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Relative to the Soviet system, however, the current situation seems to be an improvement. Certainly there has been a massive increase in private economic activity, despite the barriers of state and mafia extortion. And the legal norms governing state-private interaction in the United States are inappropriate in the Russian context (see Posner, 1995; Rapaczynski, 1996). Of surveyed Russians, 70 percent do not expect fair treatment from the state; 45 percent do not expect fair treatment from grocery stores, either (Rose, 1995:39). In such circumstances, high levels of corruption that allow citizens to buy services from government officials for a bribe in the same way they can buy bread at the grocers may not be such a bad outcome.20 There is some evidence that the analogy is not far-fetched: ". . . Moscow newspapers list the going rates for whatever ostensibly free government service you may need" (Germani, 1995:2A).

The transition period in Russia has been marked by radical changes in the official rules and by significant individual responses to the new rules—including widespread evasion. A return to a normal policy regime—a treadmill of reforms—might be quite welcome after the momentous changes of the past few years. With small policy changes and time, state involvement in the economy can "wither away" to levels more consistent with long-term growth.


Alexeev, M., C. Gaddy, and J. Leitzel 1995 Economic crime and Russian reform. Journal of Institutional and Theoretical Economics 151:677-692.

Berliner, J.S. 1952 The informal organization of the Soviet firm. Quarterly Journal of Economics 66:342-365.

Blasi, J.R., M. Kroumova, and D. Kruse 1997 Kremlin Capitalism: The Privatization of the Russian Economy. Ithaca, NY: Cornell University Press.

Chalidze, V. 1977 Criminal Russia. New York: Random House.

Epstein, R. 1995 Simple Rules for a Complex World. Cambridge, MA: Harvard University Press.

Gaddy, C.G. 1991 The Labor Market and the Second Economy in the Soviet Union. Berkeley-Duke Occasional Papers on the Second Economy in the USSR No. 24, January. Washington, DC.


Rose (1995) characterizes Russia as an "hour-glass society," where the top half of the hour-glass is political and social life, and the bottom half contains informal networks of friends and relatives. He characterizes a "significant portion of the electorate" as "actively wanting to protect their well-being by keeping the center of the hour-glass as narrow as possible in order to limit what the state can do to them" (p. 41).

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