The Russian authorities, yet again, are taking decisive steps to deal with the economic crisis. This time, they are threatening a foreign investor with expropriation of property (without due compensation by simply revoking licenses) if production does not increase to satisfactory levels.
As Foreign Policy notes, this is not a one-off incident. Foreign investors in labor intensive industries may be coming under the same pressure that local companies are already facing – pressure to keep up production levels, despite an economic downturn, to avoid social distress connected with job losses (see the story of Pikalevo).
Some time ago, a paper by Bruce Bueno de Mesquita and George Downs detailed very well how modern authoritarian leaders remain in power by reaping the benefits of economic growth (driven by things like demand for resources) and using those benefits as a trade off between political freedoms and social stability. Russia’s story may be giving some more credibility to their arguments.
Published Date: July 21, 2009