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Creating Capitalism

Transitions and Growth in Post-Soviet Europe

Patricia Dillon and Frank C. Wykoff

Employing historical analysis and building on growth theory and modern political economy, Dillon and Wykoff explain Soviet disintegration and analyze efforts to create capitalism in newly independent states. They show how five fundamental economic reforms generate growth, and use an original model to test the connections between reforms, elections and economic performance. The authors examine the progress of six countries (Bulgaria, Czech Republic, Estonia, Hungary, Russia and Slovakia) in terms of each country’s history and its successful application of the five reforms. Anyone interested in how capitalism works and why pro-market reforms encounter resistance in spite of their potential for generating higher living standards will find this book essential reading.
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Chapter 11: Can Russia Make It?

Transitions and Growth in Post-Soviet Europe

Patricia Dillon and Frank C. Wykoff


* We must kill more professors! (Vladimir Ilyich Lenin1) They pretend to pay us and we pretend to work. (Soviet humour of the 1980s) The sternest test of our historical analysis of the politics of economic reforms is Russia.2 As the motherland of the 1917 Bolshevik Revolution, Russia was taken over by homegrown communists who imposed the Soviet model under the guidance of Lenin. Unable to blame communism on someone else (as could the citizens of the satellite states)3 and thus delegitimize communist ideas as foreign, reformers must overcome even greater political barriers to transform Russia from communism to market capitalism and democracy.4 Furthermore, history before communism provides no Russian example of a successful private market economy, much less of democratic capitalism. Nomadic, rural and agricultural for most of its history, Russia has during all of recorded history been dominated by authoritarian regimes. As Europe was industrializing from the middle of the eighteenth century to the early twentieth century, Czars empowered by history, by the aristocracy, by the Church and by the military paid little heed to the wishes of peasants or workers. This hierarchical class society, virtually feudal, was ill suited to the highly cooperative and integrated demands of the industrial state and thus Russia fell behind her modernizing Western European neighbors. Nothing in Russia’s past provides a model for reformers who want Russia to evolve into a pluralistic democratic system, supported by a rule of law and reliant upon a private market economy.5 No sound model for the...

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