Reality is Contextual: Politics and Economics in the Newly Independent States of the Former Soviet Union

Stephen A. Boyko

Both Nikolas Gvosdev’s Vexing Questions of Democracy and Irakly Areshidze’s A Western-style Two Party System, Not “Managed Democracy” is Georgia’s Only Hope, view the same phenomenon—the development of two Newly Independent States (NIS) of the Former Soviet Union (FSU). Yet their well-reasoned articles that emphasize the development of political institutions before economic institutions reach different conclusions.

While the above articles focus primarily on political institutions, I argued in the spring 2002 issue of The National Interest that the “commercial DNA” bequeathed to the economic enterprises of the post-Soviet successor states are worthy of consideration as well. In other words, reality is contextual; understanding the political development of NIS countries has more to do with economic determinism than the evolution of social infrastructure. From a simple Maslowian perspective, people will address their need for food before social interaction.

Some background is useful. The FSU was a hierarchical structure that provided enterprises with detailed organizational charts and procedure manuals for the production of all goods and services. Prices were set through command-and-control processes, not buyer-and-seller negotiation. In business terms, the Soviet Union might best be understood as a “firm” or, more appropriately, as a massive “corporate continent”. Joseph Stalin was a robber baron Chief Executive Officer (“CEO”), and the Politburo was an overly compliant board of directors. (1) When the burden of the state bureaucracy became too costly and caused inefficiencies, gray market (offshore and underground markets) realities prevailed. When the burden of corruption from gray market activities rendered governance ineffective and the FSU could no longer sustain itself under communism, it reorganized in a series of mass privatizations to embrace capitalism.

I argue that grasping the essence of present-day NIS political dynamics requires tracing its lineage back to the FSU economic antecedent. The model combines constructs that analyze ranges of economic activity relative to transparency and profitability. The transparency construct addresses the treatment of information. Markets tend to be “open” and develop disclosure regimes for information requirements; whereas, firms are inclined to be “closed” and guard trade secrets through intellectual property protection (i.e., patents, trademarks, and copyrights). The prime determinant for the transparency construct is whether “open” investment banks or “closed” commercial banks are the dominant source of financing. The prime determinant for the profitability construct is determined by the political preference for either maximizing profits in the commercially viable private sector or maximizing participation in the self-sustainable public sector. These constructs with their binary benchmarks combine to form a robust model for economic governance. Analysis suggests that the post-Soviet successor states are functioning in a closed, firm-like fashion under capitalism much the same way as they had under communism.

Economic Governance Matrix

Similarly, political leaders of post-Soviet successor states can be viewed as entrepreneurs. Both political leaders and entrepreneurs can be categorized in a matrix consisting of an orientation construct that defines leaders in terms of “conviction” or “consensus” and a sequence construct that defines leaders who either initiate their agenda or respond to opportunities. This produces four leadership profiles: dreamers, dealers, doers, and doubters. “Dreamers” are visionary leaders of conviction who initiate their agendas. They live in the conceptual world of abstraction and specialize in seeing the big picture of broad societal trends. “Dealers” are leaders of conviction who respond to opportunities. “Doers” are leaders of consensus who initiate agendas. “Doubters” are leaders of consensus who respond to opportunities. “Dreamers” and “dealers” tend to view the world with a conceptual perspective, while “doers” and “doubters” tend to focus on concrete tasks. These constructs with their binary benchmarks combine to form an analytical model for political governance.

Political Governance Matrix

Given competition, I contend that economic determinism is the preferred measure of societal progress in developing societies. The "glory that was Greece" reached its height in the fifth century BC, in Athens, under the leadership of the statesman Pericles, not the Greek Council. As Georgia and Russia's economic numbers improve, power will consolidate in hands of strong CEO leaders. Presidents Putin and Saakashvili are political “dealers” who respond to opportunities with strong conviction. They, in turn, will expand their influence through strategic alliances based on their vision for the future.

Stephen A. Boyko is president of Global Market Thoughtware, an international consulting company.