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A Russian Puzzle What Makes the Russian Economic Transformation a Special Case

Author

Listed:
  • Popov, Vladimir
Abstract
This paper seeks to explain, why Russian (and CIS) economic transformation was neither a shock therapy nor a gradual transition case, but instead followed a sort of middle ground inconsistent shock therapy path. It is argued that there were some objective constraints, mostly of a social and cultural nature, that prevented the policy makers from successfully implementing the classical shock therapy approach. Nevertheless, actual Russian policy during transition was far from first best feasible choice in such areas as macro-stabilization, exchange rate management, cuts in budgetary expenditure, industrial restructuring, social and labour market programmes. If current trends continue, emerging Russian capitalism is not likely to duplicate European or East Asian patterns of development, but instead may resemble somewhat the Latin American model. Poor traditions to comply with laws and regulations and low tax revenues; highly uneven distribution of wealth and income and strong social tensions; government failure in providing public goods and social transfers and in restructuring the economy through supporting the winners rather than the losers; poor investment climate, capital flight, growing foreign debt, low savings, investment, and growth - this bleak picture is the most probable option provided that the government will not proceed with major reforms. The brighter scenario implies that the government would adopt a growth strategy based on: downsizing part of the government, while making the remaining part more efficient; sound industrial policy favouring export-oriented industries; efforts to build consensus through strong social policy; measures to stimulate savings and investment (through a low exchange rate, pension system reform, increased government and foreign investment).

Suggested Citation

  • Popov, Vladimir, "undated". "A Russian Puzzle What Makes the Russian Economic Transformation a Special Case," WIDER Working Papers 295322, United Nations University, World Institute for Development Economic Research (UNU-WIDER).
  • Handle: RePEc:ags:widerw:295322
    DOI: 10.22004/ag.econ.295322
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    Cited by:

    1. Popov, Vladimir, 2020. "A myth of soft budget constraints in socialist economies," MPRA Paper 99769, University Library of Munich, Germany.
    2. Richard Disney & Jelena LauĊĦev, 2011. "Monopsony With Heterogeneous Labour: Evidence From Economic Transition," Discussion Papers 11/11, University of Nottingham, School of Economics.
    3. Wayne Nafziger, 1996. "The Economics Of Complex Humanitarian Emergencies: Preliminary Approaches And Findings," WIDER Working Paper Series wp-1996-119, World Institute for Development Economic Research (UNU-WIDER).
    4. Rosser, J. Jr. & Rosser, Marina V. & Ahmed, Ehsan, 2000. "Income Inequality and the Informal Economy in Transition Economies," Journal of Comparative Economics, Elsevier, vol. 28(1), pages 156-171, March.
    5. Vladimir Popov, 2001. "Money Unmade: Barter and the Fate of Russian Capitalism," Journal of Policy Analysis and Management, John Wiley & Sons, Ltd., vol. 20(2), pages 376-379.
    6. Vladimir Popov, 1999. "Investment, Restructuring and Performance in Transition Economies," Post-Communist Economies, Taylor & Francis Journals, vol. 11(4), pages 445-462.
    7. Popov, Vladimir, 2001. "Currency crises in Russia and other transition economies," MPRA Paper 28117, University Library of Munich, Germany.
    8. Juha Honkkila, 1997. "Privatization, Asset Distribution and Equity in Transitional Economies," WIDER Working Paper Series wp-1997-125, World Institute for Development Economic Research (UNU-WIDER).

    More about this item

    Keywords

    International Development;

    JEL classification:

    • P20 - Political Economy and Comparative Economic Systems - - Socialist and Transition Economies - - - General
    • P21 - Political Economy and Comparative Economic Systems - - Socialist and Transition Economies - - - Planning, Coordination, and Reform

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