CAPITALISM LUZHKOV-STYLE…

Mayor Yuri Luzhkov has forged a model of paternalistic capitalism that has brought Moscow stability and prosperity. His model, however, now appears to be reaching its limits. It is unlikely to sustain Luzhkov in a presidential bid in 2000. This was the conclusion of Virginie Coulloudon, an associate of the Davis Center for Russian Studies, in a talk at Harvard on April 8.

Since his appointment as mayor in 1992, Luzhkov has maintained tight control over the capital’s political and economic life. Moscow was exempted from the federal privatization program, and — instead of a quick distribution of state-owned assets at low cost — Luzhkov choose to retain most of the capital’s property and enterprises in municipal ownership, selling off a few shares at a time or leasing properties at lucrative rents. He also maintained tight control over commercial development. In doing so, he created elaborate licensing procedures that could be waived in return for contributions to the city’s "charitable" foundations.

In addition to the official $400 million annual budget, the city has 300 plus off-budget funds whose contents and distribution are now available only to Luzhkov and his cronies. Holding companies with ties to the municipality have moved into a dominant position in many business arenas, from funeral homes and gas stations to hotels and casinos. Proceeds are channeled into city-owned media outlets and prestigious projects such as the Cathedral of Christ the Savior and the $150 million business center.

These nefarious operations are protected by laws passed by the Moscow city parliament, which is slavishly loyal to Luzhkov. Court challenges to Luzhkov’s operations have gone nowhere.

…May not Yet Propel Luzhkov Into the Presidency.