Draft

Oligarchs have become one of the big political problems after communism, and one of the biggest policy questions in both Russia and Ukraine is what to do with the oligarchs. Russia has seen the lawless confiscation of its biggest oil company, Yukos, through taxation, while Ukraine is reconsidering its whole privatization. The resolution of the question of the oligarchs will greatly influence the future of the economic systems of these countries. In order to design a suitable policy for the treatment of oligarchs, we need to examine what oligarchs actually are, the economic and legal reasons for their emergence, how they act politically, and what people react against. Our endeavor is to discuss oligarchs as a social phenomenon rather than a matter of morality. Our conclusion is that oligarchs are economically highly useful. They are a natural product of large economies of scale and little legal security, and very large enterprises can hardly develop without them. A major problem is that the oligarchs spend inordinate amounts to reassure their property rights. The best cure is to guarantee private property rights to all, including the oligarchs. If not even the property of the richest of the land is safe, how can anybody trust his property rights? Such a guarantee of property rights marks the crossing of the threshold to mature capitalism. It may become politically more palatable, if the oligarchs are charged additional taxes or induced to undertake large-scale charitable donations. What must be avoided is the redistribution of property and legal limbo. Ultimately, the acceptance of oligarchs is a matter of ideology. Do we accept the very rich or not? Mature capitalism does, while lesser systems do not. www.iet.ru