Informality trap: a foundation of Russia’s statist-patrimonial capitalism*

Abstract

The paper analyses the origins of Russia's statist-patrimonial political economy, marked by insecure property rights and particularistic state-business relations. Based on in-depth interviews, the paper argues that statist-patrimonial capitalism is not only a result of top-down activity of the state sovereign and its corrupt agents but is also a system that rests on the bottom-up contribution of the bulk of economic actors - small and medium-sized firms. This contribution happened - often inadvertently - through informal practices that locked small firms in the ‘informality trap' and undermined the security of property. Back in the 1990s some of those informal practices were taken up by companies out of expediency. In the 2000s informality backfired as the state exploited it to violate property rights of virtually any business actor. Thus the advent of statist-patrimonial capitalism was facilitated, among other factors, by the informal choices and practices of business actors in the previous decade.