The spate of forceful company takeovers rocking Russia has now hit Moscow. An armed attempt was made at Moscow's Moskhimfarmpreparaty pharmaceuticals company to take control of the premises and install new management.
But this case was not entirely the same as other recent "hostile" takeovers at the Achinsk clay plant, Nizhnetagil metallurgical plant, Kachkanar mineral enrichment plant, Vyborg paper mill and the Lomonosov porcelain factory.
For one thing, the takeover attempt failed. The workers didn't let the new security men and director onto the premises, having no incentive to freshwater pearl jewelry do so as the old director was running the place just fine and paying wages on time.
The second difference was that this was a fight for control of a state enterprise and not a private company. The status of the company wasn't the issue, but rather the wish to grab a profitable business whether it had been privatized or not.
The third difference was that for once, the government stepped in, and Deputy Prime Minister Ilya Klebanov decided to take the situation under his control.
One detail is of interest in all this: Moscow Mayor Yury Luzhkov, a constant critic of privatization a la Chubais and always ready to add his pinch of salt to events concerning privatization, barely reacted to a conflict taking place in Moscow itself.
For an explanation, let's look closer at the property revolution underway in Russia.
Critics of Russian privatization reproached it above all for being political rather than economic. There is truth in those assertions, but all the blame can't be laid at Anatoly Chubais' feet. Such large-scale privatization in such a short time couldn't be done any other way, nor could it just be put off.
The textbooks said that bankruptcies would force bad managers out and bring good ones in. Practice hasn't disproved this theory, it's just that real life is always more complicated.
People's interests get in the way, especially the interests of those in power. Regional governors are actively involved in these new asset carve-ups, as freshwater pearl is clear in Krasnoyarsk, the Kuzbass and Yekaterinburg. Federal authorities aren't just on the sidelines either, as was seen in the latest conflict in Moscow.
The obvious weakness of the judicial system is another element to take into account. It's often impossible to resolve property disputes through the courts. Economic realities also play a part, again as illustrated by events in Moscow.
When ZIL, one of the giants of socialist industry, was privatized, Luzhkov was up in arms about it having gone to a private firm for a mere $4 million. Some politicians said it should have fetched $2 billion. But serious economists gave it a negative value, as it would have required investments of at least $1 billion to turn out competitive products.
But Luzhkov didn't listen to the economists. Moscow bought ZIL back from its private owners and began financing it from the city budget. The project was a failure. ZIL is still struggling to survive, and the city doesn't have the money to keep it propped up.
The Moscow authorities criticized the government for giving away industry at bargain basement prices but then followed that approach when privatizing an even more significant asset – housing.
Again, they didn't listen to economists who said that this kind of privatization program would have a negative social impact, widening the gap between different groups. The state was handing out free housing, but not all of it was the same size, and higher earners ended up with more than people on lower wages.
The Moscow government rejected the proposed federal housing reform program. But here too, economic reality has come to show what's what. Owners of large apartments profited at first from the emergence of a real estate market. Then the Moscow government discovered it had no money to subsidize utilities services.
There has not been any real housing reform in Moscow. Utilities are still run as monopolies. Waste and inefficiency are still rampant in the housing sector. But payments for this wastefulness continue to rise. From Feb. 1, housing and blister pearl utilities payments will increase by 20 percent in Moscow.
Nobody has looked at this news in the light of the conflict at the pharmaceutical plant because, at first glance, they seem unrelated events. But this isn't so. Both cases show that you can't deceive the market economy or avoid its laws, no matter what your ideological motive.