Janine Wedel - Shadow Elite - How the World's New Power Brokers Undermine Democracy, Government, and the Free Market

The Rise of Flex Nets

Such networks of operators would be far from irrelevant as the region supposedly “transitioned” to free market and democratic rule with the demise of communist regimes. While the mantra of “markets” dominated public discussions and media accounts, other logics were at work, in which business agents ( biznesmeni ) danced together to a nonmarket drummer, gaining exclusive access to information and hoarding it for their own purposes—the antithesis of a free market. Likewise, while the ideology of “privatization” reigned supreme, the view from the ground revealed the rearranging of state assets into privatized or might-be-state, might-be-private entities, often with powerful players—themselves mergers of state and private power—at the helm. Networks would help organize all these processes and thereby the emergent systems. 21

In fact, amid legal, administrative, political, and economic flux, more “network capital” was at play than under communism. That is because, when the command structure of a centrally planned state that had owned virtually all the property, companies, and wealth breaks down and no authoritarian stand-in is put in its place, the existing network-based mode of governing and business moves in to replace it, drawing on the networks and groups that had permeated the old official structures. 22

As communist states’ control over resources crumbled (and even before they embarked on formal privatization schemes), communist managers and other privileged players acquired companies and other resources at fire-sale prices for the benefit of their groups. In this loosest of environments—some scholars have even talked about the absence of a state in Russia in the early 1990s—well-connected individuals could, and did, control resources and wield influence. 23

In the near free-for-all that was the “Wild East,” great incentives moved people to work quickly: Opportunities were often fleeting, opening up for weeks or months, only to close as someone else cornered them, laws or other circumstances changed, or better opportunities came along. The ambitions and activities of the players were frequently unfettered by rules and regulations because such restraints did not exist, were not known, were unenforced, competed with one another, or were simply ignored. Even people committed to a public interest and democracy were forced to embrace, or at least to tolerate, extralegal means just to be successful and sometimes even to survive. Exactly what was legal was often not clear, nor did it matter. Because the line between legitimate and illegitimate was blurred—and because legal and illegal often did not equate with moral and immoral—the practices of those who thrived eventually defined the new rules. The people who were most savvy, energetic, well positioned, and quick on their feet were the most successful at gaining access to resources.

Inside information and resources presented themselves wherever reform appeared—as did networks hungry to take advantage of them. Economic restructuring and the privatization of state-owned industry and agriculture (often introduced with the guiding hand of international financial institutions and Western donors) offered much action, especially in states radically divesting themselves, while systems of health care, social security, and so on also were candidates for overhaul. Because some reforms provided prospects for acquiring resources, even plunder, some fostered the entrenchment of informal groups and networks linked to organized crime. “Reform” would become a permanent fixture: not just a steady mantra, but to this day a process without end in many countries of the region. 24

Close observers of the transition have struggled with what to call these networks. They weren’t quite “interest groups” or “lobbies” and defied characterization as state or private, bureaucracy or market, even legal or illegal. One attempt was the “institutional nomads” of Poland mentioned earlier. In Hungary sociologists found that “restructuring networks” with inside information drove privatization and resulted in property forms neither private nor collective but “recombinant.” In Romania “unruly coalitions” controlled many resources—defined by the anthropologist who identified them as loose clusters of largely former Communist Party elites “neither institutionalized nor otherwise formally recognized,” and less visible and legitimate than political parties. 25

Further east, clans mobilized to exert control over arenas valuable enough to deem worth their while, positioning their members in and around the state to best promote a group’s political, financial, and other strategic agendas. In the Russia of the early 1990s, the most important clans were those involved in the gas, oil, and extraction industries, which provided returns from exports and were directly linked to top officials, Kosals observes. And, as we shall see in Chapter 5, the Chubais Clan monopolized foreign aid and economic reform, and helped set the country’s economic and political order for years to come. 26

Clans have played an equally significant role in another geopolitically strategic part of the former Soviet Union, Ukraine, where they are regionally based, monopolize many national resources and industries, and underpin much political power. Power is contested among several clans, and alternates among them. The Donetsk Clan, an informal association of business and criminal elite from the southeastern Donetsk region, appeared marginalized by the Orange Revolution, a progression of protests and political actions that took place in late 2004 and early 2005. That revolution brought to power opposition leader Viktor Yushchenko, who many think was poisoned by Russian agents, although that has never been proven. Yushchenko defeated Viktor Yanukovich, the clan’s candidate and the incumbent prime minister. But the Donetsk Clan made a fast and triumphant comeback when its political party won a majority in the March 2006 parliamentary elections. The clan also played a key role in the subsequent derailing of the government by successfully working to splinter it. In August 2006, President Yushchenko, who had previously trounced Yanukovich, was forced to confirm his rival as prime minister instead of Orange Revolution coleader and political ally Yuliya Tymoshenko, who had been serving as prime minister in Yushchenko’s government. The Donetsk Clan now effectively controlled both branches of government. Following the September 2007 parliamentary election, however, the Tymoshenko-Yushchenko alliance returned to power and continued shakily. 27

Even in Poland, institutional nomads are alive and well, despite Poland having joined NATO in 1999 and the European Union in 2004, boasting one of the strongest economies in Europe and little evidence of criminal mafia infiltration in the political establishment (as there is, say, in Russia and Ukraine). Kurczewska, cocreator of the theory of institutional nomads, has pointed out that these groups continued to evolve with Poland’s admission into the EU. The sphere of nomadic activity widened to encompass positions and opportunities in Europe available to officials and citizens of EU countries; and, because subnational regions are important in the EU resource and power structure, regional nomads have arisen to establish their influence at the regional level. In short, institutional nomads, clans, and the like have shaped the dynamic environment around them while also reshaping themselves. 28

Flexing Forward—to the Past

Nomads and clans convey a kind of tribal sense. That’s no accident. As uninstitutionalized, unregistered, and unannounced sets of people, they are the antithesis of actors in the Weberian state. They are elusive and difficult to track. Yet their very involvement defines where the action is and who is fashioning crucial political and economic directions.