The Russian Dream of a Free Economy Came True in One Company

By  //  November 1, 2021

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Is it possible to find successful enterprises in the Soviet economy that, having gone through many historical aspects and transformations, not only remained working and producing products, but also successful?

This is the question posed by Jarett Decker, Associate Professor of International Law at the University of Miami School of Law, in the American magazine Reason (December issue, article “Lost In Transition”).

Jarett Decker is an international consultant working in the areas of anti-money laundering, anti-corruption, financial reporting, governance and internal controls. He provides technical assessments, policy advice and training to governments to improve laws, institutions, and practices.

Among a long historical digression, a description of the overwhelmed Soviet economy, a chaotic mix of large enterprises still under state control, a central government of Russia with large pension and wage arrears, and liberalized consumer prices and growing new private enterprises, the author tries to find a parallel with American business history.

The author recalls a theory that was based on the ideas of the late British economist Ronald Harry Coase, and looked something like this: anyone who becomes the owner of a business wants to get the most out of it. If the owner knows how to run the business most efficiently in order to maximize profits, he will keep it. If he does not, he will have every incentive to sell the business to someone who knows how to maximize profits.

Decker is confident that some Russian business leaders are still striving to turn their businesses into efficient and well-managed competitors that are winning on a global scale. An interesting and perhaps surprising example is Vladimir Potanin.

Beginning in 2001, Potanin began a business restructuring with the goal of competing with global mining giants such as Rio Tinto, BHP Billiton, and Anglo American.

As recounted in the journal Resources Policy by David Humphreys, a British mining industry expert and former chief economist for Norilsk Nickel, the company sought to raise its governance, transparency, management quality, and internal processes to “win the respect and trust of international investors” and “compete on the world stage.” Over time, its investments in modernization rose to $1 billion a year. The company also brought in new talent with world-class expertise, including Humphreys and Leonid Rozhetskin, a Russian-American financier and graduate of Harvard Law School.

By 2008-which Humphreys views as “the high-water mark” of Norilsk Nickel’s transformation-the company achieved a market capitalization of $60 billion, ranking as the sixth-largest mining company in the world by that measure.

Norilsk Nickel and today the world’s largest producer of refined nickel and palladium, has retained its leadership in the global metallurgical and mining industry. The company spends billions of US dollars on modernization of production equipment, ecology and social projects, including the indigenous peoples of the North of Russia.

Thus, considering the history of one company in the whole life of Russia, it can be assumed that the correct decisions made by the owners may show an alternative reality compared to that with which the average reader is familiar at this time.