Russia’s defense sector, like its U.S. counterpart, forms a key aspect of the country’s national power. Unlike American defense companies, however, the Russian defense industry largely belongs to the state, de facto if not always de jure. Accordingly, Russia’s large defense corporations and their subsidiaries compete not in a free market but within a so-called administrative market—an ongoing redistribution of government resources, mostly via Moscow, among players important to the political system and its sustainability. The industry bolsters Russia’s modern-day authoritarianism not only by projecting power but by providing a major part of the system’s social base—from the ordinary Russians who benefit via employment to the political elite involved in managing the industry or reliant on its contributions to local coffers. This gives the state too little freedom to reform a sector plagued by economic inefficiencies that create a drain on the budget, leading instead to the partial restoration of a command economy and raising the specter of economic overstretch.
Read Full Article »
