Despite making a recovery after the 1998 market crash, Russia remains weighted with numerous holdovers from the Communist era that keep its economy from taking advantage of free-market reforms. In short, Russia has not prospered under capitalism because it has not yet discovered it. In order to do so, the Russian government must engage in extensive reform in several key areas: improving the rule of law, creating stable monetary policy, and ending a policy of favoritism to particular businesses. Engaging in these reforms would lower the extremely high transaction costs of doing business legally, stimulating a wave of new investment and wealth creation within Russia, as well as encouraging investment from abroad.
While the causes of Russia’s economic problems are numerous, the absence of a rule of law causes enormous unpredictability and uncertainty that is the primary barrier to economic growth. The regulatory mess caused by presidential decrees, legislative changes and numerous bureaucracies putting out contradictory rulings is just one aspect of this problem. The court system, which is supposed to be a neutral arbitrator of private disputes, is highly publicized, and even worse, is used by the governments to silence critics and unfavorable companies.
One of the major challenges to reform is the uncooperative nature of the bureaucratic apparatus in carrying out laws and policies enacted by the executive. While Yeltsin and Putin have generally been in favor of free-market reforms, the bureaucrats meant to carry out their policies are often rich oligarchs who stand to lose financially or politically from reform. To combat this, Putin has replaced most of the Yeltsin-era ruling...
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9. Dmitry Pinsker, “TV6 saga nears final episode.” The Russia Journal http://www.trj.ru/index.htm?obj=5321
10. James A. Dorn and Ian Vasquez. Ending Russia's Chaos, September 9, 1998 http://www.cato.org/dailys/9-9-98.html
11. Daniel J. Mitchell, “Tax Reform: Russia, 1; United States, 0,” March 21, 2002 http://www.heritage.org/views/2002/ed032102.html
12. Rose Brady, Kapitalizm : Russia's Struggle to Free Its Economy, New Haven, Conn. Yale University Press, 1999.
13. Martha De Melo, and Gur Ofer, “Private Service Firms in a Transitional Economy: Findings of a Survey in St. Petersburg”
Studies of Economies in Transformation, 1014-997X ; Paper No. 11: 1994.
14. William C.Gruben, "Dollarization: The Greenback Goes Global," Federal Reserve Bank of Dallas Expand Your Insight, March 1, 2000 http://www.dallasfed.org/eyi/money/0003.html
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