Toward a Russian market economy

Two views of economic transformation and their implications for Russia's future

Seminar paper from the year 2006 in the subject Politics - International Politics - Region: Russia, grade: Honors (Bestnote), Yale University, course: Dynamics of Russian Politics, 13 entries in the bibliography, language: English, abstract: The story of the post-Soviet economic transformation of Russia told by radical reform advocates is compelling in the sense that it is cogent within the limited confines of economic logic. However, it is not exhaustive. Rather, it should be regarded as a snapshot view from a very specific - and in particular: an ahistorical - perspective. We will contrast this perspective with an alternative interpretation of reform that takes into account exogenous factors, namely culture and history. As Hedlund suggests, 'there are good reasons why economics in particular would be insensitive to the highly specific conditions that marked Russia's attempted economic transition.' We will begin our remarks with a short overview of the transformation process according to the positivist view of the economist and radical reform advocate Anders Ås-lund. The purpose of the discussion is not to merely recapitulate the chronology of transformation but rather to point out the underlying assumptions on which economic policy rested. These are crucial for understanding why reform deviated from the path forecasted by the proponents of radical reform. In a second step, we will attempt a critical appraisal of theses assumptions and look at some of the adverse implications that followed from them. Third, a different interpretation of the transformation process will be introduced that puts path dependence at the center of analysis, putting the approach taken by radical reformers in a different light. Finally, as a concluding remark, we will briefly go into the practical consequences as implied by the two different approaches regarding the strength and stability of the Russian Federation, the prospects for liberal democracy, and the prospects for an effective market economy.