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Enterprise development according to local economy
Orekhovsky P.

Enterprise development according to local economy (abstract)

This article summarizes large empirical material that was collected during scientific expedition on the Western Siberia in 2001-2003. It consists of the following parts:

  1. Introduction

  2. Private enterprise development and budget incomes. Fragmentation of economic life

  3. Enterprise models in different municipalities

  4. Russian enterprise, administrative resource and financial market formation

  5. Methodological prerequisites of enterprise development policy

  6. Methods of governmental regulation
The author uses the term of administrative resource that means opportunity of different noneconomic (political, ethnic, criminal, clannish) social factors use for getting significant competitive advantages. Accordingly when classifying forms of enterprise additional ones are marked by the author. They are power and political enterprise. The power enterprise is an application of physical force threat (and the use of force) to a greater or lesser extent. In such enterprise both public agents who have official sanction for use of force and criminal structures participate. As a rule the power enterprise is carrying out on basis of market capture and sharing (first of all local) with the subsequent forced competition-blocking. At the same time the consequences similar to the impact of monopoly appear: overpricing, artificial volume containment, quality fall-off, etc. The political enterprise means the use of regulative administrative resource (including judiciary system, arbitration those are widely used in bankruptcy processes). The political enterprise can be used in different markets. Among its features assets selling out during bankrupting processes is (that is widespread in private sector); political rent getting in process of public (municipal) purchases, lobbying, natural monopoly reforming and interbudgetary connections system are (those are concerned with public or quasi-public sector of economy).

Statistical materials (financial and socio-economical) show that there’s no connection between enterprise development level and budget receipts. Moreover (and that is sudden) there’s also no correlation between budget expenditures and level of social and engineering infrastructure development in municipalities (also see P. Orekhovsky. Budgetary revenues equalization methods in Russia). In fact there is an economic life fragmentation at the local level. This phenomena means that the related economic spheres become disintegrated and the vectors of their development become independent.

According to the type of relationships between business structures and municipal authorities there are four models of enterprise formulated by the author:

  1. “Luzhkov’s model”;
  2. "Oligarchic capitalism”;
  3. “Stagnating town”;
  4. “Soviet economy”.
Examples from the practice of several municipalities are given to illustrate these models. It is typical that within all models the administrative resource is used by local elites informally, this theme is concerned with corruption so it’s not a point for public discussion.

As an original positive alternative Tatarstan’s practice can be considered. There the administrative resource was “institutionalized”: the heads of municipalities are directly responsible for territorial socio-economic development level that can be estimated by list of indicators. It turns out to be impossible to exclude the administrative resource out of the economic development process without financial market forming that provides capital movement.

The enterprise development beyond the local, municipal scope that predetermines the employed resources structure and quantity seems to be methodologically incorrect as a rejection of purposeful federal enterprise developing policy. The author marks out the territorial marketing as one of the most actual aspect. Unfortunately all attempts to accomplish any strategic measures both municipal and federal were ineffective. Several examples of such failures are given in this work.

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