The Economics of Russian Transition
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Book Review The Economics of Russian Transition Yegor Gaidar (ed) MIT Press: Cambridge, Massachusetts, 2003. Comparative Economic Studies (2006) 48, 545–549. doi:10.1057/palgrave.ces.8100168
This formidable book, organised into 26 chapters plus 6 scientific and statistical appendices, provides very detailed testimony and analysis of a group of economists, most members of the Institute of Economic Transition (IET) headed by Gaidar, intermittently at or near the helm of the Russian Government and the reforms during 1991–1993, and later leader of ‘Democratic Choice’, a liberal, market-oriented party in the Duma. Most of the chapters in the book focus on 1992–1998, the formative and most turbulent years of the transition, but some go beyond up to 2000–2001. During all these times, IET provided background research, position and policy papers and draft laws to the reformist segment of the government and Duma. Such work for the government and Duma continued even when officials pursued more ‘leftist’ and conservative policies, a disclosure to the reader who may wonder about the relationship of the IET group with the policymakers in later years. In the space allowed, I can cover only part of the rich and highly valuable content of this volume. The following selection is based on what emerged as the main issues of the transition, my own biases, and elements less emphasised in the vast literature on covered topics. At the outset of the volume, Gaidar and Vladimir Mau link the postcommunist transition to the nature and heritage of the communist regime. As in other revolutions, when the government is most needed, it is very weak, because of the struggle between would-be winners and possible losers and owing to the deep fiscal crisis resulting from the collapse of the old public revenue system and a lag in the adjustment of expenditures to the emerging but smaller tax base. As reasons for the collapse of the communist system Gaidar emphasises the distorted structure of the economy – too large and dominant an industrial sector with a weak agricultural one. The collapse of the system came when Gorbachev tried to reform it. In Gaidar’s view this was impossible. The communist system was so rigid and inseparable that it could not be bent or partially reformed; it could only break up. This is an important explanation for why the change did not start during the mid-1960s. A second
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explanation is the energy boom of 1973–1984, which helped the USSR disguise the ills of the system, allowed it to muddle through for a while, and postpone the change. Eleven chapters, covering more than 300 pages, are devoted to a very detailed analysis of the issues of macroeconomic stabilisation, a struggle on how to transform and stabilise a centrally planned economy and shift to market principles. This is a story of the record of a handful of inexperienced policy-makers with only a few tools – fewer than the number of targets to be reached – mostly weak and inefficient, working in a politically fragmented
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