Standard Oil and Yukos in the Context of Early Capitalism in the United States and Russia

Demokratizatsiya, Summer 2008 by Volkov, Vadim

Elected officials' participation in large business enterprises-the state's direct involvement in entrepreneurial activities-is another important feature of early capitalism. Structurally, this can be understood as the absence or weakness of a boundary between the economy and the polity, between business and the state. During Western Europe's early capitalist period, state resources were widely invested in large construction and trade projects, with state officials acting as capitalist entrepreneurs. Large trading companies performed governing and military functions and were heavily armed. In Western Europe, state formation proceeded in the "classic" order: the central state's consolidation of power, bureaucratic specialization, democratization, and popular participation. The state developed economic initiatives, particularly during the mercantilist period, and only later shifted to civil (bourgeois) society.

In U.S. history, state formation followed a different path. Broad political participation and party-based democracy came first; the civil service and autonomous bureaucracy came later (circa the late 1870s), and the strengthening of federal authority concluded the process (from 1900 onward).21 Although business and politics were institutionally undifferentiated, as in the European early-capitalist pattern, the United States displayed an inverse dynamic: business groups had power over the state in the nineteenth century, and the state began to establish economic initiative and regulative capacity only in the twentieth century. European intellectuals such as Georg Wilhelm Friedrich Hegel, Alexis de Tocqueville, and Karl Marx refused to acknowledge the existence of anything resembling a state in the Gilded Age United States, seeing it as either absent or fictional.

The federal state's weakness was balanced by strong local governments and a strong civil society. For the majority of rural American citizens, order and regulation emanated from community mechanisms and courts, aided by local executives and sheriffs. On the national level, parties and their influential representatives in Congress dominated politics. Party bosses, senators, and congressmen also influenced legislation at the state level. Such a system could have suited a localized society of small entrepreneurs, but concentration and industrialization allowed newly emerging strong actors to dominate this system. The robber barons' intentional efforts at "state capture" created a culture of party politics and the system of patronage. Federal authorities had neither the capacity nor the political will to set constraints and introduce regulations matching the new forms of large-scale economic activity.22

Party machines and congressmen exercised far more real power than did presidents. The executive branch not only did not have an administration to carry out independent policies, but also did not have any assistants. Until the end of the nineteenth century, the central state's efforts to regulate business were irresolute and inconsequential. Stephen Skowronek referred to state activity as "patchwork."23 American politicians limited themselves to a few federal regulations and commissions, such as the 1887 Interstate Commerce Act and the Interstate Commerce Commission and the 1890 Sherman Act, to respond to concrete problems and the public pressure to address them. These measures were generally ineffectual.