The two decades that have elapsed since Mikhail Gorbachev took the highest post in Soviet Communist Party hierarchy has been a time of sweeping changes in Russia and across the world, as well as the subject of heated scientific and political debates. Whatever aspects of this period are being discussed, an intriguing question always stands out, explicitly or implicitly: Could the events have taken a different course? To what degree was the course of developments predetermined by objective factors? Or was it spurred by an accidental concourse of circumstances, mistakes and spontaneous whims of certain leaders?

RESPONSE TO THE CRISIS OF INDUSTRIAL SOCIETY

Soviet economic policy was subjected to cyclical fluctuations since the days of its infancy. Scientists have termed this phenomenon the ‘investment cycle in socialist economies’ which had the following phases: implementation of an investment program; economic growth slowdown; liberalization measures; acceleration of the rate of growth; increased macroeconomic imbalances; rejection of liberal reforms and enactment of a new investment program [Bajt A. Investment Cycles in European Socialist Economies. Journal of Economic Literature, Vol. 9, 1971, pp. 53-63; Bauer T. Investment Cycles in Planned Economies. Acta Oeconomica, 1978, Vol. 21, No. 3, pp. 243-260; Ickes B.W. Cycles Fluctuations in Centrally Planned Economies: A Critique of the Literature. Soviet Studies, 1986, Vol. 38, No. 1, pp. 36-52] 
This is how developments progressed from the 1920s through to the mid-1980s. In line with this logic, the liberalization measures offered by perestroika did not look novel. As opposed to previous periods, however, they did not entail a toughening of the economic regime. Instead, liberalization began to deepen and expand.
There were two fundamental factors that predetermined the nature of restructuring processes and the eventual collapse of the Communist system. First, the Soviet Union suffered a crisis regarding industrialization, which catalyzed the need for systemic changes. Second, the transformation took the form of a full-blown revolution, comparable with great revolutions of the past in nature and dimension. While the first factor determined the essence and direction of the transformation, the second one decided its form and character.

The Soviet social and economic model was the product of the industrial age. This model was characterized by the dominance of several factors: large industrial entities that influenced all spheres of society, mass production technologies that relied on standardization and wide-scale use for their efficiency, and monopolistic tendencies in the economic and political spheres. Soviet economic policy also suggested direct government interference in the economic process, weak competitiveness inside the country and, more specifically, a tendency toward the restriction – or elimination – of external competition. The industrial age was successful in that it met several important industrial and social challenges: it helped stimulate a sizable rise in labor productivity, intensify urbanization and satisfy the basic needs of the population of its respective countries. The Soviet Union, which continued to advance pre-revolutionary Russia’s process of industrialization, successfully solved those problems in the late 1950s and early 1960s.

At this time, the economies of the industrialized countries were becoming based on information technologies. The formation of the new economy was accompanied by several factors, such as the weakening of monopolistic tendencies, animated competition, the reduced role of large industrial entities, increased flexibility of production, and individual approaches to production and technology solutions. Globalization evolved as a crucial element of the new economy, which promoted the diminishing role of the government in economic affairs, together with the liberalization of the domestic economy and foreign trade.

In the early 1970s, the industrialized West was hit by a deep economic crisis known as “stagflation” which persisted for the greater part of that decade. Stagflation is a half-forgotten term now, but it was quite popular thirty years ago. The crisis gave the impression that the West had slid into a new stage of the “general crisis of capitalism.” It soon became clear, however, that the social and economic systems were adapting to a new phase of technological development (or, to put it in Marxist terms, to a new level in the development of productive forces).

The Soviet Union faced nearly identical problems, but its rigid political and economic system did not allow the authorities to begin a timely adaptation to the new realities – the Soviet economy was utterly unreceptive to innovation.

The result was that while the West used the crisis to adapt itself to the new challenges, the Soviet Union showed small but steady growth rates, while at the same time falling into a severe systemic crisis. Traditional heavy industries remained dominant to the detriment of the more advanced technologies (IT, telecommunications, etc.); defense production maintained the central role in the Soviet economy. Against the background of a new economy emerging in the West, Soviet growth rates were sliding. The main problem, however, was that in the 1980s the gap between Western and Soviet economic development became apparent to everyone. 

The nature of that crisis predetermined the general direction of the steps the authorities had to take: the liberalization of all aspects of life. While the objectives of the industrialization (more specifically, the catch-up industrialization) required active mobilization and a concentration of resources in the so-called ‘growth point’ sectors, the post-industrial economies required the activation of individual and corporate creativity and the total development of human resources.

The specifics of the post-industrial age explain, for instance, why liberalism has been blooming over the past 25 or so years. The development of productive forces and the relevant models of successful modernization rely on liberal policies (in the developed Western countries), or policies which mark a tendency toward liberalization (in the fast-growing countries of Southeast Asia, for example). It also explains why the Soviet and Russian governments followed a more or less consistent course of liberalization, regardless of their partisan attitudes.

THE HONEYMOON OF PERESTROIKA

Another important feature of Russia’s transformation is that it turned into a full-blown revolution. Whether or not it actually experienced a revolution is mostly a subject for debate amongst Western analysts. In Russia, the issue never stirred much debate, but the idea that the revolution was over came through in President Putin’s annual address to the Federal Assembly in 2001.

In a most generalized sense, revolution is a systemic transformation that radically changes a country’s social structure and takes place under the conditions of weak state power. The latter is a major contributing factor of revolution – it predetermines many of its typical features and makes it different from other changes that produce major social changes. The crisis of state power manifests itself as a sharp conflict between the elites (or main groups of interests) that do not have a consensus on basic values and key issues concerning the country’s further development. In the economic sphere, the weakness of state power manifests itself in a financial crisis, the government’s inability to collect taxes and keep expenditures and revenues in balance.

A weak state power results in the spontaneous transformation of economic and social system. Social development becomes dependent on the conduct of various forces “dragging” the country in different directions. All full-blown revolutions go through several typical stages:

1) a “rosy period” or “honeymoon,” when all forces in society unite to overthrow the old regime and power is supplanted by a popular “moderate government;”
2) the split of socio-political forces which brings about the collapse of the “moderate government;”
3) a period of radical change which accompanies the ultimate breakup of the old system;
4) a Thermidor period, during which the foundation is laid for the new state machinery;
5) post-Thermidor stabilization and end of revolution.   

An analysis of Russia’s transformation as a revolutionary process indicates that perestroika represented its first “rosy” stage. And the specific characteristic of this stage is a bizarre economic policy which hinged on two illusions. First, the seemingly unanimous dislike of the old regime and a desire to overthrow it by all members of society. Second, the seemingly universal popularity of the new revolutionary government which proclaims a course for discarding the legacy of the past. The combination of these illusions has some long-term consequences for the country.

First, a popular revolutionary government tends to make extraordinary decisions, especially in the economic sphere. Leaders of the early revolutionary government are inclined to overestimate their own popularity and the nation’s unity, which results in decisions that are alien to economic logic and unthinkable under normal conditions. Here are just a few examples of the perestroika period.

The anti-liquor campaign. This ridiculous attempt to solve Russia’s centuries-old problem had a dangerous consequence – the country sacrificed a sizable part of its budget revenues at a time when it was already suffering heavy losses due to a fall in oil prices.  

Simultaneous implementation of the policies of economic restructuring and acceleration. The latter involved an increase in the amount of savings in the national income and a reduction in the consumption expenditure, while economic restructuring suggested greater freedom of the economic agents (which lacked incentives for extensive investment activities).

Stimulating entrepreneurship (in the form of cooperative societies and individual labor activities) while fighting against “illicit incomes” at the same time. The regulation of both spheres would be endorsed almost simultaneously.

Second, an early revolutionary government seems to be unable to formulate a coherent program of social and economic reform. It still has strong ideological and political bonds with the old system, and its reform program tends to implement certain programs deferred in the past. Such programs cannot be implemented in principle, but they enjoy broad public support and, hence, receive the attention of the authorities. For instance, during the perestroika years there was serious discussion involving the possible replication of reforms drafted in 1965, and even some which were drafted under Lenin’s New Economic Policy [which admitted of private enterprise within the context of the Bolshevik government-controlled economy – Ed.]. The authorities searched in vain for some sort of socialist economic model, but the post-industrial age already challenged the validity of those outdated programs.

As the Soviet government attempted to restore the independence of economic agents under conditions of state ownership, it strengthened the independence of the directors of the industrial enterprises. This decision produced a dual negative effect. First, it deepened the economic crisis, as an expansion of the factories’ independence did not entail higher responsibility for performance. Furthermore, it strengthened the position of the director as the factory’s owner, although not de jure. Thus it seriously aggravated the problem that is typical of any revolution – bringing into balance the formal and real status of the owners.

Third, the government’s self-perception as being popular with the people deprives it of the ability to make necessary but unpopular decisions. During perestroika, the government headed by Prime Minister Nikolai Ryzhkov lacked the courage to raise retail prices; this timidity set off a snowballing commodity deficit and a collapse of the consumer market. Yet, the government’s coy policy toward retail prices did not prevent it to raise wholesale prices, which played into the hands of certain interest groups. Add to this tax and budgetary populism – the readiness to cut down taxes and increase budget spending during a severe budgetary crisis – in a bid to buy political support.

The above three factors played a crucial role as catalysts of the economic crisis during the perestroika years. Yet the arguments herein mentioned should not be regarded as charges against the early revolutionary government of Mikhail Gorbachev and Nikolai Ryzhkov. The commencing revolutionary transformation had its own logic that is typical of all great revolutions of the past. One fact remains irrefutable, though: the economic decisions of the late 1980s kicked off a heavy financial crisis that Russia had to overcome during the entire next decade.

Later developments testified to the revolutionary nature of the transformation. The logic of the financial crisis, property redistribution and subsequent stabilization were typical of the governments of all countries that had evidenced full-blown revolutions. Inflation curves during the revolutionary age, the history of English land ownership, the French Revolution Assignat and debt defaults of revolutionary governments help us to understand many things in Russia’s post-perestroika social, economic and political processes.

But let us consider whether there were real alternatives to the perestroika policies, and if the answer is yes, what were they? 

REPEATING SOVIET STRATEGY?

Mikhail Gorbachev commented on one occasion that he was not pursuing personal political goals when he began the reforms. “I had enough resources to keep power during my lifetime,” he said.

In the early 1980s, few people expected any intensive changes from the Soviet leadership and the most far reaching statements were something like “improvements in the economic mechanisms” in the style of the “reforming documents” of 1979 and 1983. Nobody saw the sources of transformation inside the Soviet system or within its elite. Moreover, many people had interpreted Gorbachev’s first statements about reform as a temporary and, in all probability, verbal liberalization. People were expecting the traditional mobilization measures, such as toughening discipline at workplaces, intensifying administrative control over the quality of products (introduction of the so-called State Product Commissioning Boards at factories), raising the amount of savings in the national income, and maneuvering the investment course in favor of the machine-building industry. All of these initiatives had been envisioned by the 12th state five-year plan. In a word, a serious market reform looked highly improbable, and many Western analysts believed economic improvements would take the form of regulations of centralized control, reduction in the bureaucratic chain of command and a gradual drift toward the centralized governance typical of East Germany. [Hanson Ph. From Stagnation to Catastroika: Commentaries on the Soviet Economy, 1983-1991. New York: Praeger, 1992, pp. 63-66, 68-76, 85-92.]

On the other hand, the Soviet system looked exceptionally durable. Eminent political scientists were quite confident the Soviet Union had long passed the age of revolutions and, like the U.S., was invulnerable to destabilization. They viewed both superpowers as classic examples of countries where only gradual transformations were possible. [Huntington S.P. Political Order in Changing Societies. Hew Haven: Yale University Press, 1968; Dunn J. Modern Revolutions: An Introduction to the Analysis of a Political Phenomenon. 2nd ed. Cambridge: Cambridge University Press, 1989.]

An analysis of the political processes taking place inside of the Soviet system prompted the conclusion that it would remain stable and durable (at least in Gorbachev’s political lifetime), but the economic situation was not quite so clear. In the mid-1980s, there existed two factors which prohibited the Soviet system from being passive or stagnant. First, structural changes had occurred in the Soviet economy as a result of an oil boom of the 1970s. Second, the West had entered the phase of post-industrial growth.

The commencement of the perestroika policy is often associated with the 1984 fall of oil prices and swelling budget problems. No doubt, this is true: in 1985 a deficit was registered in the Soviet budget for the first time in decades. While in 1980 the budget had a surplus of 1.3 percent of the GDP, it gave way to a 1.7-percent deficit in 1985, which grew to 10.3 percent in just five years.

The roots of the crisis go down not to the collapse of oil prices in the 1980s, but a sharp increase of oil prices in 1973 and the oil boom that followed. The prices stayed at very high levels for almost a decade and hit a new unprecedented record at the beginning of the 1980s, when a barrel of crude would sell at about $90 when calculated at current exchange rates. As it turned out, high oil prices had a double effect on the Soviet economy.

Large oil revenues created a special situation that enabled the Soviet leadership to ignore economic reform that the depressed economy of the 1960s had necessitated. The reform of 1965 was deemed necessary as the Soviet economy had stalled, growth rates had begun falling, the output of consumer goods had fallen short of the demand and industry needed many up-to-date resources. It was obvious that the Soviet economy could function smoothly only when there was a continuous inflow of cheap resources. From the 1930s through to the 1950s, the pool of cheap resources had been formed from the labor of numerous prisoners and a highly inequitable exchange of commodities and finances with the agrarian sector. By the mid-1960s, however, the country ran out of such resources and reform became inevitable. But with the commissioning of the West-Siberian oilfields, together with the oil shock of 1973, there was ensured an influx of “easy oil dollars,” and economic reform fell off the agenda.

Yet the Soviet economy was changing structurally, and its dependence on earnings from the exports of energy resources was growing. The Soviet system of the 1960s showed signs of certain stability. There existed moderate consumption rates which permitted a consistent level of distribution along the traditional same-amount-good-for-all principle. Furthermore, the Soviet economy was closed and fairly independent from foreign trade. The “positive shock” of 1973 marked an abrupt increase on the future dependence of the Soviet system on such external events. The Soviet government actually used the oil revenues for a sort of structural maneuver – it exchanged oil and gas for foodstuffs and purchased new oil and gas equipment to increase further oil and gas output. Simultaneously, the country was getting increasingly more dependent on imported food (see Table 1 and Table 2).

Naturally, industrial efficiency, labor productivity and the quest for new innovations receded to the background of the government’s attention. It eagerly stated their importance, but the good disposition did not go farther than ritual statements. Innovative activity was confined to defense production. But since the country’s defense potential depended as much on the defense industry as on the economic and political environment in the country, the defense sector was also influenced by the situation in foreign trade activity.

At this time, the Soviet economy grew considerably more open, as did its dependence on the international market situation. Furthermore, an important change occurred in the structure of the Soviet economy, as well as in the psychological disposition of the nation. The economy now depended on the international market situation, apart from the availability of inexpensive resources. By the end of the 1970s, it became obvious that the Soviet Union could no longer ensure its stability without massive imports of foodstuffs. Soviet society began opening up to the outside world, as increasing numbers of people started to travel abroad and getting to know the way of life in Western democracies. Amassed imports of consumer goods further discredited the Soviet economic system. In fact, imported consumer goods opened for the Soviets a window to the Western lifestyle.

Falling energy resource prices could not help but provoke a heavy crisis which was economic as well as political in nature. It also included problems concerning the maintenance of military and strategic parity with the U.S. This eventually meant that Communism, nourished by a standoff with an opposing system, was doomed.
Hypothetically, the government could have begun “screw-tightening,” that is, permitted a fall in living standards and reverted to the old socio-economic model that was hinged on mobilization. This option, however, had three powerful obstacles to it.

First, the elite, urbanized and educated sections of society would have refused to accept such developments. Unlike in the first decades of the 20th century, the people had accumulated some material and cultural assets and were unwilling to lose them. This circumstance set barriers against converting the masses and mobilizing society to sustain material losses “in the name of a bright future.”

Second, the new stage in the development of productive forces practically eliminated the possibility for an advance within the format of a closed economy and in disregard of the globalization processes. Even a reverting to the mobilization model would not make it possible to boost the development of productive forces to a level suitable for the upkeep of the defense potential and retention of the status of a superpower. In other words, the result would be the same as in the case of a fall in oil prices. But it is also true that the demise of the system might have taken a much longer time – the system had enough energy to drag on until the end of Gorbachev’s political life.

Third, the urban population with its demographic habits (one or two children per family) was not prepared to support the military and political adventures essential to maintaining the country’s status of a superpower. Despite the tremendous pride that the citizens had in their vast and powerful country which was supported by satellite states, they would not agree to pay with their very lives for the preservation of such a system.

To sum up, all the opportunities to maintain the Soviet system without great changes had been exhausted by the mid-1980s.

TRANSFORMATION CHINESE-STYLE: PRO AND CONTRA

Today, there are Russian politicians and researchers who argue that the political reforms in the Soviet Union were a mistake, while the Chinese method of reform might have been the best model to follow.

The Chinese transformation that was launched in 1978 had a special feature: economic reforms prevailed over the political ones. The Chinese economy was overhauled to a much greater degree than the political system, which remains essentially totalitarian and relies on the monopoly of the Communist Party – although it, too, has experienced some modifications. The one-party system has remained intact; the regime maintains an ideological stringency, while the old nomenklatura keeps power in its hands. Thus, economic changes are gradual and well controlled by the state, which puts down any attempts of political activity by individual members of society.

There are several arguments of an economic and socio-political nature as to why the Chinese path is inapplicable in present-day Russia, and, furthermore, why it could not have been helpful in the Soviet Union.

The political impossibility of using the Chinese recipe in post-Communist Russia is obvious. The Chinese method presupposes the presence of a totalitarian regime as a core political element. That regime exercises an all-embracing control over all aspects of life through vertical party structures and state security agencies. In Russia, the liberal reforms of late 1991 and early 1992 began in the absence of a state machinery, to say nothing of a strong state – by that time the Soviet Union had ceased to exist.

The socio-economic structure of Chinese society resembled the Soviet one – yet not that of the 1980s, but from the period of Lenin’s New Economic Policy. Specifically, China of the 1980s and the 1990s was more similar to the Soviet Union of the 1920s and the 1930s. This is obvious when we look at specific indicators, such as the correlation of the urban and rural population, the structure of the Gross National Product and employment, the level of literacy, the social security system, the resultant per capita GDP and public sector share in GDP (see Table 3).

In other words, there are three crucial – and interconnected – conditions for fast economic growth with the preservation of political authoritarianism. First, a relatively low level of economic development: this implies the non-involvement of large labor resources in efficient production (i.e. overpopulation of rural areas). Second, a low level of social development: the government does not make social commitments that are typical of the developed nations. (For instance, social insurance and guaranteed pensions cover 20 percent of the Chinese population, while in the Soviet Union those social guarantees were enjoyed by the entire population.) Third, a low educational level: the demand for democratization is not of paramount importance for the greater part of the population.

All of these factors are present in China, while none of them were to be found in the Soviet Union of the 1980s. That is why those people insisting that Russia take lessons from China must agree to the following main conditions for such development. First, the government renounces its social pledges, which would involve the elimination of the bulk of pensions and social benefits, as well as a sharp reduction in free services in public healthcare and education. Second, it reduces the public sector share in GDP to 20 to 25 percent from the current 36 to 40 percent.

The architects of reform should also take account of two distinct properties of the educated urban population – it has a good historical memory and depends on the government’s social spending.

People in the rural areas offer a straightforward reaction to any changes: in the past, after the nation had passed through a war or violent campaign, for example, the provincial folk returned to their customary business and the economic growth in the country quickly resumes. People from the urban areas, on the other hand, behave differently – they remember historical precedents and are more difficult to deceive. Soviet society of the 1980s was already fairly mature and well educated and the country was open enough to accommodate a more Western lifestyle. Thus, the people would not believe in the sincerity of the party leadership’s economic initiatives in the absence of political changes. Reform-minded Soviet officials had to prove that their actions were not mere rhetoric or a provocation of the security forces and thus demonstrate a real readiness for political change.

A slashing of the public sector burden on the economy – similar to that in China – was not permissible for Russia. In China, the abrupt cutting of the public sector share in the GDP was possible because it renounced the subsidization of its non-profitable industrial facilities – a step that caused no major social problems in a predominantly agrarian country. But the Soviet leaders did not venture such a policy for political considerations. Too many industrial facilities could have immediately collapsed, thus accelerating the crisis in the Soviet economy. (I once asked Mikhail Gorbachev why he and his associates had not tried to take the Chinese path. The former leader of the Soviet Union said that the majority of people understood the fundamental differences between the situation in the Soviet Union and China.)
Finally, the stability factor is of crucial importance, too. Since the mid-1990s, China has occupied the top position in terms of foreign investment. Many analysts link the Chinese reforms to the investment boom. However, statistics show that Beijing started its reform program in 1978, while large amount of foreign investment did not begin to enter the Chinese budget until 1992. In other words, it took China 13 years of reform initiatives and political stability to win the trust of foreign investors.

THE EXPERIENCE OF CENTRAL AND EAST EUROPEAN COUNTRIES

Russia’s transformation was starkly different from the transformations that took place in the countries of Central and Eastern Europe, including the former Soviet Baltic republics. Although all of their starting points were the same (all found themselves in a post-Soviet crisis) and had identical objectives (building modern market democracies), later – during the post-Communist transformation – they showed noticeable differences in the character, pace and mechanisms of their reforms.
Russia and the former Soviet bloc countries chose the liberalization of prices and foreign trade, macroeconomic stabilization, privatization, together with the creation of incentives for the emergence of new businesses. However, most Central and East European countries succeeded in divorcing themselves from the heritage of Communism faster than Russia and at a lower cost. Those countries were able to quickly attain stabilization, bring order into property relations and achieve overall economic growth (see Table 4).

The reason for such discrepancies lies in the political sphere. The collapse of Communism was tantamount to national liberation in Central and East European countries, that is, liberation from a system that had been imposed on them through the use of force. Conversely, the Soviet Union had to overcome the fall of a system that had grown from within. This factor predetermined an evolutionary transformation in the first case and a revolutionary one in the latter.

From the very start, people in Central and Eastern Europe shared consensus over the direction of their transformation – returning to Europe and joining the existing European economic and political institutions, above all, the EU and NATO. Those objectives were shared by the entire political elite, both on the left and on the right, except for some marginal political groups. Whatever the dimensions and complexity of the post-Communist transformation in those countries, there was no talk of a full-blown revolution, i.e. the collapse of the state and the need to restore major institutions of power. The certainty about the guidelines for progress and the steady functioning of  key institutions (primarily, judicial and legal agencies) always limit transactional costs, stimulate the development of private business and, consequently, lead to economic growth.

An additional factor making the policies of Central and East European countries predictable was their declaration to join the EU and NATO, as well as the preparedness of the two alliances for enlargement. The candidacy terms for the countries seeking accession to the EU and NATO set clear tasks for institutional reforms and provided certain external control by the more developed nations – also members of these alliances. Thus, a barrier was erected against possible populist risings in Central and East European countries and this significantly contributed to their overcoming the post-Communist crisis. It should be mentioned, however, that their adoption of cumbersome and highly expensive European legislation later slowed down their economic growth.

As stated earlier, in contrast to Central and East European countries, the former Soviet Union experienced a full-blown revolution. The collapse of government institutions, together with the collapse of the Soviet empire and the absence of external stimuli for stabilization, dramatically extended the time needed to overcome the systemic crisis. As a result, post-Communist transformation in Russia, although similar in form with the other Communist countries (liberalization, stabilization, privatization, etc.,) had specific features.

First, macroeconomic stabilization took a longer period of time. Political fighting in a society on the brink of revolution made financial and monetary policy a hostage. Inflation, which in essence is a process of redistribution, turned into an instrument of political struggle. Its rate often reflected a balance between the groups of people interested in stabilization and those whose economic aspirations would suffer from it. The immense weakness of state power and its dependence on different interest groups forced the people in power to build shaky coalitions, sometimes at the price of macroeconomic stability.

Second, issues concerning property often became an important factor in the political struggle. Generally, the redistribution of property (privatization in the case of Russia) can pursue three objectives: 1) the creation of efficient owners, 2) replenishment of the budget, and 3) the winning (or purchase) of political support. In the conditions of a revolutionary crisis, the political objective of privatization unavoidably moves into the foreground, since serious investors (candidates for “efficient owners”) do not put their money into an economy that is plagued with political ambiguity. This means that the government redistributes property to build up its social base, while efficient owners enter the economy only after the revolution is over. Naturally, such a situation slows down a country’s pulling out of crisis and its efforts to achieve a steady economic growth.

Third, a crisis involving political institutions obstructs business activity. The laws regulating the economy may be good, but it is much more important for a businessman to see how they are applied in practice and how the government ensures their normal functioning. First and foremost, this concerns the judiciary and law enforcement systems. If they are inefficient, this drives up transactional costs and often forces businesspeople to incur extra expenses (for protection of property, maintaining private police and lawyers), which in turn drives up the cost of their products or services. Such a scenario hinders competitiveness in the country.
The specific features of Russia’s transformation discussed above are not unique, and all of them can be found in the great revolutions of the past. At the same time, the model of post-Communist transformation in the Central and East European countries can hardly be regarded as an alternative to Russia’s reforms. Although having identical goals, we are approaching them under different conditions while relying on the political institutions which our countries inherited from the last governments of the Communist era. In Russia’s case, it is the heritage of perestroika.