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The State-Society Deal: Origins, Transformations And Projections. How It Happens In Russia – Analysis

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Geopolitical instability, the aggravation of relations between liberal democracies and growing autocracies, and sociopolitical and economic turbulence within the developed countries themselves force us to seek answers to questions related to the causes of this state of the modern world. 

Under the conditions of growing uncertainty, the question of the future of the world becomes even more exciting and acute.

The question of the future of the world order is becoming even more troubling and acute in the face of growing uncertainty. In search of answers, scientists and experts try to analyze the cause-and-effect relations of the situation through various prisms and concepts capable of clarifying the understanding of today’s processes and supplementing or clarifying possible projections for tomorrow’s day.

Often, to understand the details and practical processes within which we have to exist, it makes sense to turn to the fundamental models that explain the nature of human social behavior, the institutional structure of various societies, and, finally, the relations of state and society as such.

In this connection, without claiming to make a comprehensive and multifactorial analysis, I will try to examine the basic foundations underlying the modern state and its main varieties that have developed to date, and I will also try to use the proposed concept to trace in a cursory way the formation, consolidation and prospects of contemporary Russian authoritarianism.

The concept in question is a conditional scale of changes in the social contract based on its three basic configurations. This view is based on the models of the Public Choice Theory, the Social Contract Theory and some other models of institutional economics and sociology. Strictly speaking, the proposed view on social metamorphoses and, in particular, on the hardening of Russian authoritarianism is only an interpretation and adaptation of existing concepts and models to explain the erosions of modern states. 

I have chosen the notion of the social contract as the main point of reference in my reasoning. As is well known, the social contract in the definition of modern sociology and institutional economics is a certain state of relations between society and political power, implying certain rights for each party and obligations of each party with respect to the other to obtain certain or implied benefits. 

In modern states, the main formal institution embodying the social contract and its terms is usually the Constitution. All other laws, norms and regulations can be considered additions and clarifications to the Constitution as a formalized social contract.

Often, however, the social contract can be seen as a metaphor or figurative definition that has the economic logic of an agreement to exchange certain goods between two parties on the basis of consensually approved terms, conditions, obligations, and rights.

Any contract, as the formalization of a transaction, is made when there is a demand and a suitable supply. The social contract is no exception.

If the one who offers to satisfy your demand has no competitors on the one hand, and you are his only possible “customer” on the other hand, then he – the supply side – has a monopoly position. The monopoly position leads to the potential for transformation of contractual benefits and loss of equilibrium, when the supply side starts to get more benefits.

If the supply side has no constraints and positive motivations for good faith (competition and liability mechanisms), the supply side expands its opportunities and rights and, consequently, its benefits. Also, the supply side (the executor) tries to extend the contract, for which it creates in the client (the demand side) a feeling of satisfaction until the moment of all-satisfaction of the demand side.

When the client becomes dissatisfied with the services rendered or the suspicion of cheating on the supply side (the contractor), the client begins to express dissatisfaction. The supply side buys the dissatisfaction at first through informational manipulation: it tries to provide incorrect information to conceal the dishonesty or fraud and convince the customer that it is useful. Then, when this no longer works, the perpetrator turns to violence.

Violence in this case is the supply side’s way of holding onto its dominant position and beneficiaries by forcing the client to “pay” for its services, while the services are fewer and worse, and their cost to the client has increased. Then the contract gradually breaks down, and in fact there is no longer a deal. What is left is unilateral forced coercion, in other words, extortion.

In such cases, the supply side becomes a usurper of contractual rights and benefits, voluntarily determining how many rights and benefits the demand side, i.e., the client, will receive. The client, under the threat of violence, agrees to the reduction of his rights and benefits and the expansion of his obligations to the point where he decides to unilaterally terminate the relationship with the supply side. Then, if the supply side resists, the demand side also uses violence to honor and restore its interests, and often to achieve its goal of terminating the contract. Often this happens in a situation called “when there is nothing to lose.” In fact, this means that any riskiest step forward with a minimum probability of success is preferable to passive waiting. In other words, any future is better than the present.

The scale of such degradation and, ultimately, termination of the social contract begins with the democratic modus as a measure of contract equilibrium, passes into the modus of soft-autocracy as a median measure shifted toward expansion of rights and benefits of the supply side (executor), and ends with the modus of tyrannical dictatorship, when the contract is actually terminated from the supply side and turned into a unilateral violent directive.

The described sequence of transformations is an illustration of the scheme of socio-political degradation. Historically, however, the social contract progrades from the archaic violent subordination of the population to power to an equivalent market exchange of certain goods under certain conditions.

All states flotillate on this scale between these root modalities of the social contract.

As mentioned, the social contract was transformed from the modus of tyrannical dictatorship and violent coercion, where power was originally an extortionist and absolute domain in its relations with the population. The proto-contract was initiated by power and was the coercion of the population to serve its needs. Power decided to become a “sedentary bandit” and enter into a long-term rent-seeking relationship with the population as a more profitable and less costly way of enriching itself, instead of robber raids from time to time. Such a proto-contract was de facto a directive and implied a minimum of rights and a maximum of obligations for the population.

Further, with humanization, the development of individual self-consciousness and technological progress, contracts were liberalized: they became more equal for both parties. Coercion was transformed into a more or less mutually beneficial arrangement. Power gave more and more rights and benefits to the population, reducing its obligations and receiving in return greater productivity and, consequently, wealth, as well as the loyalty of the subaltern population, which strengthened its stability. At the same time, power voluntarily increased its obligations to the population and fulfilled them more conscientiously, since the satisfaction of the population directly affected its productivity.

Finally, in the modern stage of institutional liberalism, the contract has entered the modus of the democratic regime, where power is reduced to the level of publicly elected management of public resources and, accordingly, is a party to an equilibrium transaction with well-defined rights and benefits corresponding to the rights and benefits of the population.

In the democratic stance, the social contract is initiated by the demand side in a competitive supply of managerial services. The more differentiated and detailed are the conditions of the contract, the more developed are the institutions – the rules and procedures that ensure the observance of the parties’ rights and the conditions of fulfillment of obligations. Therefore, the monopolization of services and access to the demand side of the supply side is strictly limited, because otherwise will entail inevitable degradation on this scale.

Restrictions on supply-side monopolization and usurpation of contractual rights and benefits are ensured by various institutional conditions and ethical factors, including social rhetoric, social consensus on the primacy of natural rights, and the mechanisms and resources necessary to implement the contractual rights and obligations of both parties.

Today, all states can be placed on this conventional scale of social contract development.

On one edge is the proto-contract and violent enforcement of obligations with de facto disenfranchisement of the subordinate party.

At the other end is an equilibrium market contract between the demand side and the supply side, concluded under competitive conditions, containing detailed rights, obligations and benefits of the parties and implying institutions and mechanisms that enforce the contractual terms.

In the middle is a contract with obvious advantages for the supply side in the form of greater rights relative to the demand side. However, at the same time, such a contract also contains significant benefits for the demand side. This contract is still not a market contract and is in fact a relaxed directive of the supply side in a non-competitive environment. However, this directive is no longer based on violence, but on the approval of the population, or at least does not actively displease the population.

States are generally dynamic with respect to their position on the proposed scale.

Autocracies shifting into tyranny, such as Russia or Belarus, degenerate, moving from the center toward the proto-contract. China, too, is moving toward personification of power and autocratic concentration.

Developing autocracies, such as Singapore or some Middle Eastern monarchies, by contrast, are progradating and moving toward a democratic modus operandi, liberalizing institutions and giving more and more rights and benefits to the population.

Shifts of developed democracies toward the proto-contract are also possible, as we can observe in the case of Hungary or Turkey. Significant expansion of the state can be observed in the United States and leading Western European countries. However, the range of state expansion is usually limited there to a stable liberal ethic and social rhetoric, which actually underlie individual consciousness, social customs and traditions, and, ultimately, a stable institutional arrangement.

Using such a system of coordinates, one can try to determine the movement of any state over any chosen time range.

In this case I am interested in the metamorphoses of the Russian state and the possibility of explaining them with generalizations admissible within the framework of the proposed concept.

So, how has Russia moved on the scale of the social contract over the past 30-odd years since the disappearance of the USSR?

In a simplified and generalized way it is possible to distinguish the following basic states of the social contract and the cause-and-effect relations underlying their occurrence.

The late 1980s and early 1990s: characterized by the emergent demand for democracy and maximum opportunities for the population in consumption and production with public consent to self-organization and the reduction of the rights of the state. There is no demand for

there is no demand for a developed institutional structure. First, because trust in the state and its mechanisms has sharply declined, and second, because the public completely lacks understanding of the connection between effective institutions and socio-economic success.

The mid-1990s: the demand for a strong state and an exogenous ordering of life returned, even at the expense of the emerging opportunities for entrepreneurship, freedom of choice and political preferences, an increase in the level and quality of consumption, etc. The population – the demand side – is ready to give back some of its rights to the supply side in exchange for stabilization of consumption and certainty. Such a demand is in fact

is a consequence of the population’s awareness of the need for workable rules with enforcement mechanisms. The state failed to meet this demand, losing the trust of the population.

In the second half of the 1990s, the demand for a “strong state” transforms as the volume and quality of consumption and production increases into a demand for a stable institutional arrangement with the preservation and protection of emerging opportunities. There is a need for a rational ordering of the accumulated and expanding rights and obligations of both sides: state and society. In other words, there is a demand for a liberal capitalist state, a protected opportunity for creation, for the development of production and increased consumption. This implies, on the one hand, the liberalization and streamlining of institutions and, on the other hand, the adjustment of mechanisms to make these institutions work. The contract enters a phase of potential empowerment of the state while preserving the significant benefits and rights of the population.

The first half of the 2000s is marked by a growing demand for even greater empowerment of creation and consumption. As consumption and production, as well as an increase in accumulated benefits, society is ready to give even more rights to the state under assurances of good faith performance of its duties and guarantees of preserving society’s rights and opportunities. The accumulated potential for state empowerment by the end of the 1990s to meet the demand for protection and institutional ordering is being realized. 

The second half of the 2000s: there is a demand for the preservation of the political status quo, when the state has greatly expanded its rights, and the population has been given the opportunity for intensive consumption and production under more or less protected conditions with significant rights on its side. However, the supply side gradually usurps rights and narrows opportunities for protected entrepreneurial creation and production, while expanding its own opportunities. There is a demand on the part of the population to slow down the empowerment of the state. The most protected and evolving opportunity for the accumulation of benefits becomes work for the state – there is an active demand for state employment. In the lower strata, it is a social and economic elevator in the budgetary sphere. In the upper strata, it is an opportunity to enrich oneself more securely in the civil service, comparable to the entrepreneurial sphere, which is under pressure from the state. Enrichment is ensured at the expense of the opportunity provided by the state to participate in budget redistribution through consensually approved corruption and the established rule of vertical loyalty.

In the first half of the 2010s, the state continues to expand its rights and benefits, stimulating demand for the opportunities it is able and willing to offer the population. Accordingly, a steady demand is developing for the population to retain consumption opportunities and, at the same time, to be as close to the state as possible. There is also an obvious demand for depoliticization – the avoidance of active citizenship – on the part of the population with a rational choice of supporting the authorities as the most effective way to be protected and secured in the conditions which the state has created during the expansion of its rights and benefits. 

In the second half of the 2010s, the demand for nationalism and imperial superiority, stimulated and actively encouraged by the authorities as a way to compensate for the gradual decrease in economic opportunities for the population, is intensifying. Accordingly, the demand for better consumption and production opportunities grows. Power, as the supply side, actively shifts into the state of the initiator of the social contract on its own terms due to the sprawl of rights and opportunities. Power neutralizes the emerging discontent of the population with information manipulation and motivation to assimilate distorted or fictitious facts, i.e. it convinces the population of its usefulness through factual lies. The social contract is actively shifting to the edge of the proto-contract, but so far remains a display of a bilateral transaction, despite the sharply compressed rights, benefits and opportunities of the demand side, which is not fully aware of this. 

The early 2020s: economic conditions continue to deteriorate, and the population gradually begins to realize the loss of a significant amount of rights and opportunities. The authorities act in three directions to preserve the status quo and the appearance of a bilateral deal with the population. 

First, it intensifies repressions and further squeezes civil rights due to the growing dissatisfaction of the population with the economic policy and activation of opposition self-organization. 

Second, power sharply accelerates the demand for national greatness, imperial revanchism, and opposition of Russian identity to liberal Western values, which allows it to maintain legitimacy and majority support amid economic stagnation. 

Third, power shifts to an active shift of the sociopolitical situation into a zone of extreme uncertainty and creates a hypershift. Such a shift allows us to shift the focus of the population’s attention away from economic and social problems, or more precisely, from the authorities’ actual inability to provide quality services to the population and to meet its demand for expanding consumption and production. The situation in the hypershift situation preserves the bargain for a while, despite false perceptions of the government’s successful performance in fulfilling its obligations.  

On the other hand, such a shift, if necessary, can allow the power to finally usurp contractual rights and opportunities with minimal risk of demand or violent termination of the contract by the population in the near term.

Thus, there remains a persistent demand for nationalism and imperial revanchism, actively stimulated by information manipulation and falsification on the part of the authorities. The demand for growth of economic opportunities is decreasing against a background of hypershift and uncertainty deliberately created by the authorities, as well as due to global economic stagnation. Instead of a demand for economic development, there is a demand for the preservation of existing economic opportunities, in the modus vivendi of “as long as it is not worse. The population still regards the social contract as more or less mutually beneficial, agreeing to the expansion of the state’s rights and opportunities and the growth of its responsibilities while squeezing its rights, viewing this movement as a necessary tightening in the face of hypershift. 

Projection: mid-to-late 2020s. The contractual disequilibrium continues to intensify: rights and opportunities are almost entirely shifted to the side of the state. The authorities are compelled to intensify repression and forcibly suppress popular discontent instead of neutralizing it through information manipulation and false beliefs, which are rapidly losing effectiveness. 

Economic conditions are deteriorating intensively, and it is impossible to maintain opportunities at the level of “at least so that it does not get worse. The hypershift and its consequences require the involvement of new economic and human resources. The demand for ideological patriotism and imperial revanchism is declining, while the demand for better production and consumption opportunities is growing. The demand for the expansion of people’s rights and for the organization of the return of these rights is beginning to develop. 

All of this aggregate demand obviously cannot be met by the supply side. False information on the part of the authorities about the proper quality of their obligations to society is no longer trusted by the population. The authorities have to cure the growing dissatisfaction by increasing repressions and an even greater compression of the population’s rights, which actually leads to the termination of the transaction, i.e. the social contract, by the authorities, transforming the contract into a violent coercion of the population to perform the duties demanded of them by the authorities. Power, like any tyrannical dictatorship, is forced to permanently demonstrate its superiority to the population. 

There is a growing demand for an easing of the pressure of power on society. This demand can be met in two ways, leading in fact to the violation of the violent directive of power and the conclusion of a new social contract. 

The first is a change in the position of power through a revolutionary change in the structure within elite groups, in other words, the displacement of the ruling domain group and the rise to power of another elite interest group. 

The second path is social revolution, where the population forcibly forces the government to reverse the directive, replace the current domain group with another and enter into a new social contract.

The concept of the scale and the three basic frames of the social contract lacks many important variables, such as, for example, interest groups in power and in society, the interaction and self-organization of these groups, economic factors, specific geo- and domestic political conditions, ethico-cultural and bio-anthropological grounds and behavioral motivations, etc., etc. 

However, all these and other drivers of socio-political changes can be both useful additions and refinements leading to the detailing of the proposed concept and can be coordinated with it as independent models explaining metamorphoses of society and the state. 

Paul Tolmachev

Paul Tolmachev is an Investment Manager, Economist and Political Analyst. He is Certified Professional in Philosophy, Politics and Economics (PPE Program), Duke University. Having more than 20 years' experience in the financial markets, Paul held management positions in leading international investment and wealth management firms. Paul is serving as a Portfolio Manager for BlackRock with more than $500 million in personally managed assets. He also is a visiting scholar at the Stanford Institute for Economic Policy Research, where he researches institutional and political economy, decision science and social behavior, specializing in the analysis of macroeconomics, politics, and social processes. Paul is a columnist and contributor to a number of international think tanks and publications, including Duke University, Mises Institute, Eurasia Review, WallStreet Window, RealClear World, Investing.com, The Epoch Times, L'Indro, etc.

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