THE BROAD VIEW

When civilisational models collide

Oligarchic capitalism and civil society are at odds in the Russia-Ukraine war – and in the Western world

Janine R. Wedel
Published Fri, Mar 10, 2023 · 02:00 PM

THE war in Ukraine is a theatre for two competing development paths: Russia’s oligarchic capitalism and Ukraine’s burgeoning civil society. Western countries should mark this distinction, because oligarchic capitalism has increasingly taken root within their own systems of economic and political governance. The Ukrainians, meanwhile, have offered an alternative: people working together democratically to fashion a better collective future.

Following the break-up of the Soviet Union, oligarchic capitalism flourished in Russia and Ukraine. In the 1990s, informal power networks took hold in both countries, and some of these “clans” (as local analysts called them) mobilised to control key sectors such as internal security, energy or natural resources.

The keepers of these assets – the oligarchs – then became millionaires, or even billionaires, almost overnight, owing to the era’s corrupt privatisation schemes. The clans ran their own kleptocratic resource extraction and offshoring operations, and competed for control.

These webs of political-business-criminal relationships also ensnared Western leaders, helping to spread oligarchic capitalism globally. Consider former German chancellor Gerhard Schroeder, whose mutually beneficial relationship with Gazprom, the Kremlin-controlled natural gas conglomerate, began before he even left office.

From similar starting points, however, Russia and Ukraine have taken different paths. For its part, Russia pursued a strategic state vision – in which Gazprom played a big part – that was heavily dependent on infiltrating and corrupting Western institutions.

Since 2012, when Vladimir Putin began his third term as president, Russia’s clans and oligarchs have been firmly in his grip, helping to cultivate political corruption abroad.

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While Gazprom operatives weaponised oil and gas and corrupted Western politicians and parties to achieve dominance in European energy markets and distribution networks, “Kremligarchs” served as handmaidens of Putin’s foreign policy.

Meanwhile, at home, Putin was slowly suffocating the non-governmental organisations (NGOs) and independent media outlets established in the 1990s, leaving the security and intelligence organs holding all the real power.

Whereas Russian informal power networks came to serve the state, Ukraine had no comparable arrangement, and it has remained a democracy – albeit a weak one – since gaining independence in 1991.

In the absence of a strongman, its competing clans and oligarchs enfeebled the state while promoting their own interests – as did the Kremlin, through channels ranging from propaganda and cyberwarfare to corrupting Ukrainian officials.

Nonetheless, this weakening of the Ukrainian state created an opening for civil society and collaborative organising. Owing to this space for mobilisation from below, the Ukrainian state was newly empowered after Russia’s annexation of Crimea and incursions into eastern Ukraine in 2014. Since then, it has been able to impose some limits on the power of the oligarchs, including those serving Kremlin interests.

The Ukrainian civil society that has emerged over the past two decades embodies a collective commitment to national survival. Since last year’s invasion, Ukrainians have mobilised themselves repeatedly: to repair damaged homes, shelter internally displaced persons and sustain the war effort as volunteer cooks, drivers and fundraisers.

Since the war began, efforts organised mainly at the municipal level and coordinated with Kyiv have helped to evacuate almost 7 million women and children to neighbouring countries. Ukrainians are not only defending their homeland; they are also showcasing a sustainable and scalable political project.

The Ukrainian example is especially relevant to Western democracies, where a trend towards oligarchic capitalism has compromised the integrity of political, financial, and educational institutions. The world’s financial centres, notably in Europe and North America, are awash in dirty money that is laundered and then channelled towards lobbying and political action.

Again, Schroeder exemplifies this corruption. After leaving office, he made millions from Russian energy interests, while Germany came to rely on Russia for more than half of its natural gas in the years leading up to the invasion.

The structures of oligarchic capitalism in the West are mostly home-grown. They are the creation of the hedge fund managers, lawyers and tax attorneys who deal in ill-gotten cash; the professionals who help inflate real estate prices; and the public relations firms and universities that burnish kleptocrats’ images.

The rise of oligarchic capitalism in the West has both perverted capitalism and eroded democracy. Wealth inequality has surged, trust in institutions has plummeted and Trumpism and other anti-system movements have flourished.

The Ukrainians can teach us a lot about how to confront these challenges. While a war-weakened oligarchic capitalism persists there, the country’s civil society is pushing back more effectively than almost anywhere else.

Even while under fire, Ukrainians continue to fight corruption both through grassroots NGO-led efforts and state anti-corruption institutions. Since 2015, the government has used online platforms to provide greater transparency regarding public procurement and state officials’ assets and incomes. And, following important financial sector reforms, the National Bank of Ukraine has been able to nationalise or shutter several oligarch-owned banks.

But the endurance of Ukraine’s reforms will largely depend on how oligarchic capitalism plays out in the West. For years, Ukrainian anti-corruption experts have pleaded with Western policymakers to dismantle the financial structures, practices, and policies that sustain oligarchic capitalism around the world. Russia’s war of aggression against Ukraine has further underscored the urgency of this task.

That is why Ukrainian civil society leaders have stepped up their activism over the past year, meeting frequently with representatives of European and North American governments, NGOs and media.

To be sure, Western civil society has also tried to shine a spotlight on the problem, though it has not yet benefited from the groundswell of civic attention and activism – or even the lukewarm elite backing – that we see in Ukraine.

But make no mistake: the conflict between the two civilisational models – oligarchic capitalism and civil society – is as much about our own future as it is about theirs. The civil society for which the Ukrainians are fighting and dying must win on the battlefield – and then in our institutions. PROJECT SYNDICATE

The writer is a social anthropologist and university professor at the Schar School of Policy and Government at George Mason University, and the author of Unaccountable: How the Establishment Corrupted our Finances, Freedom, and Politics and Created an Outsider Class.

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