Financial and industrial groups: Russian experience

2024 Author: Henry Conors | [email protected]. Last modified: 2024-02-12 02:46

Financial-industrial groups are a number of enterprises united by a common management structure and a source of credit, which is usually a bank. Companies that are part of FIGs do not necessarily represent the interests of a particular industry. They can perform different functions in the market, releasing dissimilar products. However, all investments are made from a single source. In addition, FIGs are concerns, sometimes a group of concerns, the majority of whose shares are owned by one individual who determines the development strategy for all enterprises of the association.

Visible autonomy and structure

Formally, from a legal point of view, such enterprises operate autonomously from each other. At the same time, having external management and financing, they form what we used to call "financial-industrial groups". What is characteristic, despite the apparent autonomy of the companyfocused on a specific task, which may not be directly related to the requirements of economic income growth. Financial capitalization often comes at the expense of the concentration of completely different resources.

Financial-industrial groups integrate the efforts of legal, insurance, financial companies, several alternative media resources and, of course, technology industries. What can unite them, except for the banal desire of the owner to earn a little? Obviously politics. It's just that a certain development of business requires not so much judicial and legal as political and instrumental guarantees for maintaining the inviolability of accumulated capital. And this is possible only in the case of the transformation of industrial, financial, banking and other types of capital into political capital, that is, into power. As a matter of fact, the activity of any FIG is aimed at solving such a problem.

Forms of financial-industrial groups

• Industrial FIGs are industrial associations operating on the principle of a concern. It is a rare case when such groups include the advantages of an enterprise in one sector of the economy.
• Classic financial-industrial groups are associations created on a contractual basis and creating a management company as a basic link. All structural units of FIGs retain their former legal status.

Financial-industrial groups in Russia

In principle, the FIG is a purely Russian phenomenon, which appeared thanks to the relevant decree of the President of the Russian Federation in the second half of 1993. Initially, it was assumed that by creating such groups, the state would be able to quickly get rid of a series of uncontrollable and, by and large, unprofitable post-Soviet enterprises, and somehow streamline unhe althy, wild competition. However, the mechanism for creating FIGs did not imply the formation of “friendly integration” mechanisms, which provoked the emergence of super players who dominated various market niches. Thus, instead of a controlled competitive environment, total monopolies were created that control entire industries and sectors of the economy. And this, in turn, led to an equally strong dependence of companies on the activities of state structures. It was thanks to the creation of their own political projects that they began to create the “necessary” lobbying political and managerial decisions. This is how the monopoly economy was born.