Wednesday, May 17, 2006

Hobbsian Jungle, Russian Style

"In Russia's early transition days, amid the collapse of authority and resulting lawlessness, organized crime groups wielded great influence. Teams of armed thugs used to carry out takeovers, arriving at a businessman's door with little to back them up but the threat of violence, even murder. Indeed, contract murders reached a frequency of more than one a day in the mid-1990's.

Later, law enforcement, from the tax police to special forces units, played a role in forcing transfers of property in the scramble for assets of the former Soviet state.

In what became known as "masky shows," police officers, their faces often hidden behind ski masks, swarmed into a business to intimidate employees and force concessions from owners. The headquarters of the Yukos oil company, for example, were the scene of a series of high-profile masky shows. .

Now, the trend in business crime in Russia is decidedly white-collar — with the faking of documents, hiring of lawyers or payoff of judges — but no less insidious, Mr. Matthews and other business owners say."

That is from a story in NYT, read more here.

Questions I have:

1) What prompted the change in the form of property takings? Was it endogenous to some other changes in institutions?

2) Why companies did not hire private protective agencies to protect them from predators? One answer might be that only large firms had the resources to do so, but not for most mid and small size concerns...

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