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Russia: Analysis From Washington--Today's Moscow Is Not Yesterday's Chicago

Washington, 5 September 1997 (RFE/RL) - A World Bank report demolishes one of the most widely-held views about the nature of the Russian economy and the reforms taking place there.

That view holds that Russia is now passing through the "robber baron" stage of capitalism much as the American economy did a century ago. And it implies that the Russian economy will just as inevitably graduate to mature capitalism.

In its 20th annual world development report, World Bank experts make three key arguments:

First, they point out that the Russian economy is fundamentally different from the "robber baron" capitalism of the American past.

Second, they suggest that there is nothing inevitable about a "robber baron" stage of economic development.

And third, they argue that a quick and easy escape from what many call the "robber baron" stage of economic development is not inevitable either.

Each of these arguments is laid out in the annual report released in late June, entitled "The State in a Changing World."

First, the report calls attention to the differences between "robber baron" capitalism in the United States and what it calls "robber capitalism" in Russia.

In the American case, entrepreneurs during the latter part of the nineteenth century built enormous industrial enterprises, often flaunting governments and laws in the process but creating something of real value for the society as a whole.

In the Russian one, various former Communist party officials and economic managers have privatized the Soviet economy into their own hands, selling off assets rather than creating new ones and exporting capital rather than creating it.

Second, the report which surveys developments in more than 60 countries concludes that many of them have developed free market economies without passing through a "robber baron" stage at all.

In some of them, a strong legal system kept entrepreneurs from overwhelming the political system, and in others, the legal system grew apace with the economic one, preventing outrages of either the American or the Russian kind.

And third, the report makes it very clear that Russian "robber capitalism" today, just like American "robber baron" capitalism of a century ago, does not necessarily contain within itself a cure for its excesses.

Rather those excesses must be addressed by the political system and they must be addressed in a comprehensive way over time.

That is what happened in the United States. Popular revulsion at the behaviour of the robber barons helped to power a political movement that imposed a variety of constraints on their behaviour and thus allowed the American economic system to mature.

In Russia, on the other hand, that process has not yet really begun. Some Moscow officials are now trying to cope with some excesses of "robber capitalism" and even having some success, but no mass political movement has emerged to push the process further.

As a result, virtually all efforts to reform the Russian economy after privatization have been incomplete or even had consequences directly opposite to those the reformers have sought.

Indeed, in its report, the World Bank concludes that the successes Russian reformers point to are almost always matched or even exceeded by negative developments that the political leaders in Moscow have been unwilling or unable to address.

But if the Bank's conclusions about the current situation in Russia are largely negative, its findings do provide some useful guidance both for that country and for others who hope to see the Russian economy develop.

And that message is a simple one: Russia cannot overcome its own "robber capitalism" stage by economics alone. Instead, Russia can and must create a state that enjoys sufficient authority to erect the boundaries within which economic development can occur.

If Russia achieves that political goal, it will have greater economic success. If it does not, the World Bank's report suggests, Russia faces a bleak future economically as well as politically.