Book Review

Book: Vadim Volkovs Violent Entrepreneurs: The Use of Force in the Making of Russian Capitalism

Student: Nadya Stoynova Student Number: 1901885 Instructuror: B. Herborth

Vadim Volkovs book Violent Entrepreneurs: The use of force in the making of Russian capitalism is a valuable examination of the origins and evolution of providers of protection in post-Soviet Russia. The role of these actors in building capitalism in Russia is aptly demonstrated by terming such groups violent entrepreneurs - the book focuses on market supporting functions performed by organized criminal groups, private security services (PSSs), private protection companies (PPCs) and state agencies when their services are provided outside of formal capacity for personal gain (the focus, however, is almost exclusively on organized crime).Yet the state as an official institution is not completely left out of consideration and some implications of the wide spread operation of violent entrepreneurs are considered. Despite being Russian himself, Volkov manages to provide an unbiased account of the evolution and activities of violent entrepreneurs. He utilizes his closeness to the events in a fashion that makes the book believable and somewhat of an insider account. Most of the book, as already mentioned, focuses on organized criminal groups and their dynamics. However, the chapter before the last is dedicated to the private security services and private protection companies that were usually formed by the former employees of the police, military and the interior ministry. Those companies were legal, even though they employed illegal tactics at times and some of them were in fact criminal groups that were attempting to bring their activities to the legal realm. What does not become clear, though, is why there is such extensive attention for organized criminal groups and not for PSSs and PPCs. The dynamics of their emergence and evolution, however, are not explored in much detail. The book does leave the impression that because they entered the scene a bit later, they are important more as showing the continuous erosion of the authority and capacities of the state, rather than as new actors that changed the situation significantly. Before setting out his own theoretical framework, Volkov briefly discusses approaches focusing on Communist legacy as responsible for the creation of post-Soviet organized crime out of a blend of corrupt nomenklatura and the classical Soviet criminal underworld. The author, while recognizing the importance of historical path dependency seems to prefer using a less historically bound theory. He instead opts for modified version of institutional economic theory. Institutional economics treats the rise of violent entrepreneurs as a response to the emergence of the new institutions of the market and private property in places where state weakness precludes the centralized provision of the supporting services needed for market mechanisms to function effectively. Violent entrepreneurs provide the protection, contract enforcement, debt collection and other services that are usually performed by the state.

The sociological twist Volkov adds to the institutional economic framework is Veblens concept of the predatory man1 who is ever present but becomes widely visible only under certain circumstances. The concept is tied to sociological theories of deviance focusing on the distortion of social bonds and norms during times of turmoil. Volkov uses the notion of the predatory man to account for the situation on the ground in post-Soviet Russia which favored the strong, unscrupulous and aggressive, thus correcting for institutional economics implicit presumption of equality between suppliers and consumers of protection2. The sociological component of Volkovs framework is expressed in his tracing of the social origins of the violent entrepreneurs, their interactions and evolution. The consumers of protection are largely left out, underscoring their underprivileged position in the exchanges with violent entrepreneurs. While they have some discretion in choosing which roof to have, businesses do not have a choice whether to be consumers of protection. If they have no protection, they are quickly compelled to find some. Implicit in the concept of the predatory man is the assumption that not everyone can become a violent entrepreneur. Indeed, Volkov traces the origins of the new organized criminal groups to the martial sports and war veteran clubs3. It is not surprising that exactly these are the people that would become the core of the new violent entrepreneurs they have the physical capabilities that make them particularly well suited for intimidating businessmen and the ruthless mentality needed for making it as a bandit. Moreover, members of particular clubs knew each other well and were often friends - in the beginning when such gangs were becoming prominent, all the members of a group would have close relations, which made for good cohesion. Here, Volkov makes the point compellingly that the anarchy after the fall of communism particularly advantaged these segments of society that had the capacity to use force. Indeed, one of the main premises of the book is that the situation resembled the state of nature (this premise also allows Volkov to leave out considerations about the state when exploring the emergence of the violent entrepreneurs4). The economic chaos and the removal of state guarantees of employment created an opportunity structure in which physical force became a great asset that could be levied against others for financial gain. At the same time the penetration of Western popular culture, together with movies on the mafia provided the inspiration for the aspiring violent entrepreneurs. While the economic perspective seems to be predominant throughout the book, the sociological perspective is most evident in the first and last chapter, thus making the text come
1

Volkov, Vadim. (2002). Violent Enterpreneurs: The Use of Violence in the Making of Russian Capitalism. London: Cornell University Press, 21. 2 Volkov, 19. 3 Volkov, 6-13. 4 Volkov, 26.

full circle. The first chapter looks at the origins of criminal groups, inextricably linked as they were with state reform and arising as a consequence of state (in)actions, while the last chapter looks at the effects of the operations of such groups on the state, making use of classical sociological theories on the state. While this configuration of chapters is useful in terms of clarity, conceptual delimitation and organizational neatness, it serves at times to obscure the fact that violence managing agencies and the state were in constant interaction with each other and the relationship was quite fluid. Widespread corruption allowed individuals and groups to capture state resources. Criminal groups, for example, often had connections within the state, sometimes using the police or various regulatory agencies to their own advantage. Volkov addresses these issues only briefly in the last chapter, when he talks about how some of state agencies or elements in those agencies also joined the markets of protection as competitors to actors already operated informally as well as formally in the protection market. Volkov shows in a very accessible way the importance of violent entrepreneurs in the making of Russian capitalism. There is an implicit line of reasoning that runs through the whole book that the emergence violence managing agencies is the natural outcome of the situation in Russia after the fall of the Soviet Union. Such a view is characteristic of institutional economic examinations of the role of violent entrepreneurs. The often not well thought out reforms were the product of a government that wanted to do away with the old system as fast as possible without a clear vision of what is to come next. The ensuing chaos then created a gap between the oversight and enforcement needs of newly emerging markets and the supporting services offered by the state that were almost nonexistent because of lack of vision, experience and capacity. This gap was readily identified and seized by those most suitable for the job. The book views violent entrepreneurs as rational economic actors, filling the demand for market supporting services and working in a structured environment of mutually worked out rules. What is important, however, and this is where Volkov departs up to some extent from the economic institutional perspective is the fact that while answering to the existing demand, they also create, manipulate and perpetuate it. Thus they are strong actors that have the upper hand due to their controlling the means of violence. Considering the weakness of the state and the social turmoil and anxiety of the period - the time when the old guarantees where gone and survival itself was being called into question, it is realistic for security providing actors to have a very important sway that will rarely be questioned. This, on the other hand, gives these actors the leeway to influence weaker actors to a considerable degree. The constraint on such strong actors is only an equally strong competitor. The author describes the economy of protection in significant detail and justifies the view that the protection market is unlike any other. It becomes evident how organized criminal groups operate. Volkov uses economic historian Frederick Lanes concepts of tribute which is the price

collected from consumers of protection and protection rent, the gain that customers receive from the protection provided, and combines those with institutional economist Douglass Norths concept of transaction costs to account for the emergence of what Volkov calls an enforcement partnership the relations between the violent entrepreneurs and their customers. The tribute and protection rent play a more important role in the early stages of the emergence of private property namely the cooperatives allowed during the last years of Gorbachevs reign. At that time, the new criminal groups emerged in their initial forms, harassing and extorting money from small businessmen for protection, including from the criminal group making the offer. This way the groups themselves created the initial, often artificial demand for their services. However, as those groups proliferated, they necessitated their own operations and thus started solving some real transactional problems. This is where the transition occurred from mere protection rackets to enforcement partnerships a roof becomes an indispensible prerequisite to doing business, thus shaping the whole economic environment. Moreover, the emergence of criminal gangs as violent entrepreneurs, while perhaps not the leading cause, also has a bearing on the emergence of private security services and private protection companies as an alternative to criminal roofs. The book is very useful as a characterization of organized criminal groups as economic actors. Volkov refers to them as violence managing agencies agencies using the manipulation of violence for the creation of profit5. The resemblance of criminal gangs to companies is evident they have a hierarchically organized chain of command and structure, they have distinct names, trademarks and reputations. The market dynamics is also evident in the book the proliferation of criminal gangs reached a peak around 1995 at which point the market for protection became saturated and at some point overcrowded and some of the violence managing agencies had to exit the market. The book does not really state exactly which groups won out or why, which might have been interesting especially considering the fact such examination would have contributed to understanding the evolution of criminal groups. What is addressed is only the winner of the two broad categories of criminal groups the vory v zakone (criminals professing the code) and the newer criminal gangs. The newer criminal groups were much more rational and profit oriented, using whatever tactics suited their purpose, while the vory where were holding to their criminal norms emphasizing animosity towards the state, support for fellow vory and basically living on the margins of society. The vory were holding on to out-dated principles that were ill suited to the new realities and thus declined in significance relative to the newer groups. Some of the vory, however, changed their tactics and managed to stay in business. The exchange between criminal groups, however, was not only one of conflict. They were indeed competitors for influence, having their designated spheres but glad to take over

Volkov, 65.

extra ones when possible, especially the more profitable industries. But there were also dynamics of ad hoc cooperation. Besides the economic functions they performed, the criminal groups were social groups that had to find a way to interact with and accommodate each other. Specific rules of interaction arose that were observed by the groups. While these rules did not prevent violent clashes once in a while they significantly reduced them. This seems like a reasonable proposition since in the absence of formal regulation informal arrangements usually emerge to prevent total chaos. There were even norms that emerged that regulated the excessive use of violence. In short, criminal groups created their own domain, with their own norms, rules, dynamics and discursive practices, which was necessitated by their operation on the same peculiar market. Volkov describes these in much detail, but does not specifically trace how they emerged. There are several main themes that Volkov identifies in the evolution of organized crime. The consolidation of criminal groups into more cohesive units, the decrease in open violence and other criminal acts as a profitable tactics and the professionalization of the relationships between criminal groups and their clients are the most important. First of all, the various clashes produced fewer and larger groups with clearly delineated territories, sometimes industries under their control. Moreover, with time the violent entrepreneurs realized that long term gain is better advanced when there is less harassment and excessive extraction from the businessmen and more investment in the business. Many criminal group leaders became stockholders or managers in companies under their control. This coming out on the surface in the top layers of legitimate enterprises reduced the added value of using criminal tactics extensively at this point reputation was usually enough to sustain the claim of the group over the business. Increasingly, criminal bosses wanted to reinvent themselves into businessmen and shed the associations with their criminal beginnings. It also became increasingly tempting to enter politics, since the immunity of a deputy in the Duma provided a suitable shield against investigations of all sorts. This shift in focus according to Volkov meant that after a particular turning point, having acquired a stake in legal businesses, the newly christened businessmen often found out that they have more interest in the consolidation and strengthening of state structures to take over the of property rights and contract enforcement6. There are, however, some problems with this argument. Leaders of criminal gangs can hardly be thought of as a homogenous group with shared interests. In addition, criminal bosses have a good reason to be wary of the state because of the way they obtained their property they have no interest in returning the
6

Volkov, 191.

monopoly of legitimate violence to the state when it might use it against them. The state is too big of a machinery to control which is also potentially hostile, especially to criminal leaders and if the rule of law is strengthened. Mafia bosses rather have an interest in keeping the state weak by creating a thin veneer of state capacity, leaving it to act when it is beneficial for them but seizing the initiative back when the situation so requires. This way they further delegitimize the use of violence by the state by rendering it arbitrary and ineffective, while retaining the notion that it is better and more effective to know the right person to ask a favor from. The widespread corruption in the government provided criminal groups, even if their dissolved their own enforcement teams to fit the image of the honest businessman, with the opportunity to use state structures to their own advantage the police for example would make a surprise check in the competitors premises finding all kinds of violations and closing the business down. Such actions were common and they do not serve to consolidate state structures because while it seems that state agencies are doing their job, they are in fact working for private interests the real wielder of power is thus not the state. The police as a state organ and other agencies charged with law enforcement are still viewed as illegitimate for their ineffectiveness and arbitrariness. However, because of corruption and connections such ad hoc operations as the one outlined above will be carried out effectively, especially compared to those agencies regular tasks. Despite the fact that Russias criminals are not the same roaming racketeers as they were in the beginning of the 1990s and their use of violence has declined, does not mean that they have no interests that need protecting and that they are not willing to use force for that purpose. Whether they use state structures for or their own thugs does not really make much of a difference holding the de facto monopoly of legitimate violence does not mean use it all the time. On the contrary, it means that the violent entrepreneurs have actually gotten better at it they need to use less of it to yield the same result. This is because behind the businessman with the connections always looms the shadow of violence, but by now only it is enough in most cases. Moreover, the continued existence and operation of PSSs and PPCs is a further barrier to bringing back under the state the monopoly of legitimate violence. If criminal bosses had an interest in strengthening the state they would also have had an interest in dissolving these structures. In fact, they frequently employed them or used them to relocate their enforcement teams under a more lawful structure. When talking about the state in the last chapter, Volkov first explores the dynamics of state formation elaborated by classical sociologists such as Weber. Borrowing from Weber, Volkov specifies the monopoly on legitimate violence as being an essential attribute of statehood, necessary as it is for the existence of peaceful economic transactions and the creation of public goods through extraction. Volkov then goes on to classify the processes that have been taking

place in Russia in the 1990s as state formation7. Putins policies are examined as part and parcel of these developments. The author identifies the condition on the ground as approaching the state of nature and acknowledges that the there was a withering away of the state and its monopoly of legitimate violence during the 1990s8. Nevertheless, there are some problems with this argument. Putins policies can be considered as making an attempt at centralizing and pulling the state back together. Still, that means that state formation began during his time as president since 2000. The book, on the other hand, was officially published in 2002, which was only two years after Putin became president. Granted, his policies were centralizing, but designating two years of such policies as state formation seems to be somewhat speculative. His supporting argument that the turning of criminal leaders into capitalists is advancing state formation has been addressed above. What the author wishes to achieve is to define and trace the role of the protection providing units acting for their own profit, which are most often than not outside state structures. The book manages to do that in an entertaining and engaging way, while still conveying the seriousness of the situation in Russia. This book is very useful for everyone who wants to gain a broad overview of the dynamics of making Russias capitalism, who de facto managed this transition and how, in a time when the state was incapacitated. This is done using a light and understandable theoretical framework around it. What is more, this book is useful since it operates on the interstices of a couple of disciplines and it would be beneficial to students of economics, sociology and to some extent to students of criminology as well, since the book focuses overwhelmingly on organized crime. Therefore, Violent Entrepreneurs is a good introduction to the topic of Russias troubled transition to capitalism and it contributes to the fields mentioned by furthering the exploration of violent entrepreneurs and their place in emergence of capitalism, but also their internal dynamics of emergence, evolution and interaction. Another important argument the book makes is that the late 1990s were a time of state formation for Russia. While there are some criticisms that can be raised with regard to this argument, it is not entirely unfounded and some readers will probably find it fully convincing. This book will surely be very useful for my Bachelor Thesis, since it provides a very detailed account of the emergence and evolution of organized crime in Russia. The evolution of organized criminal groups is the most important element that I can utilize to explain how organized criminal groups were performing tasks that should have been performed by the state and were thus dismantling the monopoly of legitimate violence. It is also valuable that in contrast to most research on organized crime in Russia Volkov actually also looks at its effects
7 8

Volkov, 155. Volkov, 167.

on the state, which I am also intending to do. He argues that at some point criminal groups changed pace and stopped obstructing state formation from above under Putin. Conversely, I am going to argue that the consolidation of criminal groups only increased their power, without leading to consolidation of the monopoly of legitimate violence under the state. Putins policies were indeed an attempt to consolidate the monopoly of violence but they were an attempt to remedy the situation, not a response of a favorable environment for recapturing the monopoly on violence. In the end, then we argue different roles for organized criminal groups in Putins Russia. Nevertheless, Volkovs book is very suitable and it will probably be one of the main sources to be used in my Bachelor Thesis.