We are a rich country of poor people. And this is an intolerable situation.
Earlier we analysed Putin's reform of the federal system designed to ensure the unimpeded application of constitutional norms. No less important was his struggle to modify the close and unhealthy relationship between the state and the economy that had developed under Yeltsin. The privileges of various business and commercial structures had turned into a specific type of 'state within the state', with their own media empires, house politicians, television channels and security services. Hellman described developments under Yeltsin as a 'partial reform equilibrium', with regional bosses and oligarchs taking advantage of an economy stuck midway between the plan and the market. 2 This 'equilibrium' (although the degree to which a balance had been achieved is unclear) was now upset by the emergence of an activist presidency. We have noted that in the struggle against certain oligarchs the principle of 'equidistance' between business interests and the state was advanced. What was the economic legacy that Putin inherited, and how did he plan to move forwards? What was the economic model that he sought to apply? These are the questions that we shall address in this chapter.
In the last years of the Soviet Union its GDP per capita ranked 43rd place in the world; by the time Putin came to power Russia took 135th place, rubbing shoulders with countries such as Costa Rica. Not only was a large proportion of the population impoverished by the shift to the market, inequality had greatly risen. By March 2003 Russia could boast of 17 billionaires, most of whom had made their money in the energy sector, 3 while at that time the average monthly income was 3,868 roubles (about $110) with some 30 million people (22 per cent of the population) gaining less than the minimum living wage of just under 2,000 roubles. As in politics, the political economy of Yeltsinism looked both forwards (towards effective lib-