Global Capitalism and the Transformation of State Socialism David Lane

Working Paper CSGP 08/3 Trent University, Peterborough, Ontario, Canada www.trentu.ca/globalpolitics

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ABSTRACT The paper outlines the footprint of international economic interests under state socialism, and considers in more detail the economic integration of the post-communist countries into the world system in the post-1989 period of the building of capitalism. The focus of the paper is on the extent of economic globalisation of countries and their economic corporations. It is contended that the globalisation of capitalist companies and the direct role of global economic forces had little importance under state socialism. Since 1989, policy in the former state socialist countries has been geared to ‘joining’ the world system, optimistically its core. Important differences have developed between the post-socialist states with respect to economic penetration and exposure to the world market. The outcomes have not fulfilled the expectations of early advocates of transformation and entry to the world economy. While the new member states of the EU have entered the world economy as formal members of the ‘core’, they are not economically equal to the dominant ‘old’ members of the EU. In all the post-communist countries, there is an absence of large scale global companies, of comparable levels of innovation, research and development. Russia is a resources rich country, a ‘hybrid’ social formation containing elements of state economic control, national capitalism and global capitalism. It is concluded that the semi-periphery is not a transient category in the world economy, it has potential for persistence and renewal.

Globalisation under State Socialism?

David Held and Andrew McGrew, in a widely accepted definition, refer to globalisation as

'the historical process which transforms the spatial organisations of spatial relations and

transactions, generating transcontinental or interregional networks of communication'1. This

might be contrasted with a narrower version of globalisation defined as international

economic networks operating independently of any country2. One might distinguish

between the economic dimension made up by transnational and international corporations3,

and the cultural ideological sphere embracing a market ideology and a consumerism ethic4.

This paper is restricted to the economic dimension of global transformation of the countries

of Eastern Europe and the former USSR, though comparisons are made with developed

countries and China. It is in two parts: the first examines the footprint of state socialism and

considers the extent to which the state socialist countries had been part of the world

economy, the second outlines the place of the economies of the post-socialist countries in

the world economy.

The world system approach associated with Emmanuel Wallerstein consider the

state socialist countries to have been part of the capitalist world economic system. The

world system orientation attempts to combine a Marxist capitalist ownership paradigm of

capitalism with a political-military state system. World system writers divide the world

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economy into three sectors: the hegemonic core (the dominant 'Western' capitalist

countries), the periphery (developing countries of the South) and the semi-periphery -

countries with industrial capacity and national capital but not part of the capitalist core.

State socialist countries were part of the semi-periphery. There were no 'socialist

economies'. Wallerstein claims that the world capitalist economy included the 'entire world,

including those states ideologically committed to socialism'5. State socialist systems, it is

contended, were not socialist modes of production, but interacted with the capitalist world

economy. The socialist state, which exhibited some features of socialism (e.g. employment

security, comprehensive welfare provision), nevertheless became a major player in capitalist

accumulation, which in turn provided a basis for reintegration into the world capitalist

system. Socialist states he argues are socialist movements in power in states that are part of a

single capitalist world economy6. This is theorized by combining the economic component

of capitalism (accumulation) with the political interstate system: a capitalist world economy

is driven to expansion concurrent with the deepening of transnational (global) relations.

World system theorists7 regarded these social formations as transitory; the dynamics

of world capitalism would bring the state socialist societies closer to, and eventually

integrated with, the world economic system. The disintegration of the state socialist systems

and their move to the market and capitalism was seen as a major step in this direction. This

was a view shared by those in the countries who advocated the destruction of the planned

economy, and who also believed that subsequently the post socialist countries would join

the ‘core’ nations of capitalism. Some such writers contend, wrongly in my view, that

already by the mid-1980s, the state socialist countries had moved into the global system.

There are two main economic arguments put forward in support of the thesis of

incorporation into the world economy. First, the increasing levels of imports, and

consequent high levels of foreign debt, created dependency on the Western capitalist

system. Second, the growth of communist transnational corporations - which led to a direct

internal dynamic. I discuss these in turn and conclude that the Soviet bloc was not part of the

world capitalist economy. The evidence shows that the state socialist societies were a

relatively autonomous socio-economic formatin which interacted with the capitalist world

system, that a qualitative change was required to push the socialist societies into the world

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capitalist system and that this was the intention of many of the proponents of the movement

for political transformation.

Trade for all the socialist countries between 1950 and 1985 had experienced

exceptional growth: the index of turnover, for example, had grown 39 times for the USSR

and 24-fold for Poland8. But these developments do not, as contended by world system

theorists, involve a high level of dependency on the world capitalist market. If we

disaggregate these data by trading blocs, we find that the state socialist societies were far

from being included into the world economic system. Consider data for 1983, before

Gorbachev’s perestroika policy. Even for the highest traders with the capitalist world

(Hungary, USSR and GDR), trade turnover was under a third of the total; by far the highest

share of this growth was between the socialist countries themselves9. The scale of imports

from capitalist countries, moreover, was not great. In 1984, imports from non-socialist

countries came to only 1.39 per cent of gross national product for the USSR, 4.2 per cent

and 2.1 per cent for Hungary and Poland. The dollar values of imports expressed as an

average per capita of the population were only $97.7 for USSR, though a more considerable

$307.2 for Hungary10.

A second development was the growth in debt to Western governments and financial

institutions. By 1973, gross indebtedness was some $17.6 billion11. By 1986, net debt for

the European socialist countries had risen greatly though it was distributed very unevenly: of

particular significance was Poland and Hungary. The high level of imports, mentioned

above, was financed by loans from the West. Such borrowings, in support of consumer

imports in Poland, led to political tensions when imports were curtained, but this did not

make them a component of the capitalist world system, as sometimes concluded. The

USSR, however, was not a debtor. East European and the USSR's total export earnings

covered imports, with a large positive trade balance in 1984 and only a 2 per cent deficit in

1985. The loans mentioned above were the financial side to the growth of east-west trade

agreements which enabled the exchange of licenses and designs, and co-production ventures

(usually Western firms providing key components)12.

A critical component in the globalisation of capitalism is the interpenetration of

companies between nation states – the rise of international corporations. For globalisation in

any significant way to be a component part of the state socialist economies, one would

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expect to find the presence of global companies. Study of developments before 1985,

however, shows that inflows and outflows of investment capital were small in scale.

Outward investment from the state socialist countries went both to the advanced

capitalist nations and to the Third World. It included the setting up of offices of companies

abroad (such as airlines, Aeroflot and banks, Moscow Narodny) which were registered in

the host states as well as direct investment in their host companies. By 1983 some 500

companies in OECD countries had equity participation from state companies in Comecon

countries: from the USSR were 11613; followed by Hungary 107, Poland 102 and Bulgaria

with 48. The most important hosts were West Germany (83 companies), United Kingdom

(68), France (46) and Austria (44)14. The major role of these companies was to support the

marketing of exports from the home country; only 34 companies were concerned with

material production15. The scale of such investment was small: a total of only $550 million

in 1983 and more than half of this was capital in banks and financial companies16.

The Third World accounted for approximately a third of outward investment which

was directed to natural resources and was in small local companies. Overall, the outward

investment from the state socialist countries was relatively meagre. Even relatively small

TNCs like Pepsi Cola (55th in world rank) had a greater share in the world stock of foreign

investment than did all the state socialist countries combined. In 1985, the share of socialist

countries (excluding China) in the world stock of foreign direct investment was between 0.1

and 0.2 per cent, whereas IBM alone had 3.32 per cent. The state socialist countries' foreign

holdings were low in capital value. Moreover, one must take into account the political

factors. The socialist economic corporations were controlled by the home governments, they

did not operate with the freedom of capitalist firms and exerted little influence over

governments. Many did not have a capitalist economic function.

To conclude: one could not argue that state socialism before perestroika was in a

financial crisis precipitated by participation in the global economy. The economies had a

relatively low participation in world trade, the companies (the 'red’ transnational

corporations) were small and had insignificant external penetration. Foreign direct inward

investment involved small companies and there was negligible penetration by transnationals.

Global capital, it is true, brought indirect consequences for the state socialist system - at

best a modicum of Western capitalist know-how concurrently with a market ideology.

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There were important differences, moreover, in the levels of exposure to international

economic influence in the different socialist countries: those adjacent to the European

Economic Community (particularly Hungary and Poland) had much greater exchange

compared to the USSR. One might concede that these countries were increasing their

trading links with the core states. However, they were not dependent on the world capitalist

system in the same way as were Latin American countries; moreover, one cannot

extrapolate from them to the state socialist bloc as a whole.

The state socialist semi-periphery was a relatively independent autonomous

economic entity, not closely linked, let alone integrated into the world economic system.

Superstructural institutions (such as ideology and a dominant communist party) are beyond

the scope of this paper, but they too were not supportive of capitalistic market forms of

exploitation and accumulation. The centrally directed system, which operated on a country

level, as well as regionally through COMECOM (Council for Mutual Economic

Assistance) which greatly limited the extent of interaction with the world capitalist

economy. Hence the context in which capital accumulation occurred was quite different

from that of modern capitalism. A qualitative shock, a transformation, was required to push

the state socialist societies into the world system. This came with the reform programme of

Gorbachev.

The Consequences of Reform: The Shift to a Global Economy

After 1989, the move to markets and private property strongly impacted on the

shape of foreign trade, foreign investment and the place of the post-communist countries in

the world global order. The global dimension of change is usually regarded positively as

part of the victory of liberalism and democracy. Others contest this judgment and contend

that globalisation has negative connotations: global corporations and political organisations

disempower individuals and weaken the responsibility of states because the processes of

government, previously subject to internal polyarchic control, are strongly influenced by

autonomous (and non-accountable) decision making by transnational organisations.

Gorbachev, and supporters or radical reform in the state socialist countries, regarded

the world economy in a positive light. 'The world economy is a single organism, and no

state, whatever its social system or economic status, can normally develop outside of it.

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This places on the agenda the need to devise a fundamentally new machinery for the

functioning of the world economy, a new structure of the international division of labour'17.

The object of policy was to join it. Here he follows writers such as Castells, who contends

that the exclusion of the USSR from world developments in information technology led to

stagnation18. Only by joining the global society could the socialist bloc advance not only to

provide its own citizens with a comparable standard of living, but also to procure the

technology necessary to compete militarily. This was a policy which was implemented by

Eltsin and has been continued, though modified, under President Putin.

Gorbachev had no doubts that the USSR would join the ‘core’ nations of capitalism

and in so doing would return to its European home. This has not happened in the way

anticipated by those who sought to join (or rejoin) the system of world capitalism. In joining

the world market, the reformed central European countries of the former socialist bloc have

joined the world economic system through their membership of the European Union. In

doing so they have become absorbed into the economic mechanism dominated by the

hegemonic old member states of the EU. Russia and Ukraine, the largest of the post-USSR

states, remain outside the EU. Putin and others claim that Russia has not only survived, but

is now sufficiently strong to be considered to be among the world’s leading military states

and economies. I would argue that Russia’s power has declined and the economy has

inherent weaknesses which preclude it from becoming a major world power, at least in the

foreseeable future.

This paper can deal only with a limited range of economic issues (it ignores

important currency reserves and military power). To evaluate the world standing of the

former state socialist societies, transnational penetration is surveyed in terms of foreign

investment as a proportion of gross capital formation, the position of the post-socialsit

countries in the ranks of the top capitalist corporations, the value added by, and the

employment dependency on, foreign company affiliates. Innovation and economic potential

are measured by the number of patents registered and spending on research and

development. Finally, we consider the effects of transformation on human development and

evaluate Putin’s claim that Russia is emerging as a major world power.

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Post State Socialist Countries in the World Ranking of Capitalist Firms

Following the collapse of Comecon and the opening of markets to the West, capital flowed

to the former state socialist societies. However, in comparison with advanced countries of

the West such flows were relatively small.

As the amount of FDI can vary greatly from year to year, reflecting foreign

purchases or investments of a ‘one off’ nature, EBRD has aggregated the inflows over the

whole period of transformation (1989 to 2005)19. The average for the CEECs was $2,714

per capita; for the Czech Republic the sum came to $5000. For the CIS states, the average

was only $643 per head; the only country with a substantial amount, though less than the

CEEC average (per person), was Azerbaizhan with $1225; and, despite the considerable

flows of FDI to Russian energy development, its total was the lowest for all the CIS

states just $61, lower even than Belarus. The FDI stock in 2006 for Russia came to 197.6

billion dollars, by comparison, China it was 292.6 billion; Russia is just above Ireland

which had a stock of 179.0 billion, and China just below Italy which had 294.8 billion.

West European countries are in a different league: the comparable figure for Germany is

502.3 and UK 1,135.320. These figures represent purchases of assets in the host

countries as well as capital investments in private companies. To what extent then

the privatization of companies in the post socialist countries lead to the growth

corporations having a world ranking?

, did

of

The economic power of capitalist companies is evaluated in two ways: by measuring

their revenue and by their market valuation. On the basis of these measures, the post-

socialist countries have very low rankings. Fortune magazine publishes a list which is based

on revenue21. This list has the advantage of including companies not quoted on the stock

exchange (and therefore having no market valuation). In the July 2008 edition (data for

March 2008) of Fortune 500 top global companies, the United States has 153 companies,

followed by Japan with 64; France and Germany had a significant number. The only post

socialist country to have any significant number of companies is China with 29; Russia had

only five companies, four in the energy sector and one bank, as shown on Table 1. The total

revenue and profits of these companies is relatively small in comparison with the top

Western corporations. Gazprom, the highest post communist earner had a smaller profit than

Exxon Mobil, thought a much higher proportion of its revenues in 2008.

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Table 1. Russian Companies in World Rankings of Top 500, 2008 (By revenue)

World Rank Company Revenue (mills$) Profit (mills$)

World Top Two:

1. Wal-Mart Stores 378,799.0 12,731

2. Exxon Mobil 372,824.0 40,610

Russian Top Five:

47. Gazprom 98,642 19,269

90. Lukoil 67,205 9,511

203. Rosneft Oil 36,184 12,862

357. Surgutneftegas 23,302 3,466

406. Sberbank 20,785 4,164

Source: Fortune Magazine, Top Hundred Companies, issue for July 21, 2008.

http://money.cnn.com/magazines/fortune/global500/2008/countries/Russia.html

A similar picture is seen when we consider companies by market value. The

Financial Times Global 500 lists companies which have at least 15 per cent of shares in ‘free

float’; it therefore may underestimate some corporations which have very large state or

family holdings. The FT allocates companies to a parent country on the basis of

‘incorporation, stock market listing and market perception’. On this basis, there are 184

companies with American ownership, followed by Japan with 49 and the UK with 41; the

post socialist countries include China and Russia with 8 each and the Czech Republic has 1.

Even if one limits the number of countries to Europe, by market value, Russia has only 19

companies in the top 500 European ones; it does, however, have the top company,

Gazprom22.

The sum of revenues earned as well as market value for four countries of the top

500 global companies, is shown in Figure 1. Data here illustrate the vast qualitative gap

between the USA and Russia and China. In terms of market value, these data put in

perspective the economic wealth of the two major post-communist countries: in terms of

revenue earned, the companies in the United States earned 41.7 times more than Russian

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ones and the comparable statistic for total market value was 16.46. They have

comparable economic wealth to countries such as Canada, Switzerland or Spain and are

considerably behind the leading European countries such as Britain, Germany and

France.

Figure 1. Total Revenue and Market Value Top 500 companies: USA, Britain,

Russia and China 2007

138.00 176.00

1,270.00

7,338.00

860 642.00

2,496.00

10,585.00

0.00

2,000.00

4,000.00

6,000.00

8,000.00

10,000.00

12,000.00

China Russia Britain USA

Bill$

Total Revenue Fortune500 $billsTotal Market Value FT 500 $bills

Source: Fortune Magazine, Top Hundred Companies, 23 July 2007. http://money.cnn.com/magazines/fortune500/2007. Accessed 20 Oct 2007. FT Global 500, 2007. http://FT.Com/Global500_2007_by_country. Updated 29 June 2007. Accessed 19 Oct 2007. China excludes Hong Kong - which had 8 companies valued at 393,079.8 million dollars.

A comprehensive range of the top 2000 companies has been constructed by Forbes. Each

company has an index derived from four major commercial components: sales, profits,

assets and market value. Again an element of caution is necessary, wholly state corporations

and others with no publicly available accounts are excluded. Russia has only 20 companies

in the list (just 1 per cent). The sector breakdown of data show that for Russia the largest

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group of companies was composed of oil and gas (8 companies) followed by materials (iron,

steel, aluminium, gold, nickel) with 7 companies, there were two banks, two telecom

companies and one utility (UES)23. China not only has twice as many companies (44) but

also the firms are much more diversified by sector. In 2007, the most numerous were banks

(9), followed by materials (8), transportation (7), insurance (3), utilities (3); oil and gas,

capital goods, technology and hardware and equipment, consumer durables, food and drink

– all with two firms; finally there were single companies from telecoms, construction,

diversified finances, and trading companies.

Even with the reservations noted about the omissions in the data bases, the data

show quite conclusively that the economic power of Russia and China, as measured by the

presence of large scale companies, are qualitatively at a lower level than the advanced

Western states - particularly the USA. China has a rather wider representation in terms of

economic sectors, but Russia is limited to companies in the primary sectors – oil and gas and

materials and is particularly lacking in high tech industries.

Transnational Companies

A crucial feature of the relationship a country has to the world economic system is

the position a country’s economic enterprises has in the system of business, and the extent to

which its economy is penetrated by foreign corporations. Transnational corporations are a

major economic instrument of international business. Transnational corporations (TNCs) are

constituted of parent enterprises and foreign affiliates24.

We measure the international spread of companies through their foreign earnings, the

number of foreign affiliates, and the number of foreign employees. By 2005/200625, on a world

scale, there were 78,411 transnational companies with 777,647 foreign affiliates. One should

bear in mind in interpreting these figures that UNCTAD take a relatively low threshold for

inclusion of affiliates (10 per cent of ordinary shares or voting power), thus in many cases

one cannot imply foreign control of the affiliate. The figures show the international reach of

parent companies. The countries of the ‘core’ of the world system dominate large scale

industry and finance.

Foreign affiliates of TNCs in 2006 employed over 70 million workers and FDI stock

came to over 12,000 billion dollars26. Foreign affiliates are also rising in the value of their

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assets, in 2006, estimated sales rose by 18 per cent, and value added (gross product) rose by

16 per cent (over 2005). Overall, affiliates of TNCs accounted for 10 per cent of world GDP

in 200627. A top company like General Electric has 1,184 foreign affiliates, over 412

billion dollars of foreign assets, 60 billion foreign sales, and employs 155,000 foreign

workers; the comparable figures for BP (ranked no 4) are 417 affiliates, 161 billion foreig

assets and 78,000 foreign emp

n

loyees28.

The top hundred companies play a major role in international production. The top

100 companies (ranked by foreign assets) include only those with affiliates in majority

ownership29. In 2005, they accounted for 10%, 17% and 13% respectively of foreign assets,

sales and employment of all TNCs30. Eighty four of the companies have headquarters in the

EU, Japan and the USA, the largest cluster of which is the USA with 24 corporations. The

transnational corporations have immense economic (and consequently political) power. In

2005, 54.5 per cent of the assets of the world’s 100 largest TNC’s were located outside the

home of the corporation, as were 55.5 per cent of sales and 53.1 per cent of their

employees31. Profits, of course, were repatriated to the owners in the home countries and

thus wealth is transferred to the hegemonic economic states. The top 10 TNCs located in

South and East Europe and the CIS had a much lower foreign presence than those in the top

100 companies. Their earnings derived principally from sales, their ownership of assets was

much less and they employed relatively few personnel. The comparable figures (for 2003)

are: assets – 25 per cent, sales 56 per cent and employment 8.5 per cent32.

The companies formed after the collapse of state socialism have little presence in the

world of dominant transnational companies. In the UNCTAD 2007 World Investment

Report, there is not one former European communist country in the top 100 non-financial

companies. China also has no company, though Hong Kong has one (Jardine Matheson

Holdings Ltd) in 97th place33. If one considers the ranking of the top hundred companies by

geographical spread, Lukoil is the only European post-socialist country ranked 90th with

affiliates in 19 host countries, it is followed by the Lenovo group from China ranked 94th

with affiliates in 15 countries34. A similar situation is found for transnational financial

companies: of the top 50 (ranked by geographical spread, which is essentially a measure of

foreign affiliates) there is only one communist or post communist country, China, with the

Bank of China occupying 40th place35.

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Table 2. Number of foreign affiliates in post-communist countries with Comparisons

to other countries (2006 or latest available year).

New EU members Foreign Affiliates! Czech Rep (1999)< 71,385> Hungary 26,019 Poland 14,469 Slovakia 2,780 Slovenia (2000) 1,617 Lithuania 2,877 Latvia 603 Estonia 2,858 Other former communist countries Bulgaria (2000) 7,153 Albania 16 Romania (2002) 89,911^ Croatia 2,532 CIS Total 10,782 Of which Belarus 52 Ukraine 367 Russia 1,176 Kazakhstan 1,837 Kyrgyzstan (1998) 4,004 Moldova 2,670 Comparisons: USA (2002) 24,607 Turkey 14,955 UK 13,667 Brazil 3,549 China (excluding Hong Kong) 280,000 World Total 777,647 !Number of foreign affiliates in the economy shown. ^These figures appear abnormally high, but are given in the source. > The high figure for parent corporations in Czech Republic probably accounted for by splitting of former Czechoslovakia; of this figure 53,775 are fully-owned foreign affiliates. < Years before 2004 shown in text. Definition: ‘An equity capital stake of 10 per cent or more of the ordinary shares or voting power for an incorporated enterprise.. is usually considered as the threshold for the control of assets. A foreign affiliate is an … enterprise in which an investor, who is a resident in another economy, owns a stake that permits a lasting interest in the management of that enterprise’. The threshold is 10 per cent of equity state or equivalent. Source: World Investment Report 2007. UNCTAD, United Nations, New York, Geneva 2007. pp. 217-218. Data based on national sources. Definition cited from the 2005 Report, pp.297-8.

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Affiliates and Global Reach

One measure of economic dependence is the extent to which companies in a country

are owned by foreigners. The growth of capitalism has led to foreign affiliates playing a

significant role in the economies of the post communist countries. Foreign penetration, for

post-communist countries in the European Union, as measured by affiliates to foreign firms,

was exceedingly high (see Table 2). There were over 71 thousand in the Czech Republic

alone. As one would expect given the much lower level of foreign direct investment noted

above, in the CIS countries foreign ownership is much less: of the 10,782 firms, 4,004 are in

Kyrgyzstan (data only available for 1998); Russia in 2004 had 1,176, Belarus - 52 affiliates,

and Ukraine, only a few hundred. China seems a special case, hosting approximately a third

of all foreign affiliates of TNCs on a world scale. As China has a small share of world

inward investment (2% in 2006) these foreign affiliates must be small in size.

Figure 2. Affiliates of Foreign Corporations: Poland, Russia, Turkey and USA

14,469

1176

14955

24607

0

5,000

10,000

15,000

20,000

25,000

Poland Russia Turkey USA

Corp

orat

ions

Foreign Affils

Transnational companies themselves vary in the extent to which they have foreign

exposure and global reach. The Transnational Index (TNI) of a company is the average of

three ratios: foreign assets to total assets, foreign sales to total sales and foreign employment

to total employment. Of the top 100 companies, those located in Japan had the lowest TNI

index in 2003 (42.8), those in the USA 45.8, smaller European countries had higher

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exposures: Britain was 69.2 and ‘small European countries’ 72.236. The top transnational

corporations (TNCs) in South-East Europe and the CIS are below the averages cited above,

being only 36.6. Their global spread is much less37. The average for a company like Lukoil

in 2004 was only 37.8, most derived from its foreign sales and Norilsk Nickel’s index was

32.338. The top company ranked by foreign assets, General Electric, in 2005 had a TNI of

50.1, and the number 2 world company, Vodafone, 82.439. Clearly such companies were

much more dependent for sales and profits abroad than the relatively small TNIs of the post-

socialist countries. The post-socialist countries had entered the ‘core’ of industrialised

nations, but on different terms to the dominant countries.

These data show that the expectations of those reformers who conceived of

integration into the world economy have been fulfilled to some extent. The new EU

members and China have certainly attracted investment from foreign corporations and have

an even larger number of foreign affiliates than many established Western capitalist

countries. The large numbers of take-overs has led to a growing preponderance of foreign

companies in some of the central European states, though not so in the CIS. In all the post

communist countries, there has been a lack of capacity to form large capitalist companies

able to complete in the world economic system. The only exception is a small number of

Russian companies exploiting natural resources detailed below. While the new EU member

states have been integrated into the world economic system, they have not become equal

members of the dominant ‘core’ nations. While traditionally the ‘core’ refers to the

dominant European countries (and USA) and the periphery to the south, changes in the

production chain involving the spread of manufacturing through outsourcing have led to

differentiation of the capitalist ‘core’’ and the emergence of a hegemonic bloc (USA, Japan,

Germany and UK) among the ‘core countries and others (the new members of the EU

among them) which constitute a subordinate group. The CIS countries have remained on its

semi-periphery. This becomes clearer when we consider the exposure of the post socialist

countries to global influence.

Globalisation of the post socialist countries

Above we considered the global reach of corporations; we now turn to consider the

extent to which the economies of countries are exposed to global influences. The

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transnationality index for a country (TNI) is calculated as the average of four ratios: FDI

inflows as a percentage of gross fixed capital formation for the past three years, FDI inward

stocks as a percentage of GDP in a given year, value added of foreign affiliates as a

percentage of GDP in a given year, employment of foreign affiliates as a percentage of total

employment in a given year.

For a country, a high index indicates a significant economic dependence on foreign

companies. In 2004, the average for developed countries was 24. There is a great range

between the exposure of developed economies: lowest was Japan with 1 per cent, the USA

had a low index (6 per cent) and UK 17 per cent. As one might expect from the earlier

discussion, the new post communist members of the EU had high exposures: Estonia (47),

Bulgaria (39.6), Slovakia (35.4) and Hungary (32.8), Czech Republic (27). Russia had a

fairly low exposure (12) (though for 2002 it was 18 due to the disproportionate contribution

of FDI stock as a percentage of GDP) ; Ukraine (14)) and Belarus (5) - one of the lowest in

the world. China also had a low ratio – only 840.

If one considers the proportion of employment by foreign affiliates (as a

proportion of all employment), Hungary has a figure of 27.4 per cent and Latvia 10.4 per

cent; the figures for Russia, Ukraine and Belarus are 1.6, 0.7 and 0.3 per cent

respectively41. While these figures are for 2002, they will have risen but not changed

very much since then.

Of course, a country with very large export earnings can be dependent on foreign

earnings. The pattern and type of foreign trade is also indicative of the position of countries

in the world system. Figure 3 depicts the types of exports of post-socialist and, for

comparison, some Western countries.

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Figure 3. Structure of Exports, Selected Countries, By Sector 2004

0

20

40

60

80

USA UK

Czech

R.

Russ Fe

d

Ukrain

e

Polan

d

Belar

us0

10

20

30

40

HiT

ech

Primary Manufac HighTecMan

Primary and manufacturing measured on left axis (per cent), High Tech exports (% of manufactured exports) measured on right axis.

Study of Figure 3 illustrates the significantly different trading profiles of the post socialist

countries compared to those of the leading capitalist states. It brings out the asymmetric

relationship of the type of exports between the post-communist countries and UK and USA.

Russia has a particularly skewed distribution of exports, its energy sector exports accounting

for 62 per cent of merchandise exports in 2004. The top five traded products for Russia

(value traded 2002-03)were: crude petroleum (27%), natural gas (14%), ‘special

transactions’ (arms), (12%), petroleum products (11%), aluminium (3%); for Ukraine, iron

steel (primary forms) (12%), iron (steel shapes) (7%), petroleum products (refined) (5.7%),

wheat (unmilled) (3.8%). The United States had the following top exports: transistors

(6.5%), aircraft (6%), motor vehicles parts (4%), special transactions (3.2%), and passenger

motors (3.1%) (the low figures indicate a much more diverse range of export products); for

the UK, the leading exports were passenger motor vehicles (5.6%), pharmaceutical products

(5.6%), telecom equipment (5%), crude petroleum (5%), engines and motors (3.7%). Russia

provided 9 per cent of the world’s crude petroleum, and 18 per cent of the world’s gas;

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17

Ukraine exported 7.6 per cent of the world’s iron and steel in primary form and 5.2 per cent

in steel shapes.

The ‘high tech’ component in manufactured exports is extremely low for all the

central and east European countries, except for Hungary. By value in the period 2002-3,

Hungary’s top exports were in the commodity groups of: telecom equipment (12.1%),

combustion piston engines 9.3 (%), automatic data processing equipment (5.6%), and motor

vehicles (3.9%). These derived mainly from foreign companies hosted in Hungary and were

relatively small in scale: its telecom equipment, for example, only accounted for some 2.13

per cent of world output42. By comparison, the USA’s production was in high tech

commodities: 17 per cent of the world’s transistors and valves and 36 per cent of aircraft;

the UK produced 4.7 per cent of the world’s passenger vehicles and 9 per cent of

pharmaceutical products43. The only major industrial power in the post-socialist world is

China. Eight per cent of her exports are in automatic data processing equipment, 6.3 per cent

in telecom equipment, 4.5 per cent in office machinery, 3.53 in toys and sporting goods and

3.3 per cent in footwear. Importantly, automatic data processing equipment came to 15.56

per cent of world exports, and telecom equipment 11 per cent44.

The conclusion to be drawn from this analysis is that, with the exception of China

and Hungary, the post-socialist societies have entered the global system, but they are at the

low value added and low technology place in the world production chain. While members of

the Commonwealth of Independent States are less dependent on the world economy and

retain many companies in national ownership, their exports are not only in low tech

manufacturing, but in primary products – timber, ores, minerals and particularly energy. The

post socialist countries become part of the lower end of the world production chain. One of

the reasons for this, when studied in comparative perspective, is the minimal level of

research and innovation.

Innovation

One expectation of optimistic reformers of state socialism, such as Castells and Gorbachev,

was that entry of the USSR to the world economy would speed up the process of innovation

and development. This has not happened. We consider two measures of a country’s level of

innovation: registration of patents and the amount of research and development.

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18

The registration of patents is not a perfect measure of invention in the economy as

the propensity to register inventions varies between countries and ‘patents’ refer to a wide

range of items. It is sometimes contended that patenting is utilised as a legal device in liberal

market economies and therefore it is not a good measure of actual innovation45. Patents also

combine ‘radical’ and ‘incremental’ innovation; and it is often contended that the former

take place in liberal market economies and the latter in coordinated ones46. Nevertheless, it

is an index to plot comparative trends between ‘core’ capitalist and post-socialist societies.

We also need to bear in mind that the post-socialist countries, which under the previous

regimes were not concerned with individual property rights, only started patenting in the

1980s: in 1985, of applications at the EPO, USPTO and JPO offices , Poland had 3, Russia

20 and China 30.47 The World Intellectual Property Organisation (WIPO) collects national

data on patent registration and this may be used as one index to compare innovation in

different countries. Figure 5 shows the rankings of a sample of former state socialist

countries and some Western ones. The table shows the number of patent filings lodged at

the patent offices in Japan, USA, China, Germany, Russia, UK and Poland for the year

2005. It is differentiated by residents and non-residents: the latter include patents registered

by affiliates of foreign based companies.

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19

Figure 4. Patent Filings by Residents and Non-Residents 2005: Selected Countries

050,000

100,000150,000200,000250,000300,000350,000400,000

Japa

nUSA

China

Germany

Russia UK

Poland

Filin

gs

Res Filings Non-Res Filings

Source: World Intellectual Property Organisation (WIPO)

www.wipo.int/ipstats/en/statistics/patents. Accessed 26 October 2007.

What is clear here is the outstanding number of patents registered in Japan and the USA.

The USA and Japan owned 28 per cent and 21 per cent of the patents in force in the world in

200548 . China outstripped European countries such as the UK and Germany on all indexes,

though the country had a large number of applications from, and grants to non-residents.

Russia, in terms of filings by residents did better than the UK. The low numbers of filings

by ‘non-residents’ in Russia is probably due to the role of foreign affiliates, who make

applications in the parent or host countries. Japan with a low number of foreign affiliates has

a low registration of non-resident filings; Russia is in the same position, except of course it

is qualitatively on a different scale of innovation. For the period 2000-02, OECD data show

that EU companies have the largest share of foreign ownership from Europe, whereas for

non-European countries the American companies are the main foreign-owner (or co-owner).

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20

For Russia, EU companies account for the largest share of foreign ownership, while for

China, US and EU ownership is similar49. The overall picture is of the quantitative and

qualitative lead of Japan and the USA over the rest of the world. The European post-socialist

countries, including the Russian Federation, are simply outclassed by the USA and Japan.

China is a rapidly emerging power: in 2005 applications rose by 33 per cent compared to

2004. However, China still lags behind the leading countries the USA and Japan.

Inventions, reflected in the numbers of patents applied for, are the result of research

and development investment which again are widely uneven on a world basis. As illustrated

in figure 5, the USA followed by the industrialised capitalist states greatly outranks the

remainder. The USA and Japan have a much higher absolute expenditure on R and D and

Japan has a much greater relative research effort than any other country. China and Russia

are in a completely different league to the Western major powers. To bring home the

significance of the differences: the Ford Motor company spends 7.2 billion dollars on

research and development, the total for the Russian Federation is 4.3 billion – the same as

Volkswagen. Poland spent 1.1 billion – about half that of Hitachi50. As the largest

companies are located in the Western countries, it follows that they will dominate the R and

D spending. Of the 700 largest R&D spending firms, 296 are located in the USA and

account for 42 per cent of the spending, followed by Japan (22 per cent), and Germany 7.6

per cent. China accounts for only 0.3 per cent (Russia does not appear in the table)51.

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21

Figure 5. Research and Development: USA, Japan, Germany, UK, China and Russia

0

50

100

150

200

250

300

350

USA Japan Germany UK China Russia

Bil$

0

0.5

1

1.5

2

2.5

3

3.5

%G

DP

TotExp 2002 2000-04 Av GDP

Sources: Total Expenditure on R and D, Unctad, World Investment Report 2005. United Nations: Geneva and New York. 2005. p. 105. Per cent of GDP, World Bank, 2007 World Development Indicators, World Bank, Washington DC 2007, pp. 308-310.

One other index of the level of scientific advancement is the ranking of research

universities. According to an authoritative Chinese study, the United States again

predominates in the ranking of world universities. Of the post Communist countries, only

Russia (MGU ranked 70th) appears in the top 100: Japan had six entries; of the top ten,

the USA had eight, the other two being from the UK52. In a Newsweek survey of the top

hundred universities, there was a similar result, except this time the non-Western

universities included Japan 5, Hong Kong/China 3, and Singapore 153. One might

concede that the post-socialist states might be under-estimated by these measures. Even

so, the degree of error would not account for the magnitude of the difference between

them and the ‘core’ capitalist countries.

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22

IMPLICATIONS AND CONCLUSIONS

Before the period of transformation, the state socialist societies exchanged with, but were

not part of, the world capitalist market economic system. They formed a separate economic

formation. At best, only two European countries (Poland and Hungary) had significant

exchange with the world economic system but they were not dependent on it. The

transnational corporations played no role in the economies of state socialism. Following the

fall of the socialist system, the post-communist countries have moved into the world

capitalist economy. But they have not entered as equal partners of the core states. The post-

communist countries, including China, contain a small number of transnational companies.

The central European states (Hungary and Czech Republic) are highly dependent on foreign

transnational companies for investment, income and employment. While Russia receives a

considerable amount of investment for its energy industry, it and Ukraine remain largely

self-sufficient (or self-deficient) with respect to gross capital formation, value added and

employment. Belarus, like Japan, has little foreign capital at all. With the exception of

Hungary’s foreign owned companies, the exports of the post-socialist European states are

not made up of high technology products. Foreign direct investment certainly has had an

initial beneficial effect in creating jobs, bringing technology and advanced administrative

methods. It also has a down side, there is a high level of repatriated profits: returns to

investment in developed countries average around 7-10 per cent, in the post-socialist

countries it is estimated to be much higher – Slovakia, 17 per cent and Russia, 15 per cent54.

As labour costs are so much lower, the profit returned to capital per unit of output is much

greater in developing peripheral countries than in the core. Hence a shift of employment has

occurred from the transnational corporations to the affiliate companies. Very few companies

in the European post-socialist countries have an international dimension: those that have one

are energy corporations and those based on raw materials, and their international presence is

derived from sales, rather than from ownership of assets or employment abroad.

The former state socialist societies have different structures of capitalism. Czech

Republic and Hungary are highly dependent on foreign direct investment for capital

formation and employment. They have become integrated into the economies of

neighbouring old EU states on the terms of the latter. The post-communist states in the

European Union are incorporated into the world system, but not as equals with the ‘core’

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23

Western states, rather they have the character of ‘depressed areas’. A change has taken place

in the industrial structure of the ‘core’ capitalist countries – they have moved significant

sectors of manufacturing to states in the semi-periphery and periphery but extended their

service sector, and strengthened their research and development and access to intellectual

property rights. Joining the EU has led to formal membership of the ‘core’ countries, but the

economic life of the new members has more in common with the peripheral countries: a

decline of national industries and companies, unemployment and mass emigration. The

‘core’ of the world system is itself differentiated between the politically hegemonic states

(USA, UK), other dominant countries (such as Germany and Japan) and a number of

subservient members, such as the new members of the EU.

In Russia and Ukraine, the globalisation of companies and the role of transnational

companies have been limited. Russia is becoming a hybrid economy with a large primary

exporting sector, and a declining undeveloped manufacturing one. The Russian energy

sector is integrated into the world economy and a few significant transnational companies

are emerging. Unlike the dominant Western based transnationals, however, they lack

significant foreign affiliates. Other elements of the economy, manufacturing and particularly

agriculture are in decline. Except for Hungary, all the former state socialist countries,

particularly Russia and Ukraine, have a low component of high tech industries in their

export profiles; they are at a qualitatively lower level of research and industrial innovation

than the core Western countries. They are at the low quality end of the production chain.

Castells’s conclusion that the autonomy of the Soviet bloc prevented development and

retarded the countries’ 'fundamental sources of economic and military power'55 has not been

reversed after the movement of the post-communist countries into the world economy. The

USA has emerged as a dominant hegemonic economic, political and military power.

The assumptions of many champions of entry to the world economy, both before

and after the fall of state socialism, are that participation benefits all. What is lacking in such

accounts is recognition that the world economy is composed of rich and poor states,

economically advanced and economically backward, militarily powerful and weak. The

core countries extend their lead and keep research, design and development, finance, and

ownership of intellectual and physical property. Their economic power is constitutive of

their political hegemony. The quality and quantity of their weapons of mass destruction

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24

cannot be matched. The peripheral states provide out-sourcing as well as the provision of

primary and secondary products, they experience an outflow of profits and labour in

return for FDI and manufactured products. There is an asymmetric relationship both

economically and politically.

Overall, the countries of the post-USSR (the Commonwealth of Independent States)

are moving towards the periphery of the world system. The predicted rise in wealth and

living standards, as a consequence of a movement into the world economy, has not

materialised for all; inequality of income and wealth has increased. Of the European post-

socialist states, Russia is the only one with any global economic presence. But in terms of its

companies, it is restricted mainly to a small number of energy companies. In many respects

Russia and Ukraine are not fully incorporated into the world system, as their economies

have a high level of state ownership and coordination, and foreign companies have little

penetration (their transnationality index is below the average for developed and developing

economies). Their military and political elites (not discussed in this paper) are not integrated

into those of the Western hegemonic states. In many ways they remain in the semi-

periphery, though involvement in the world system is very much greater than in Soviet

times. Economic growth under President Putin is increasing and levels of inequality and

poverty are falling. But these rates are based on very low and very high base years.56

It is beyond the scope of this paper to detail future policy options. Many nations on

the periphery, when confronted with the economic, political and military power of the core

states, have little alternative than to accede to their policies. But some countries (Russia,

Brazil, China, and India) of the ‘semi-periphery’ may have more options than assumed by

world system theorists and those who envisage a ‘one world’ economy regulated by

hegemonic Western capitalism. There are divergencies as well as convergence in the world

economy57. The ‘semi-periphery’ may lead to the rise of alternative groupings of states

which interact with the core but are not part of it – in the same way as the state socialist

societies before their collapse. The economies of many countries have production which is

local in character, regional companies and political actors have considerable scope for

action independently of the global economy.

In this context, the Russian Federation has a limited number of choices. Membership

of the EU, as an alternative regional block sustaining political and economic networks, is not

24

25

on the agenda. Russia has to trade as best it can with the world market and meet the

conditions of global institutions such as the WTO. Concurrent with pursuing economic

exchange with other actors in the world economy (EU, USA, Japan, China, India), it has

opportunities as part of a wider CIS. The CIS has a market large enough to support home

industries and it has valuable human and physical resources (crucially reserves of oil, gas

and other minerals). In this context there is an option for a type of national corporatist

capitalism as an alternative to participation in the global economy on the terms of neo-

liberalism. This would provide a base for the widely advocated notion of ‘self-

determination’ and ‘sovereignty’ for Russia58. The key to successful policy is the utilisation

of economic rents, earned from materials’ export industries, for innovation and renewal.

Following the economic history of the successful Western countries, it is for the government

to define the industrial sectors which the country should support. As noted elsewhere59,

Russia and Ukraine, in comparison with developed capitalist countries, lack capital

accumulation (oil and gas excluded) to such an extent that one may question whether they

are sustainable growth-inducing capitalist economies. In these circumstances, economic

coordination is a task for the state, rather than markets, in directing resources to support

technically advanced industries and research. Following the lead of China, a state led type of

coordination of capitalism is probably the best course for Russia to follow.

25

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26

References

1. David Held and Andrew McGrew, 'The End of the Old World Order? Globalization and

the Prospects for World Order', Review of International Studies, Vol 24 no 5 (1998), p.220.

2. Paul Hirst and Grahame Thompson, Globalization in Question. Polity Press, Second

edition. Oxford, 1999.

3 An international corporation is one with subsidiaries that extend the firm's production

beyond the boundary of one country.

4. Leslie Sklair, 'The Transnational Capitalist Class and Global Capitalism'. Political Power

and Social Theory. Vol. 12 (1998). p.3

5. I. Wallerstein, The Capitalist World Economy. Cambridge, Cambridge University Press,

1979. p. 271.

6 Wallerstein, ibid p. 280. Christopher K. Chase-Dunn makes an analogy with socialist

parties under capitalism: they are separate from, but part of, capitalist economies; with time,

trade unions have become functionally integrated parts of modern capitalist societies.

Christopher K. Chase-Dunn, Socialist States in the World System. Beverly Hills. Sage.

1982. p.3.

7. I. Wallerstein, The Modern World-System. 3 vols. New York and San Diego: Academic

Press, 1974, 1980, 1988. For an overview of Western literature see: L. Sklair,

Globalization: Capitalism and Its Alternatives. Oxford: Oxford University Press, Third

Edition. 2002. In Russia, see the important set of essays: Grani globalizatsii, Moscow:

Alp’ina. 2003.

8 Full statistics in ten yearly intervals see: Statisticheski ezhegodnik stran chlenov Soveta

Ekonomicheskoy Vzaimomoshchi 1988. Moscow: Goskomstat 1988. pp. 339-40. 9 Statisticheski ezhegodnik stran chlenov soveta ekonomicheskoy vzaimopomoshchi 1984.

Moscow 1984 p. 297

27

27

10. Figures calculated from: 'Recent Changes in Europe's Trade', Economic Bulletin for

Europe, Vol. 37, no 4. 1985. Population data, Statisticheski ezhegodnik 1988. (Moscow

1988) p.16. GNP data from CIA, The World Factbook 1986. US Government Office,

Washington DC. 1986 p. 227.

11. Data refer to USSR and Eastern Europe. 'The European Economy in 1975'. United

Nations, Economic Survey of Europe in 1975. New York: 1975. p.144.

12. For details of the 1970s see, J. Wilczynsky, The Economics and Politics of East-West

Trade. London: Macmillan 1969, pp. 382-3. See also the discussion in A. Gunder Frank,

Crisis: IN the World Economy. London: Heinemann, 1980, pp.194-202.

13. The following companies had investments in foreign countries, after the collapse of the

socialist countries officials in these companies were well placed to procure and deal in

foreign assets. For instance, from the USSR, Gosbank 20 investments, Soyuznefteexport

(18), Vneshtorgbank (20), Sovracht (23), Exportles (14), Stankoimport (15),

Mashpriborintorg (10), Soyuzchimexport (12). For a full list see: McMillan, pp. 53 to 55.

14. Carl H. McMillan, Multinationals from the Second World. London: Macmillan, 1987.

p.34.

15. McMillan, p.35.

16. McMillan, p.43.

17. M. Gorbachev, Address to the United Nations, 1988. Cited by M.Castells, The End of

Millennium, 1988. p.5.

18 Manuel Castells, The End of Millennium, Blackwell: Malden and Oxford. 1998. p.9. 19 EBRD, Transition Report 2006, London:EBRD 2006. pp.32, 38. 20 WIR 2007, pp.255-7. 21 The data include companies which ‘publish financial data and report part or all of their

figures to a government agency’. 22 FT European 500. Data for 30 March 2007, published 29 June

28

28

FT.com/global_500_2007. Accessed 19 Oct 2007. 23 The Global 2000, Forbes.com. Data for 29 March 2007. Accessed 21 October 2007. 24 A formal definition of a transnational corporation (TNC) is that it is ‘an incorporated or

unincorporated enterprise comprising parent enterprises and their foreign affiliates. A parent

enterprise is defined as an enterprise that controls assets of other entities in countries

other than its home country, usually by owning a certain equity capital stake’. A foreign

affiliate is an incorporated or unincorporated enterprise in which an investor, who is a

resident in another economy, owns a stake that permits a lasting interest in the

management of that enterprise (an equity stake of 10 per cent for an incorporated

enterprise, or its equivalent for an unincorporated enterprise). In World Investment

Report (WIR), subsidiary enterprises, associate enterprises and branches are all referred

to as foreign affiliates or affiliates. World Investment Report 2005 (WIR 2005),

UNCTAD, Geneva 2005.p. 297. 25 Data taken from World Investment Report 2007 (WIR 2007). United Nations: Geneva

and New York, 2007 pp. 217-8. Some countries reported data for earlier periods. Data

cited are under estimates due to imperfections in collection. 26 WIR 2007, p.9. 27 WIR 2007, pp.8-9. 28 WIR 2007, p. 229. 29 WIR 207, note c p.231. 30 WIR 2007, p. 24. 31 United Nations Conference on Trade and Development, World Investment Report

2007. United Nations: New York, Geneva 2007. p.25 32 WIR 2005, p.20. 33 WIR 2007, p.231. 34 WIR 2007, p. 236. The geographical spread index is calculated on the basis of the

number of foreign affiliates, divided by the total number of affiliates, multiplied by the

number of host countries. 35 Definition see WIR 2007, p. 26, data p.235. 36 WIR 2005, p.18.

29

29

37 Ibid p.19. 38 WIR 2006, Annex Table A A.I.13. 39 WIR 2007, p.229.

40 United Nations Conference on Trade and Development, World Investment Report

2007. United Nations: New York, Geneva 2007. p.13.

41. World Investment Report 2002: 275. These data are not given in the 2003 edition. 42 UNCTAD, Handbook of Statistics, NY and Geneva: United Nations 2005.p.168. 43 UNCTAD, Handbook of Statistics, NY and Geneva: United Nations 2005. 44 Ibid p. 163. 45 Colin Crouch, Capitalist Diversity and Change, Oxford: Oxford University Press 2005.

p. 30. 46 Crouch, Capitalist Diversity… ibid. 47 OECD, Patent Data Base. OECD September 2006. Fig. 1.1. 48 World Intellectual Property Organisation, Patent Report 2007, p.25.

www.wipo.int/ipstats/en/statistics/patents. Accessed 26 October 2007. 49 OECD, Compendium of Patent Statistics. OECD 2006, p.33. Data based on

applications to the EPO, 2000 to 2002. 50 World Investment Report 2005, p.120. 51 WIR 2005, p. 121. 52 Academic Ranking of World Universities, 2006, Institute of Higher Education,

Shanghai Jiao Tong University,

http://ed.sjtu.edu.cn/rank/2006/ARWU2006_Top100.htm. Accessed 9 March 2007.

The formula take into account alumni winning Nobel Prizes and Fields Medals (10

percent), staff winning Nobel Prizes and Fields Medals (20 percent), "highly-cited

researchers in 21 broad subject categories" (20 percent), articles published in Nature and

Science (20 percent), the Science Citation Index, Social Sciences Citation Index, and Arts

and Humanities Citation Index (20 percent) and the size of the institution (10 percent).

These rankings have been criticized for placing too much emphasis on the Nobel

prizewinners, and field medals are weighted towards mathematics. The ratings are biased

30

30

therefore towards science and under weigh humanities. However, they are appropriate for

the present work.

53 Newsweek 13 August 2006. Newsweek uses similar indexes to Shanghai index, but in

addition includes per cent of international Faculty, percentage of international students,

citations per Faculty member, ratio of Faculty to students and extent of library holdings. 54 Gabor Hunya, Increasing Significance of Repatriated and Reinvested Earnings,

Vienna: Institute for International Economic Studies, May 2006. Cited by M. Haller,

‘Economic Elites and Their Role in European Integration and Enlargement’ in David

Lane, György Lengyel, Jochen Tholen (eds), Restructuring of the Economic Elites after

State Socialism. Recruitment, Institutions and Attitudes, Stuttgart:Ibidem, 2007.

55 ibid. p.67.

56 Nearly a fifth of the population in 2007 are living in poverty, the number of registered

unemployed was over 5 million, and the rate of employment has fallen greatly from

Soviet times. The average salary in 2007 was only $540 per month. Russia RG in Daily

Telegraph (London) Oct 2007.

57 For further discussion see: H. Kitschelt, P. Lange, G. Marks and J.D. Stephens,

‘Convergence and Divergence in Advanced Capitalist Democracies’ in H. Kitschelt, P.

Lange, G. Marks and J. D. Stephens (Eds), Continuity and Change in Contemporary

Capitalism. Cambridge University Press 1999, pp.427–460.

58 See the discussion in Grani globalizatsii, Moscow 2003, esp. chapter 9 and V. Yu.

Surkov, Osnovnye tendentsii I perspektivy razvitiya sovremennoy Rossii, Moscow:

Sovremennaya gumanitarnaya akademiya, 2006. 59 ‘Emerging Varieties of Capitalism in Former State Socialist Societies’, Competition

and Change. Vol. 9, No 3. September 2005: 221-241.