my worldbuilding handbook, Beyond Kings and Princesses. In particular, it ties into the discussion of selectorate theory and how rulers reward their supporters for keeping them in power. Other examples that come to mind are how many African countries, newly independent in the 1960s, tried putting in place industrial programs to build urban manufacturing industries by extracting resources from the rural farmers. In general, regimes are very much willing to wreck their national economies if by doing so they can improve their internal power position, and that of their cronies. I hope to expand on this topic in Volume Two.
What can we as authors take from this? First, always remember that for a tyrannical regime, relative power almost always matters more than absolute benefit. This shows up in domestic politics as well as foreign affairs. Second, it’s worth thinking about how to classify different parts of a country’s economy, in a way that helps you usefully organize the parts for your story needs. If you can come up with a relevant model that breaks the economy into two or three chunks, based on factors important to your story, it can clarify your thinking immensely.
(This post is part of Politics for Worldbuilders, an occasional series. Many of the previous posts in this series eventually became grist for my handbook for authors and game designers, Beyond Kings and Princesses: Governments for Worldbuilders. The topic of this post belongs in the planned second book in this series, working title Tyranny for Worldbuilders. No idea when it will be finished, but it should be fun!)