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Article Excerpt
POSTCOMMUNIST TRANSFORMATION HAS LED TO VARIED RESULTS. * Today, all the countries in Central and Eastern Europe, from the three Baltic states to Slovenia, Romania, and Bulgaria, have become market economies with predominate private ownership. They are also democracies. Ten countries in the region have even joined the European Union. (1) Further to the east, however, the situation is mixed. Out of the twelve member states of the Commonwealth of Independent States, (2) nine have become market economies by European Bank for Reconstruction and Development (EBRD) standards (EBRD, 2007), (3) but only one (Ukraine) has become a democracy (Freedom House, 2008). The starkest example is Russia, which has become a thriving market economy with an average real growth of 7 percent a year for a decade from 1999 to 2008, but which Freedom House (2008) ranks as a "not free" or authoritarian state.
In this paper, I shall first explain what I mean by saying that Russia is a market economy but not democratic. To clarify how this happened, I shall compare democracy to policymaking with regard to a market economy in the years after the collapse of the Soviet Union, which I consider to have undergone a revolution. Finally, I shall consider the contradiction that has arisen between an increasingly authoritarian state and an ever wealthier market economy. My argument is that this contradiction is too great to last for long.
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DEFINITIONS: A MARKET ECONOMY, BUT NO DEMOCRACY
The empirical evidence is strong: Russia has persistently become less democratic since 1992, while it became a market economy after a few years of transition, with no significant reversal.
A country's degree of democracy, or civil and political rights, is authoritatively assessed by Freedom House (figure 2). This group rated Russia as "partially free" from 1992 to 2003 and "not free" from 2004. Russia's political freedom has steadily deteriorated from 1992, when the country was close to free, to its present state of mild authoritarianism. The demise of democracy was not a given. Russia can be compared with Ukraine, which was similarly semi-democratic in the 1990s when both Presidents Boris Yeltsin and Leonid Kuchma ruled by dividing, but Ukraine did not suffer Russia's authoritarian degeneration, which was the work of Yeltsin's successor, Vladimir Putin. Ukraine's freedom increased greatly after the country's Orange Revolution took place in late 2004. (4)
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The most relevant measure of a country's degree of market economy is the EBRD's transition index, ranking countries from no market economy (0) to a normal Western market economy (1). From 1992 to 1995, Russia was an intermediary market economy, scoring in the range 0.5 to 0.7, and in 1996 it reached 0.7, the level of a full-fledged market economy. Figure 2 includes Poland for comparison. Poland's more far-reaching reforms are representative of Central Europe and the Baltics.
Russia's rise was sufficiently sharp to qualify it among the countries that undertook "early, radical economic reform" from 1991 to 1993 (Aslund, 2007b: 84-86).
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The key feature of a market economy is that economic decisions are predominantly made by free individuals and independent firms. Russia's distribution is completely private and independent. No State Planning Committee tells enterprises what to produce. Nor does the state allocate goods. Prices and trade are generally free, and Russia's subsidies are small. Transactions are overwhelmingly monetized. All perceivable financial markets have evolved.
The private sector is predominant, contributing 65 percent of GDP according to the EBRD (2007) (figure 3). Russia has 5 million registered private enterprises and 3.4 million registered individual entrepreneurs (Goskomstat, 2008). Its stock market capitalization peaked at $1.5 trillion, equaling its GDP, which is common in Western Europe. Russian companies take the state and one another to court regularly. The final proof of Russia's status as a market economy is that since 2004, the European Union (EU) and the United States recognize Russia as such according to exceedingly strict legal criteria.
THE SOVIET COLLAPSE: A RUSSIAN REVOLUTION
The Soviet collapse and Russia's post-Soviet transformation from 1985 to the present become comprehensible only if we realize that this country went through a revolution. Revolutions share many unique features.
As early as 1984, Richard Pipes (1984: 49-51) recognized the Soviet situation as revolutionary. "Communist societies, the Soviet Union included, are in the throes of a serious systemic crisis which sooner or later will require action of a decisive kind." Both the political and economic crises
arise from a growing discrepancy between the responsibilities assumed by the communist elites at home and abroad, and the human and material resources with which to carry them out. A crisis of such dimensions, camouflaged by massive disinformation and saber-rattling, fits very well the concept of a "revolutionary situation" as defined by Lenin. The term meant to him a condition of stalemate between the ruling elite of a country and its population: the former could no longer rule, and the latter would no longer let themselves be ruled in the old way.
Since Russia experienced the Great Socialist Revolution in 1917, Russians were acutely aware of what revolutions were and how they functioned. Major actors understood and used the revolutionary momentum, but sometimes they refused to accept revolutionary precedents. In particular, a broad consensus opposed the bloodshed and civil war of the 1917 revolution, which rendered Russia's capitalist revolution so peaceful. In July 1986, Mikhail Gorbachev himself stated, "I would equate the word perestroika with revolution." Boris Yeltsin was intensely conscious of being part of a revolution and contemplated its logic at each step (Yeltsin, 1994).
The literature on revolutions is immense, and Russia's 1991 revolution is well covered. A stylized revolution frames Russian development from 1985 to the present perfectly well (Mau and Starodubrovskaya, 2001: 330-32).
Gorbachev was the liberal reformer who inadvertently unleashed the revolution. When he came to power, both the elite and the general population harbored solid contempt for the old regime, which lacked legitimacy; moreover, they saw Marxism-Leninism as a dead idea. People were passive, but only because they thought change was impossible. Gorbachev lit their hopes, and glasnost enlightened Russians about their relative economic backwardness. Gorbachev's early attempts at economic reform failed because of resistance from the party elite. The new party leadership became increasingly divided, with a profound rift erupting between the three leaders--Gorbachev, Yeltsin, and Yegor Ligachev--in November 1987. Their split represented a characteristic revolutionary divide between moderates, radicals, and reactionaries.
As Alexis de Tocqueville (1955 [1856]) observed on the time before the French revolution, old injustices became more intolerable at such times: "For it is not always when things are going from bad to worse that revolutions break out. On the contrary, it oftener happens that when a people which...
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