The Logic of Economic Reform in Russia / Edition 1 available in Paperback
The Logic of Economic Reform in Russia / Edition 1
- ISBN-10:
- 081573753X
- ISBN-13:
- 9780815737537
- Pub. Date:
- 04/01/2001
- Publisher:
- Rowman & Littlefield Publishers, Inc.
- ISBN-10:
- 081573753X
- ISBN-13:
- 9780815737537
- Pub. Date:
- 04/01/2001
- Publisher:
- Rowman & Littlefield Publishers, Inc.
The Logic of Economic Reform in Russia / Edition 1
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Product Details
| ISBN-13: | 9780815737537 |
|---|---|
| Publisher: | Rowman & Littlefield Publishers, Inc. |
| Publication date: | 04/01/2001 |
| Edition description: | New Edition |
| Pages: | 338 |
| Sales rank: | 771,160 |
| Product dimensions: | 5.91(w) x 9.01(h) x 0.80(d) |
About the Author
Jerry F. Hough is professor of political science and public policy at and a nonresident senior fellow at the Brookings Institution. His books include "Democratization and Revolution in the USSR, 1985-1991" (Brookings, 1997) and "Russia and the West: Gorbachev and Reform" (Simon and Schuster, 1988; rev. 1990).
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Chapter One
Introduction
On October 28, 1991, Boris Yeltsin addressed the Fifth Congress of People's Deputies and proclaimed his intention to conduct radical economic reform "decisively, abruptly, and without wavering." The reform, he said, would feature economic stabilization, privatization, and price liberalization, and he warned that conditions would be very difficult for six months. A week later President Yeltsin took over the premiership himself and appointed a team of radical young economists to carry out the reform. Thirty-six-year-old Yegor Gaidar was the leader of this team.
Yeltsin declared in his October 28 speech: "We officially invite the International Monetary Fund, the World Bank, and the European Bank of Reconstruction and Development to participate in the working out of the detailed plan for cooperation and participation in the economic reforms." He called for technical assistance "in the analysis and working out of recommendations on key economic, ecological, and regional questions." Yeltsin's young economists in turn announced their complete dedication to the economic reform package of the International Monetary Fund—"the proven answers of economic theory and practice." In February 1992 they promised to accept the IMF conditions completely.
From early 1992 onward, however, real economic reform in Russia clearly deviated from that which the IMF had been promised. Despite these deviations, western supporters of theRussianreform package remained highly optimistic. As early as October 1994, Anders Aslund was asserting that Russia had become a market economy:
The main goal of the Russian economic transformation has been accomplished. Russia has become a market economy. The essential feature of such an economy is that the market is the main instrument of allocation.... The economy had been emancipated from politics.... Ownership had been depoliticized.... Bureaucratic directives were gone (with rare exceptions), and allocation had been depoliticized.... The problem is no longer one of lack of monetarization but the stabilization of the ruble.... Credit and pricing have ... been essentially (although not completely) depoliticized.
In 1995 Stanley Fischer, the first deputy director of the IMF, examined the experience of the countries of the former Soviet Union and predicted, "Growth in these countries will on average increase in 1995 and will turn positive in most of these countries by 1996 or 1997." Russia was surely among the former Soviet republics he viewed as having a rosy future. This optimism infused the thinking of the American investment community.
The optimism vanished with the Russian financial crash of August 1998. The ruble lost over 70 percent of its value, and banks defaulted on their debts and forward currency contracts. An unseemly debate ensued on "who lost Russia," with all participants generously giving credit to others, especially to the Russians. Nevertheless, the explanations almost all pointed to factors that had been well known during the period of optimism. Everyone was aware in 1991 that Russia did not have a capitalist culture, a rule of law, secure property rights, a regulated and trusted banking system, or enough trained personnel. Everyone knew Yeltsin was elected in June 1991 as an extreme populist promising reform without pain. In the postmortems, no one explained why these obvious problems proved more dangerous than anticipated and why the reform program did not take them more into account.
Some in the West said that the Russian state was "weaker" than expected. It was the West, however, that had pushed Russia to have democratic elections, and Yeltsin's government actually was far more authoritarian than anticipated in 1991. Others said that weak meant insufficient government regulation of the economy. Nobel laureate Douglass North expressed this view in 1997: "There is no such thing as laissez faire—that means anarchy somewhat akin to what we have been observing in Russia." Nevertheless, as this book will document, the Russian government under Yeltsin maintained a strong directing role in the economy from the beginning of 1992 through 1999. The system remained in place at the end of 2000.
The real problem was that the state was using its power and involvement in the economy to do the wrong things. The deviations from the announced economic reform actually went far beyond those usually acknowledged in the West. The Russian economy functioned in a manner almost the reverse of what Aslund had described. Russia was far closer to the old centrally directed Soviet economy, with its nonmonetary delivery and receipt of goods, than to a market economy. The large "privatized" enterprises and banks remained essentially state or quasi-state entities acting on the direction of the central government. Inter-enterprise loans, barter, and tax arrears were depicted as the independent actions of enterprise managers, but they usually were approved or ordered by the government. Government often required the enterprises to deliver goods free; in return it excused them from tax payments. The reform politicians idolized by the West deliberately deceived the West on these and many other questions.
As a consequence, the same need exists to probe behind the façade of the official version of the relationship between government and the economy in the 1990s as in the Soviet period. The first purpose of this book is to show the real nature of policy while Yeltsin was president and the real way in which the economy functioned. The usual analysis of the "independence" of the Central Bank, the enterprise directors, the financial oligarchs, and the regions is precisely as accurate as that rare analysis in the Soviet period that treated the soviets as independent from the Communist party organs.
The second purpose of this book is to try to explain why the economic reform went wrong. Everyone assumed that Russian economic reform would face difficulties—although, of course, the Chinese economic reform did produce nearly 10 percent growth a year for twenty years—but no one in 1991 expected that the situation would be disastrous a full decade later. In 1997 one major participant stated, "Given the scope for restructuring, the need for new capital, the relatively low labour costs by international standards, and the high level of human capital, one might have expected transition to be associated with high rates of capital accumulation." A year later, another recalled that the transition period was expected to be relatively short and that no major and prolonged drop in production was anticipated.
This book argues that the answer is not found in the Soviet past, in Russian national character, or in the lack of a capitalist culture. Adam Smith and David Ricardo developed their analysis well before Europe had a well-developed capitalist culture or a set of modern financial and regulatory agencies. Indeed, "naked self-interest," to use Karl Marx's phrase from this period, logically should be the decisive motivating force for people whose old cultural restraints have been shattered and who are not yet enmeshed in new ones.
The core assumption of the economic reform was right. Russians possessed the rationality assumed in the neoliberal economic models, and in that sense they were "normal economic men." They did, in fact, respond rationally to the incentives they were given. The corruption, mafia, capital flight, lack of investment, and lack of economic growth were not the product of Russian culture or history, but the natural consequences of the response of rational people to the incentive system created by economic reform. That is the meaning of the title of this book.
The third purpose of the book is to draw theoretical lessons from what happened. That process has already begun, and scholars agree on the first implication: institutions are more important than the neoliberal economic community supposed in 1990. In the jargon of the 1980s, many had believed that Russia could and should cross the chasm from socialism to capitalism in a single leap, as if a functioning capitalist system, culture, and legal system existed full-blown on the other side. That belief was wrong. The agreement about the importance of institutions is universal, however, because the word institution is vague, and people define it in quite different ways. The problem is illustrated by a speech by Alan Greenspan, chairman of the U.S. Federal Reserve Board, in 1997:
Much of what we took for granted in our free market system and assumed to be human nature was not nature at all, but culture. The dismantling of the central planning function in an economy does not, as some had supposed, automatically establish a free market entrepreneurial system. There is a vast amount of capitalist culture and infrastructure underpinning market economics that has evolved over generations: laws, conventions, behaviors, and a wide variety of business professions and practices that has no important functions in a central planned economy.
It is difficult to disagree with Greenspan's statement, but what is the concrete meaning of "capitalist culture and infrastructure" in an analysis of Russian economic reform? Is it the informal norms, expectations, and conventions that must take generations to evolve? Will they make economic growth impossible for a prolonged period? Or are there concrete laws and organizational infrastructure that can and should be put in place and that may fairly quickly produce the growth of the Chinese transition from communism? What is the normal or optimal sequence of the development of formal and informal constraints?
Douglass North, who received the Nobel Prize for his work on institutions (work from which Greenspan's ideas were drawn), has been utterly forthright in recognizing that neither he nor the scholarly community as a whole understands how durable, socially desirable institutions are developed where they do not exist. "We simply do not know how to create efficient political markets.... We simply have no good models of politics in Third World, transition, or other economies. The interface between economics and politics is still in a primitive state in our theories, but its development is essential if we are to implement policies consistent with intentions."
This book hopes to make a contribution to the development of such a theory. By insisting that corruption, the mafia, capital flight, lack of investment, and lack of economic growth were produced by concrete incentives created by government action, I intend to show that the role of informal institutions should not be exaggerated, at least in an analysis of change. People usually do act in a habitual, unthinking manner rather than by constant calculation, but the habits develop in response to real rewards and punishments. The effort to introduce change must focus on the establishment of real rewards and punishments.
This book does not focus on institutions in general, but on the problems of generating capital investment in early and middle stages of capitalism and on the reasons why the role of government must be different at these stages than at later ones. The book begins by suggesting another look at the work of Alexander Gerschenkron, but it insists that we move beyond a general acceptance of the importance of the role of the state to recognize that the state is not simply the king, but a range of individual government and military officials with their own interests. It argues that the individual officials have the correct concrete incentive to engage in activities that protect investment and promote economic growth. This often involves what is called "corruption." It is not a coincidence that the periods of highest economic growth in the United States, Europe, and the Pacific Rim were periods of high corruption. The problem in Russia was that the corruption was not associated with protected investment inside Russia, but with capital flight.
The Impact of the Western Economic Community
By demanding formal Russian compliance with an economic program that they knew the Russians were not carrying out, the officials of the International Monetary Fund (IMF) put themselves in a bureaucratically comfortable position. The officials did themselves no honor by accepting the same formal assurances from the Russian government year after year, long after it was patently obvious the promises would not be kept, but this meant they could always claim they were not to blame. All the failures of the Russian economic reform could be attributed to the deviations from the program, and the deviations could be attributed to some factor inherent in Russia.
In fact, no one would blame the IMF entirely or primarily for the economic failure in Russia. A great variety of factors produced that failure, and historians will spend decades and even centuries trying to assess their weight. The most important factor was Boris Yeltsin. IMF advice may be right or wrong, but government leaders decide whether or not to adopt it. Wisely or not, the United States did not raise interest rates in the 1990s as much as the IMF staff wanted. Wisely or not, the Chinese and Pacific Rim leaders did not follow the IMF program in many particulars. The leaders of those countries ultimately deserve the credit or the blame. Yeltsin was an authoritarian leader with the power to change policy when it was not as successful as promised. He did not do so although often advised to do so by critics of the IMF.
The problem was that Boris Yeltsin was not a modern ruler trying to build either a smoothly functioning democracy or authoritarian regime; both require strong laws and rules, and Yeltsin did not want to introduce such laws. He refused to create a presidential political party, he never relied on a well-organized military or police force, and he would not establish the kind of rational-technical bureaucracy that Max Weber thought inherent in modern industrial society. He sensed a point emphasized by Weber, namely that laws, bureaucracies, and organizations restrain leaders as well as citizens.
Yeltsin was the patriarchal head of the Russian family, and he adopted an extremely personalistic style of rule. He often referred to the young neoliberal economists as his children—as the sons he never had. He was the familiar Russian father who drank too much, was indulgent toward his children, but knew what was best and brooked no challenge. He tolerated an enormous amount of corruption. Perhaps he calculated that if everyone high in the system engaged in corrupt or illegal activities, everyone would fear removing him from office. Or perhaps the personalism inherent in what Weber called "patrimonial bureaucracy" naturally led to activity that those in rational-technical society would call corruption.
Yeltsin's preferences about the relationship of king, court, bureaucracy, and economy were quite typical for the early and middle stages of capitalist development. The off-budget subsidy of consumption in Russia fit well with Yeltsin's personalistic system of rule. Nevertheless, the more usual result in early capitalism is an industrial policy in which the line between government official and entrepreneur is blurred, but in which both become rich on the basis of profitable investments and economic growth, not through the redistribution of poverty.
Everything in Boris Yeltsin's background and the structure of Russian politics suggests that an industrial policy would have been a natural outcome in Russia without outside influences. Yeltsin was the quintessential party apparatchik, a construction engineer with twenty years of work in construction management before he became the governor (obkom first secretary) of a major heavy industrial center (Sverdlovsk) noted for its conservatism. The leading industrial and regional forces of Russia wanted an industrial policy, and the Russian population favored gradual economic reform. Yeltsin could have ruled in a personalistic way with investment subsidies, as easily as with direct consumption subsidies. This would have satisfied all his instincts as a construction engineer and administrator.
China had an industrial policy that focused on investment, and it erected barriers against imports while promoting export-led growth. This program, which should have seemed so congenial to a construction engineer, produced excellent growth. The Chinese model seemed the natural one for Yeltsin to emulate, all the more so since it was associated with an authoritarian political system. Nevertheless, Russia did not choose concrete indicators of success such as economic growth or level of construction, but monetary factors: inflation, money supply, and budgetary stringency. This choice can only be explained by the advice of the international community and the conditions it set.
Although the IMF program was not enacted completely, the IMF and western neoliberal economists seldom criticized the worst aspects of Yeltsin's policy vociferously. They called for property rights, but supported the violation of the property rights of those who actually owned industrial property—the insider-owners. They talked about a rule of law, but never confronted the system of nontransparent, personalistic off-budget subsidies that destroyed both property rights and legal predictability. They never declared that creation of a well-functioning, well-financed bureaucracy was crucial, but instead defended privatization as a step needed to weaken state control. Indeed, this remained the main defense of privatization when it could no longer be defended on economic grounds.
Worst of all, the international community never treated neglect of investment as the key flaw in the reform. Indeed, it almost never mentioned the problem or discussed how to cure it. The West, impossible as it is to believe, never pushed for marketization of the wholesale agricultural trade system that was the key to exploiting agriculture to subsidize urban food prices and that made any form of agricultural reform impossible. Incredibly, the West said that the epitome of a good reformer was Anatoly Chubais, the architect and chief administrator of Yeltsin's personalistic subsidy program, Yeltsin's patronage man, and the chief destroyer of property rights.
To some extent, the position of the western neoliberal reformers reflected a lack of knowledge. However, the character of the off-budget subsidies, the directing role of the quasi-ministerial state organs, and the role of the government in interenterprise loans were quite clear by the winter of 1992-93. As it became clear that Yeltsin was deviating from his promises and trying to hide the deviations, the IMF made no serious attempt to publicize the real situation, but often contributed to the effort to reduce the transparency.
Douglass North suggested that the problem might be that the neoliberal economists reacted as they did because they did not know what to do. He insisted that they could not create an institutional framework for a market because, as he argued in his 1993 Nobel Prize speech, they did not have the tools, acting by themselves, to do so:
Neoclassical theory is simply an inappropriate tool to analyze and prescribe policies that will induce development. It is concerned with the operation of markets, not with how markets develop.... How can one prescribe when one doesn't understand how economies develop? The very methods employed by neoclassical economists have dictated against such a development. That theory ... modeled a frictionless and static world. When applied to economic history and development, it focused on technological development and more recently human capital investment but ignored the incentive structure embodied in institutions that determined the extent of societal investment in these factors. In the analysis of economic performance through time it contained two erroneous assumptions: first, that institutions do not matter and, second, that time does not matter.
The most important problem, however, was that the experience of neoliberal economists and the assumptions of their model led them to assume that Yeltsin's deviations were not all that important. They had seen personalistic rule and deviations from an optimal economic model in Latin America and Africa, and they had seen their policies work despite them. That is why they could say that Russia had achieved a normal market economy by 1994, that monetary stabilization would produce growth in 1995 and 1996, and that westerners could confidently invest in 1996 and 1997. The question is the nature of the assumptions of the model.
The Assumptions of the IMF Program
Only two months passed between the failed coup d'état in Russia in August 1991 and Yeltsin's appeal for a program from the IMF and the West. No one had time to develop a reform program specifically for Russia. If the international community had studied Russian reality closely from 1992 onward and tried to make adjustments as seemed necessary, no one would criticize them for early mistakes. Instead, they accepted all the worst changes made to Yeltsin's sound early privatization program because the rent-seekers who benefited from them (the mislabeled reformers) clothed them in ideologically acceptable garb. When Yeltsin compromised with the Congress and decided to introduce an industrial policy in early 1993, the West offered to support his dissolution of the Congress and his establishment of authoritarian rule if he would reject the industrial policy. This was the key mistake.
Before October 1991, top western economists had concentrated their thinking about the transition from communism only on eastern Europe, and really only the countries of northern eastern Europe at that—Hungary, Poland, and Czechoslovakia. It was inevitable that they would think about reform in Russia in the same terms. In April 1992 Lawrence Summers, then the chief economist of the World Bank and soon to be the top Clinton administration official dealing with Russia, reported that "a striking degree of unanimity exists in the advice that has been provided to the nations of Eastern Europe and the FSU."
At another conference the previous year, Summers asserted:
The elements of reform can be grouped into four categories:
1. Macroeconomic stabilization: tightening fiscal and credit policies, and addressing internal and external imbalances;
2. Price and market reform: removing price controls, liberalizing trade, and creating competitive factor markets;
3. Enterprise reform and restructuring: private sector development: establishing and clarifying property rights, facilitating entry and exit of firms, restructuring of enterprises;
4. Institutional reform: redefining the role of the state: legal and regulatory reform, social safety net, reform of government institutions (tax administration, budget and expenditure control, monetary control).
While there is general consensus over the nature of the reforms to be implemented, the sequencing of those reforms has been intensely debated. [However], there is broad agreement that macroeconomic stabilization, followed by price and trade reform, should occur at the very beginning of the reform process. Tax reform, the development of a social safety net, and measures to encourage the private sector should follow quickly thereafter.
Restructuring, privatization, institutional, regulatory and legal reform can be addressed early in the reform process, but completion of reform in these areas will take more time. Financial liberalization, full convertibility of the capital account and full wage liberalization should come in later in the reform sequence.
The universality of Summers' language accurately reflected his belief that these principles of reform could improve the performance of almost any economy in which they were not being fully applied. The language corresponded to what John Williamson called "the Washington consensus" that had flowed from the reform experience of Latin America in the 1980s. Indeed, the order of Summers' points was similar to that of Williamson's ten points of the "Washington consensus" on Latin America and also to that in Stanley Fischer and Alan Gelb's major World Bank paper on Eastern Europe of 1990.
As Summers recognized in the long statement cited above, the sequencing of steps was crucial. The ranking of his points—and those of Williamson and Fischer—was not meant as a precise sequence of steps, but it was not random. It represented a reasonable ordering of priorities in Latin America, where the immediate problem was financial stabilization. A social safety net was not thought crucial in Latin America, because it already existed to some extent and because all agreed that "the recessionary ... effects of fiscal contraction ... are short-lived, especially under conditions of financial crisis." Economists could be strident in insisting on free trade, deregulation, privatization, and property rights in Latin America because they knew that Latin American politicians would take political considerations into account and introduce change slowly at best.
Obviously, everyone understood Russia was different. It did not have a seriously distorted market economy as did Latin America, but rather almost no market at all. As Stanley Fischer and Alan Gelb noted in 1990, Russia was not only much larger than any of the East European countries, but also had a more centralized system, more centralized even than China. As Jeffrey Sachs emphasized at a 1993 conference, the Soviet Union, like India and China, did not have the Roman law tradition of western and eastern Europe.
Despite subsequent charges to the contrary, neoliberal economists all understood that institutional change would be more important in Russia than in Latin America. Stanley Fischer explicitly stated: "One of the most difficult intellectual challenges the Washington consensus faces" is to develop an understanding of "how to create an enabling environment. The issue goes well beyond property rights to the creation of legal, accounting, and regulatory systems, and the need for efficient government administration."
Nevertheless, Fischer's statement reflected the general realization of the neoliberal economists that creating institutions was a "most difficult challenge." A similar comment in Williamson's discussion of institutional change in Latin America was even more revealing. "I suppose that I was provoked into adding property rights to [the bottom of] the list by an article ... that derided me as a "hydraulic economist" [this was presumably intended to be an abusive term for a macroeconomist] who was indifferent to such legal institutions as private property, which the author was convinced were at the core of Latin America's problems."
The real problem in Summers' analysis of the sequence of the steps of economic reform was his casual statement that "institutional, regulatory and legal reform can be addressed early in the reform process, but completion of reform in these areas will take more time." "Can," not "must." "Addressed," not "resolved." It obviously would take decades for Russia to develop a smoothly functioning institutional, regional, and legal system, but Summers and his associates did not share North's insight that institutions establish incentive structures and that rational individuals respond to the real, existing incentive structure, not to the incentive structure in some abstract model in the minds of scholars.
The crucial starting point for economic reform in Russia was to realize that incentives were going to exist from the beginning and that the top priority was to do something, even if imperfectly, to ensure that the incentives were not counterproductive. The notion that optimal institutions would arise spontaneously contradicted everything that had been learned in the decades of work on the logic of collective action. Every step in the reform should have been analyzed in terms of the incentives—the real incentives—they would create in the conditions prevailing in Russia at the time. Leading economists such as Larry Summers, Stanley Fischer, and Kenneth Arrow were very cautious about assembly plant privatization at first, for they understood the potential problem. But when, for reasons that are not clear, they supported Chubais's enthusiasm for voucher privatization, they never rethought the implications for the incentives that were created.
There was no reason to abandon the basic assumptions of the neoliberal model; they were the correct starting point of policy. But it had to be understood that those assumptions did not rest on the rosy optimism about the state of nature (that is, human nature) of Jean Jacques Rousseau, but on the harsh pessimism of Thomas Hobbes. The central point of the neoliberal model, often not emphasized in polite company, was expressed by Dennis Mueller in a succinct summary of the current state of American public choice literature in 1989:
Probably the most important accomplishment of economics is the demonstration that individuals with purely selfish motives can mutually benefit from exchange. If A raises cattle and B corn, both may improve their welfare by exchanging cattle for corn.... [However], the choices facing A and B are not merely to trade or not, as implicitly suggested. A can choose to steal B's corn, rather than give up his cattle for it; B may do likewise.... In an anarchic environment, the independent choices of both individuals can be expected to lead both to adopt the dominant stealing strategy.
Just as crime is a rational response to the incentives imbedded in a certain set of costs and benefits, so too is political corruption. Gordon Tullock implied this point when he equated anarchy and government corruption:
In a situation in which there is no government it would be possible to motivate people to do anything you wish by offering them suitable compensation. In a completely corrupt government, officials could be motivated to do anything you wish by suitable payments and, hence, there would be no difference between this society and that of anarchy. If, as I believe is correct, people under anarchy are every bit as selfish as they are now, we would have the Hobbesian jungle. In any event, we would be unable to distinguish a fully corrupt government from no government.
The market is not something that exists in the state of nature, to be released by the collapse of state institutions. Over the thousands of years of human history, the institutions of many great civilizations collapsed, but a well-functioning market did not emerge as a result, only the collapse of civilization. Markets are created and maintained by government, and there is no single "market" that can be introduced in Russia or anywhere else. The pure neoliberal model would not be tolerated anywhere, certainly not in the United States, and real market incentive structures vary with time and place. The incentives of the United States market system today are not the same as those in 1928 or in 1828—or even before the bank crisis of the 1980s or the rise of the unregulated Internet of the 1990s. The incentives in the United States are not the same as in the markets of Sweden, Japan, or India. People respond to the incentives that exist at their particular time and place.
Yet the creation of a proper set of rules, laws, and incentives (North's definition of institutions) is the epitome of a public good. The well-studied problems of aggregating individual rationality in achieving a collective good are nowhere so severe as in this realm. Neither the entrepreneur nor the uncontrolled public official has any individual self-interest to expend individual effort for the public good.
To the extent that individuals can help shape the rules and regulations, public choice literature insists that individuals have an interest in shaping them in a way that gives themselves an advantage and helps them maximize personal profit. Business lobbying over the incentives in tax laws provides only a hint of what should be expected when more fundamental laws and rules are at stake.
Nothing in economic theory suggests that neoliberal economists are any less self-interested than other human beings. Indeed, their ideology should lead them to be more self-conscious in pursuing their self-interest than those they see as misled by moralistic propaganda. Stanley Fischer made this point directly in 1993 when he criticized a paper by Andrei Shleifer and his Russian colleagues for using the word "politician" to refer only to opponents. Yeltsin and those in his government were politicians as well, Fischer insisted. "So this is really a paper about the good guys versus the bad guys, and we do not know what drives the good guys, and what differentiates them, except that we are on their side and they on ours." Fischer was implying that "the good guys" were driven to rent-seeking like other politicians, and he was absolutely right. The drive of the Russian neoliberal economists to acquire property through state action was a key element in the Russian economic reform. The mystery is why the West did not base its policy on Fischer's insight.
Table of Contents
| Foreword | vii | |
| Preface | xi | |
| Chapter 1 | Introduction | 1 |
| Chapter 2 | Economic Reform and the Role of Government | 19 |
| Chapter 3 | Privatization | 58 |
| Chapter 4 | Saving and Investment | 94 |
| Chapter 5 | The Debate over Economic Policy, 1991-93 | 127 |
| Chapter 6 | The Response of the Political System, 1993-96 | 163 |
| Chapter 7 | The Collapse of the Ponzi Game | 202 |
| Chapter 8 | Institutions, Market Reform, and Democracy | 229 |
| Notes | 255 | |
| Index | 294 |