The political economy literature largely agrees that secure property rights underpin stable economic order, prosperity, and growth. The sources of such arrangements, however, are a debated topic. In Property, Predation, and Protection: Piranha Capitalism in Russia and Ukraine, Stanislav Markus develops a theoretically-motivated, conceptually rigorous, and empirically rich account of business-state interactions over this profoundly important institution. The book explores property relations in the newly capitalist economies of Russia and Ukraine and presents a valuable addition to the recent literature examining institutional foundations of capitalism in Post-communist space (e.g., Scott Gehlbach, Representation Through Taxation: Revenue, Politics, and Development in Postcommunist States, 2008; Timothy Frye, Building States and Markets after Communism, 2010; Gerald M. Easter, Capital, Coercion, and Postcommunist States, 2012).

Departing from the dominant approach that emphasizes state commitment as the ultimate source of property rights, Markus develops an alternative, bottom-up approach to institution-building in which the state does not dominate business-state relations. Using qualitative analysis based on 125 open-ended interviews with business owners, public officials, and academic experts, along with original business survey data, Markus develops a thorough account of disorganized threats to property rights carried out by predatory state bureaucracy. By analyzing Russia and Ukraine, the author ensures that his findings are not driven by idiosyncratic features, such as oil economy, political instability, and super-presidentialism.

The book unpacks the notion of property rights security by separating ownership rights from income rights. While the threats to firms’ income in the form of taxation by sovereign and bureaucratic corruption have been extensively studied in the literature, we generally lack a proper conceptual framework to analyze instances of bureaucratic attacks on private ownership. Markus argues that in countries with a resourceful, yet undisciplined state apparatus, the most significant and routine threat to property rights emanates not from the state rulers, but from their poorly-controlled bureaucratic agents. Because the sovereign cannot commit to secure property arrangements on behalf of recalcitrant state agents, the latter may abuse their powers by extracting revenue, annexing property, and intervening in the internal affairs of private enterprise. The book’s central message is that rule-bending actions of bureaucrats motivated by self-enrichment have a detrimental effect on the quality of the business climate. While the literature on bureaucratic corruption has argued this point (e.g., Andrew Shleifer and R. W. Vishny, “Corruption,” The Quarterly Journal of Economics, 1993), the novelty of the book’s contribution is in emphasizing that, in Russia and Ukraine, such threats undermine not only a firm’s income, but also the fundamentals of private ownership.

One potential objection to the proposed framework, which separates agents’ attacks on ownership from their claims on a firm’s income, is that these might be conceptually meaningful but empirically indistinguishable. When unruly bureaucrats target firms to extract resources, they may threaten a firm’s ownership rights to maximize income extraction. The author demonstrates that the distinction between income and ownership security is born out empirically, with the business survey data pointing to significant differences between enterprises facing two types of threats (pp. 77–8). Using qualitative and quantitative evidence, the book shows that threats to ownership are substantial in terms of forgone profits and diminished predictability. Neatly designed business survey questions allow the author to gauge the extent of such threats, and they are at least as grave as bureaucratic threats to income.

The book convincingly argues against the popular notion that the autocrat allows agents’ predatory behavior in exchange for their political support. Chapter 4 establishes that, in Russia and Ukraine, agent predation undermines the principals’ political priorities. Moreover, the chapter documents repeated attempts to rein in bureaucratic discretion and lawlessness through civil service reforms (Russia) and deregulation (Ukraine). The author uses survey data to further substantiate the claim that agents act without the rulers’ blessing; the lack of regional variation in the security of property rights in Russia, Markus argues, shows the principal is not sanctioning predatory behavior to cajole “obstreperous” regions. A significant regional variation in the severity of property threats across western and eastern Ukraine, at the same time, does not support the notion of sovereign involvement. The survey data shows that Ukrainian regions supportive of the central political authorities had higher threats of predation compared to politically-opposed regions. Markus argues that this is inconsistent with the notion that the principal sanctions the predatory behavior of his/her subordinates to win their loyalty.

The book does not stop at diagnosing the problem of agent predation. It also investigates the solutions. Markus examines the standard solutions advanced by the theory of credible commitment—formal institutions limiting a sovereign’s ability to prey upon private business. In the case of Russia, such institutional constraint is presented by the state-sanctioned, encompassing organizations of business representation that bolster businesses’ political influence. In the case of Ukraine after 2004, the solution came in the form of a powerful and politically oppositional legislative branch, which checks the power of the executive. The author’s analysis shows that neither the political decisions of executive policy makers that signal their intentions to uphold property rights nor institutional mechanisms of credible commitment address the problem of disorganized, agent-driven predation. Chapter 5 documents various ways in which state agents have subverted, ignored, captured, or neutralized policies and institutions aimed at restricting bureaucratic predation. As a result of these actions, Russia and Ukraine experienced persistent threats to property rights in the 2000s—a puzzling result to the orthodox approaches to the problem of credible commitment. This book offers a reasonable explanation to this apparent empirical puzzle: the credible commitment devices have failed in both cases because “the state principal cannot commit on behalf of the state agents” (p. 121).

Chapter 6 examines an alternative set of solutions securing property rights—enterprise-specific alliances with foreign investors, labor, and local communities. Such bottom-up, micro-level mechanisms for improving business climate also include local business associations (see Dinissa Duvanova, Building Business in Post-Communist Russia, Eastern Europe, and Eurasia, 2013 for a similar argument). Case studies of six Russian and Ukrainian companies illustrate how the alliance-building strategy helps protect the property rights of firms coming under disorganized state attacks. When the state regulators and enforcers collude with private competitors in a predatory attack, companies’ owners and managers can raise the cost of predatory behavior by carrying out effective public campaigns, putting pressure on political authorities, and organizing labor resistance to coercive actions. Although such strategies are not limited to fighting disorganized attacks by agents of the sovereign, stakeholder alliances are less effective against the attacks coordinated by the central political authorities. The survey data further substantiates the claims that the alliances between firms and their stakeholders are potent defense strategies. Statistical analysis reveals that firms investing in community and labor relations, as well as firms with foreign stakeholders, experience substantially lower threats of state predation.

The last chapter of the book elaborates on how the stakeholder alliances may facilitate the rule of law. Markus concludes on an optimistic note, seeing stakeholder alliances as the second-best micro-institutional solution to the pervasive problem of state predation and the lack of the rule of law. The book’s important argument and informative empirical analysis would be of great interest to those who study business-state relations, institutional political economy, and, despite the author’s disinclination to frame his contributions around this issue, public sector corruption.