The structural origins of the Russian economic crisis

One of the outstanding characteristics of the Russian economy over the decade of transition has been the lack of structural change, whether in terms of the structure of production, of investment, of exports, or of key institutions like banks. It is argued that this is one of the main underlying reasons for continued stagnation in the performance levels of the Russian economy. Various possible reasons for continued structural sclerosis are examined. Restrictiveness in Western trade policies vis-ci-vis Russia, it is argued has been a factor of marginal importance. Much more central has been a complex of domestic factors turning on the dominance of 'insiders' in the Russian economy, and the continued prevalence of feudal/paternalistic attitudes among these insiders. Concerned primarily with controls over stocks (of assets) rather than flows (of income), these insiders are peculiarly ill-fitted for the task of restructuring capital stocks in such a way as to strengthen the corresponding flows. And because Russian neo-feudalism discourages rather than encourages the development of trust, it is not clear that it can grow into anything better in the future.