Home pageAdvanced searchIndexe-mailAdd to favorites
Books by Grigory Yavlinsky
The Center for Economic and Political Research (EPIcenter)
Moscow, May 1992


Thus the analysis of the economic reform (based on April 1992 results) gives grounds to conclude that, despite the optimistic statements by the Russian government, it has not achieved the goal it formulated.

There is yet another significant question to be answered: did the government originally opt for the right type of economic reform, does it follow an appropriate policy? This question is compelled not only by the state of the Russian economy undergoing reform but also the progress of economic reform in Poland (whose success was so often referred to by the government).

In our case the reform is based on a neo-liberal monetarist doctrine which largely relies on the forces of self-regulation of a market economy. Like many other economic concepts, it has its own theoretical assumptions, strong and weak points. But there is one extremely important circumstance which calls in question the neo-liberal school of economic thought in reforming a "post-planned" economy. This concept presupposes the existence of a functioning market economy, its de facto existence and the presence of such essential things as competing consumer markets and producers at the microlevel. Also, there should be at least a relative state of balance between the various economic sectors at the macrolevel. With regard to the institutional level, they are supposed to be private owners and an effective legal system.

Such a market economy can well fall into a crisis in which neo-liberal formulas can be applied with more or less success.

The economies of former socialist countries are special, in that standard monetary methods produce different results than they would in developed market economies where, incidentally, monetarism coexists with the other no less influential theories which determine the practical line of politicians in the economic sphere.

Of certain interest in this regard is the current crisis in Poland. A classic (in its content) stabilization programme proposed the restriction of overall demand through a tough monetary and budget policy on the one hand would make producers cut prices, and on the other, the closing of inefficient productions would give an impetus to structural changes in the industry favouring advanced and competitive productions. But the actual result was different: a sharp restriction of demand in the non-competitive, extremely monopolized economy resulted in a swift (more than 40%) decline of production while prices remained high. The slump could have been even greater had the Polish government taken a tough stance with regard to the growing non-payments of enterprises.

In Russia, the opportunity for a quick and relatively painless stabilization (when there were still considerable resources to carry it through and the budget deficit and inflation were appreciably lower) was passed by in the second half of 1990. Under the present conditions, financial stabilization can only be temporary and is achievable at a very high cost - a sharp decline in living standards and a production slump of a more than structural nature. But this combination of two powerful factors is capable of throwing things off balance quickly. Therefore, economic policy should be redirected toward a long-term financial stabilization.

A forced transition to "playing according to market rules even before the game started" (like when the liberalization of prices in the absence of antimonopoly legislation) in an economy not based on market relations leads, instead of to its transformation into a viable market economy, to its destruction and the destruction of those spheres which could serve as a framework for an efficient future market economy. An inappropriate cure can be even worse that the disease.