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Russia: Distorted Market Economy

Russia: Distorted Market Economy

(p.166) Chapter Seven Russia: Distorted Market Economy
The Power of Productivity
William W. Lewis
University of Chicago Press

This chapter presents an analysis of the Russian economy. Russia has proved that it is possible for a market economy to have a worse economic performance than a centrally planned economy. Although Russia has privatized virtually all businesses and set free virtually all prices, powerful forces against reform prevented anything more. Russia has distorted the ground rules for competition to such an extreme that businesses do well not because they do better but for other reasons. These distortions take many forms. They include government subsidies for some firms but not others; preferential taxes for some but not others; forgiving taxes or electricity and gas bills for some but not others; giving government contracts consistently to some but not others; hassling some with red tape but not others; or allowing some to steal intellectual property from others. Sometimes more productive firms cannot expand because government simply orders unproductive firms not to shut down.

Keywords:   Russian economy, economic performance, market economy, economic reform, economic policy, productivity, competition

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