Leonid Bershidsky
When it comes
to eminent domain, officials in Moscow just made Donald Trump look like a
piker. The city government simultaneously tore down 97 buildings containing
hundreds of shops and restaurants, all with valid property documents and legal
leases. And none of the small businesses stands to receive any compensation.
It
was dubbed the "Night of the Long Diggers" on social-media networks,
though I've been unable to track down the blogger who originally coined the
clever phrase. Russian authorities are choosing to address an economic crisis
largely of their own making by bulldozing small business rather than nurturing
them. They also are showing the investors who are sticking out the slump that
private property rights aren't guaranteed. Muscovites are swallowing all this without protest.
The razed
buildings sprang up next to the Russian capital's subway stations in the 1990s
and early 2000s, when the popular Mayor Yury Luzhkov was in power and his
supremely corrupt city government was open to just about anything in exchange
for kickbacks. The edifices were ugly, resembling small strip malls without
parking lots. They cluttered up the spacious Soviet-designed plazas around
the entrances to palatial subway stations, with their high arched ceilings,
stucco and mosaics. Yet they allowed Muscovites to have a quick bite, buy a
bottle of water or a mobile phone on the go.
People
loved to hate the chaotic mini-malls: They looked decidedly un-European in
a metropolis striving for sophistication. Yet almost everyone in Moscow had a
favorite shop in these makeshift arcades, whether it sold pies, car parts,
flowers or alpaca hats from Peru -- they were a well-kept secret or a guilty
pleasure.
Then
Sergei Sobyanin, a Siberian who was appointed mayor of Moscow in 2010 by
then-President Dmitry Medvedev, set about reshaping Moscow to match his vision
of capital-city glory. This entailed repaving pedestrian walkways with garden
tiles (and changing these every year), a war on street kiosks, which were
removed or torn down without much concern for their owners, and, after Sobyanin
confirmed his status in a 2013 election, the introduction of paid parking
throughout the city, with violators mercilessly towed (the system costs more to
run than it brings in revenue).
Last
year, his attention turned to the subway strip malls. The city government
declared them illegal structures akin to squats, even though their owners were
in possession of all the documents required by Moscow's bloated bureaucracy. In
December, the city council passed a resolution requiring the owners of 104
buildings to remove them at their own expense -- or else the city would
tear them down.
The
owners couldn't believe the city would make good on its threat. Some secured
court decisions to protect their property rights. Forums were convened to discuss
the issue. Delovaya Rossiya, the officially sanctioned business lobby, took the
side of the businesses threatened with extermination. It seemed disaster could
be averted, especially because President Vladimir Putin had
recently stressed the importance of small businesses for Russia's
economy:
We always say this: small and medium-sized business is, should be the
true foundation of our country's economic development.
On
Monday, the deadline for the owners had to remove the buildings arrived,
and Sobyanin struck. Heavy construction machinery rolled up,
accompanied by riot police. Heartbreaking scenes ensued. In some cases,
shopkeepers weren't allowed to get their goods and equipment out of the stores
before excavators started crushing them. Shopkeepers tried to barricade
themselves in, and some posted pictures
of Putin in
shop windows in the hopes that they would ward off the demolition crews.
Nothing helped. Eyewitnessesdescribed devastation,
plunder and despair. Shopkeepers called on passers-by to support them, but they
found little sympathy.
"Moscow,
4 a.m. The authorities launch a small business support program,"
pro-business activist Alyona Popova commented sarcastically
on Facebook. "Soccer fans or any other hooligans have never
staged such a pogrom on Moscow streets as the mayor's office has staged,"
the blogger Arseny Bobrovsky wrote.
Sobyanin's
take was understandably different. In a post on the social
network Vkontakte, he wrote that the retail buildings built in the 1990s,
"clearly with bureaucrats' aid," were "dangerous to
Muscovites" and that the city would let their owners build shops
elsewhere. He made no mention of compensating them for the lost property.
The
Moscow city government's resolution from December allows the owners of razed
shops to seek compensation directly from the city on condition that all
ownership rights are waived. It's more likely, though, that the shopkeepers
will seek redress in the courts: The resolution, which allows the city to strip
people of their property without a court order, has few supporters among Moscow
lawyers. Delovaya Rossiya estimates that Moscow could face claims of 22 billion
rubles ($275 million). The city also stands to lose 2 billion rubles a year in
taxes from the shops and cafes that operated in the destroyed
buildings.
The
Russian Orthodox Church would like to have
chapels built where the shops stood, but that's probably not going to happen.
Shopkeepers expect the Moscow city government to sanction the
construction of new retail space there so that new officials, too, get
their chance to make some spare cash. "Are there any guarantees that something
new won't get built there?" asked the anti-corruption activist Alexei
Navalny, who came in second in the 2013 mayoral election. "It'll be like
the kiosks in underground crossings: First officials said they presented a
terrorist threat and tore them down, but now other people are building ones
exactly like those old ones."
That
won't necessarily happen, either. The Moscow government can do without the
taxes it gets from small business because most of Russia's large companies are
based in the capital, and most of the country's wealthiest people pay
their personal taxes there. It can afford to sacrifice thousands of jobs and
millions of dollars simply to show Muscovites who their boss is should economic
hardship give them any funny ideas. A lot of what's going on in Russia today
makes no economic sense and serves no economic purpose: It's just a show of
force by Putin's "power vertical."
No
business in Russia, big or small, is immune from expropriation: One day an
owner may find that new bureaucrats are not responsible for the actions of
their predecessors or that the political agenda has changed. The state remains
the only true owner of assets, as it was in Soviet times. It may allow these
assets to be milked for private profit, but it keeps a tight grip of them --
and by extension on the people who manage them. That's eminent domain in its purest form.
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