Government’s Inability to Resolve Dagestan’s Problems Gives Rise to Muslim Capitalist Class

As Russia’s economic stagnation reverberates in the North Caucasus, the regional elites have begun to scramble for local resources. An uncharacteristically open discussion erupted in Dagestan’s republican parliament in Makhachkala on October 30, when a well-known politician in the republic, Eduard Khidirov, stated that between 50 to 60 percent of the Dagestani economy was in the shadows. Such estimates concerning Dagestan’s “grey economy” are not new, but Khidirov was unusually blunt about it during the parliamentary session. “Every official has a house that costs no less than a million [US] dollars, has bodyguards, multiple cars and does not pay tax [on all this],” he said. “We calculated and found out that for this money we could build four new kindergartens every year. We should establish a commission of deputies to review the income of all officials.” The republic’s governor, Ramazan Abdulatipov, also lashed out at corrupt officials. “The republic still has a lot of tax revenue potential,” he said. “In Makhachkala, even 30 percent of the land plots have not been codified and entered into the tax revenue databases. One close associate of the city’s former leadership owns 90 land plots, another one has 120 land plots, and the third has 256 hectares” (ndelo.ru, November 4).

Land in Dagestan’s capital is expensive, but apparently yields little to no revenue for the government because of the corrupt practices of officials. The republican government has little power to do anything about it, since the political system itself is based on the support of corrupt officials. The scandalous republican parliamentary session showed that while Abdulatipov conceded the elites are riddled with corruption, he had almost nothing to offer to fight it.

The government’s inability to ensure social order and rein in corruption undermines social stability. Dagestan is arguably the most volatile republic in the North Caucasus. Apart from instability, other social forces are attempting to supplant the failing government institutions. According to sources in the republic, land disputes, which are particularly rife in Dagestan because it is largely agrarian but has an endemic scarcity of land, are often solved using sharia law. Sharia specialists and sharia solutions are in demand because economic actors do not want to deal with unreliable and expensive government courts. This creates problems, given that the government does not officially recognize the decisions of sharia courts as legitimate. Therefore, the sharia court decisions on land ownership have been piling up and could explode if the government starts actively challenging them. “All mass protests of city residents in Makhachkala are tied to the protection of rights to own, buy and sell,” wrote Russian urban economist Denis Sokolov in a recent commentary on the role of Islam in the market economy of the North Caucasus. According to Sokolov, there are two capitalisms in Dagestan and, to some extent, in the rest of the North Caucasus. “The Islamic city economy is essentially in confrontation with the economy of bankers and generals,” he wrote. “One capitalism is the capitalism of shopkeepers and small producers and another capitalism is the capitalism of bankers, generals and large contractors. The first capitalism lives on competition and production, the second capitalism lives on oil revenues and redistribution of government funds” (kavpolit.com, November 7).

Sokolov’s idea of “two capitalisms” in Dagestan is interesting. The comparison seems to be an outline of social forces on the verge of a social revolution. Even though the economist connects the “generals and bankers” to the global economy as opposed to the “small time shopkeepers and producers” of the local economy, the two social forces look more like a self-styled aristocracy and bourgeoisie, correspondingly. The comparison also implies that competition between the “two capitalisms” in Dagestan and in the North Caucasus might grow as oil prices keep falling and Moscow’s ability to finance “generals and bankers” in the region diminishes. If Moscow reduces financing the region beyond a certain point, a classic social revolution of “small time shopkeepers and producers” could follow. The class of “small time shopkeepers and producers” tends to be comprised of fervent Muslims as Islamic networks are the tool that supplies a certain social trust. At the same time, as Sokolov rightly points out, what will happen if the new Muslim capitalists come to power in Dagestan and elsewhere in the North Caucasus is a big unknown. Will they become a new aristocracy that is opposed to capitalism and the free market or will they embrace the free market economy? Regardless of how suitable these social forces are for the governance of the republics, the “Muslim capitalist” class is likely to be the new dominant political class in a few North Caucasian republics if the economic crisis hits Russia hard enough to cause significant political shifts.