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Transforming Post-Communist Political Economies
Widespread evasion of rules in a transitional economy can still provide an impetus toward efficient policies. The significantly increased responsiveness of the Russian government that has come about with democratization would seem to augment this effect. The rules themselves, however, are not nearly so inefficient to begin with, so the marginal social gains from evasion-induced rule changes presumably are reduced relative to the prereform situation. Nonetheless, the ability to evade rules during transition helps prevent increased government regulation, and in the case of tax evasion is leading to simplification and rate reduction in the tax code. In other areas as well, the potential for corruption serves to limit the amount of discretion available to governmental officials.
. . . in several very important respects the development of a backward country may, by the very nature of its backwardness, tend to differ fundamentally from that of an advanced country (Gerchenkron, 1952)
It is always tempting to judge events in Russia by the standards of developed market economies. Nevertheless, the application of Western standards frequently is misleading, as I have argued elsewhere with respect to barter, monopoly power, and organized crime (see, for example, Leitzel, 1995:41-45, 100-108, 127-130). The economic outcomes that we see in the United States represent the aftermath of a long (and continuing) evolutionary process of rule making, individual responses, amended rules, new responses, and so on. Policy changes in such near-equilibrium settings then take on the character of, in Schroeder's (1979) famous phrase, a "treadmill of reform." Policymakers respond in marginal ways as problems become apparent. Over time, tremendous changes can occur, but primarily they are the result of a relatively slow, evolutionary policymaking process.
The massive reform that Russia has undergone, however, has not shared that character. Rather, the public policy changes, and individual responses, have been far from marginal, even as the initial post-Soviet conditions have continued to exert enormous influence over the Russian economic and political environment. The system of public finance and the social safety net, both of which were largely implicit in the planning system, have had to be overhauled completely. Commercial banking and its regulation have developed from ground zero. Private farming, which was permitted in the form of small private and garden plots in the old system, has expanded enormously. By mid-1993, there were already more than 250,000 full-scale private farms; individual garden plots were estimated to be responsible for 70 percent of Russian vegetable output and 90 percent of the potato crop in 1996 (Wegren, 1995:48; on individual garden plots, see Gurushina, 1996). Legal private business in general has mushroomed: there were more than 900,000 private enterprises in