This paper analyses the long-term growth and welfare impact of the transition to the market econo... more This paper analyses the long-term growth and welfare impact of the transition to the market economy in the countries of Eastern Europe. We define welfare as the average real net wage after payments of social security contributions to fund a paygo-type pension system, and of taxes to service the interests on the accumulated public debt.We examine four sets of factors that will influence growth and the welfare of wage earners up to the year 2030. First, we argue that the accumulation of physical capital will be affected by a sharp initial fall in the capital stock, by a medium-term decline in savings and investments, and by efficiency gains following marketisation. Second, the human capital stock is expected to experience a similar short-term erosion because of the recent upsurge in human capital flights and the current decline in the quality and quantity of education being provided. Third, we also argue that the transition's population crisis, which has entailed large upswings in...
ABSTRACT This paper starts with a brief description of recent Russian economic and political deve... more ABSTRACT This paper starts with a brief description of recent Russian economic and political developments and identifies the poor institutional capacity of the state as the major obstacle to growth. Then cross‐country regressions are used to provide evidence for two arguments. First, the single most important factor limiting the inflow of FDI to Russia seems to be the inefficiency of the government – its inability to enforce rules and regulations. It is not the lack of the rule of law, or high level of corruption, or insufficient democratization, or low degree of economic freedom. Second, given the poor government effectiveness, the benefits of FDI are quite weak and may be outweighed by cost (repatriation of profits, but no transfer of technology).
Le principal obstacle à la croissance de l'investissement étranger direct en Russie est la carence des institutions gouvernementales. Les régressions dans tout le pays prouvent deux choses : D'une part, le facteur le plus important qui limite le flot d'IDE en Russie semble être l'inefficacité du gouvernement – son incapacité à faire appliquer règles et règlements. Pas le refus de la primauté du droit ni le degré élevé de corruption ni encore l'insuffisance de la démocratisation ou la faible liberté économique. Deuxièmement, du fait de l'inefficacité de l'État, les avantages des IDE sont très faibles et ne font pas le poids face aux coûts (rapatriement des bénéfices sans transfert de technologie).
China and other East Asian countries were able to deal with the coronavirus pandemic much better ... more China and other East Asian countries were able to deal with the coronavirus pandemic much better than most Western countries Both the number of infections and the mortality rate were lower than in Western countries by two orders of magnitude Besides, economic recession associated with the pandemic is likely to be much deeper in the West than in the South These developments give new arguments to the views that East Asian economic and social model is more viable than the Western model This paper argues that East Asian model is superior to the other models in the Global South at least in the catch up development and possibly even in the innovations beyond the technological frontier The crucial features of the East Asian economic model are relatively low income and wealth inequalities, strong state institutional capacity (as measured by the murder rate and the share of shadow economy), high patriotism and trust in the government institutions In short, the East Asian model is based on so...
This article presents the first part of the work on how instruments and methods of the growth pro... more This article presents the first part of the work on how instruments and methods of the growth promotion should change as a country approaches the level of advanced economies in terms of welfare and the quality of institutions. We describe the evolution of economic policies in Western countries and also in countries that became known as "economic miracles" during their catch up development. Our analysis allows to trace the major directions of such evolution: from import substitution to export orientation, from regulation of import tariffs to non-selective policy of the real exchange rate undervaluation, from import of technology to domestically based research and development, from creation of large companies to support of small and medium-size firms.
International Journal: Canada's Journal of Global Policy Analysis, 2008
On 1 October 2007, two months before the parliamentary elections of 2 December 2007 and less than... more On 1 October 2007, two months before the parliamentary elections of 2 December 2007 and less than half a year before the presidential elections of 2 March 2008, President Vladimir Putin agreed to put his name on the electoral ballot sheet of the largest Russian party that had always supported him-United Russia-although he had never been a member. In December's parliamentary elections, United Russia received 64 percent of the votes, whereas Just Russia-a party that was more left-oriented but also openly supported Putin-received another eight percent of the votes. Only two opposition parties managed to overcome the seven-percent barrier in the proportional representation elections to get their deputies into parliament: Communists (12 percent) and the nationalistic Liberal Democratic party (eight percent). Other parties altogether received less than eight percent of the votes.Shortly after December 2007, Dmitry Medvedev, then deputy prime minister, became a joint presidential candidate of four parties (United Russia, Just Russia, and two minor parties not represented in parliament) and immediately offered Putin the post of prime minister in the future government. Putin accepted, making it clear he was going to stay in politics even after his second presidential term came to an end. On 2 March 2008, Medvedev was elected president by an overwhelming majority and nominated Putin as prime minister.Putin's decision to stay on board in a new administration is understandable: he is prohibited from running for a third presidential term by the constitution but he remains extremely popular-53 percent of the electorate voted for Putin in 2000, 71 percent in 2004, and over 60 percent said they would vote for him in September 2007, even though he was not going to run. The secret of his high popularity is simple: he left the country in better shape than when he came into power eight years earlier.PUTIN'S LEGACY: ECONOMIC ACHIEVEMENTSThe stabilization of the past eight years was especially impressive, if compared to the period of disarray of "the rocky 1990s." The Russian economy lost 45 percent of its output during the transformational recession of 1989-98, income inequalities increased significantly, the crime rate doubled, and life expectancy dropped from 70 to 65 years. The short-lived stabilization of 1995-98 (when the ruble was pegged to the dollar and inflation subsided) ended with the spectacular currency crisis of August 1998, when the ruble lost over 60 percent of its value in several months, resulting in the acceleration of inflation, crime, suicides, and mortality rate.However, after the 1998 currency crisis, the Russian economy started to grow. The average annual growth rate totaled about seven percent in 1999-2007, so now GDP is gradually approaching its pre-recession level of 1989. Real incomes and personal consumption increased even faster-more than doubling in 1999-2007-and have already surpassed the pre-recession level of the late 1980s. The major push was given by devaluation of the ruble in 1998 and by higher world prices for oil and gas later, but Putin can at least take credit for not ruining this growth. Inflation fell from 84 percent in 1998, when prices jumped after the August 1998 currency crisis and dramatic devaluation of the ruble, to 10-12 percent in 2004-07.Economic growth and high world fuel prices helped the government to collect more tax revenues, so the government budget moved from a deficit to surplus, and government spending as a proportion of GDP increased since 1999, allowing the partial restoration of the institutional capacity of the state that was lost in the 1990s. Moreover, high oil and gas prices in the world markets allowed Russia to enjoy high foreign trade surpluses and to accumulate foreign exchange reserves, which increased from less than $15 billion right after the 1998 currency crisis to nearly $500 billion at the beginning of the 2008.By comparative standards, Russian performance is not that impressive. …
This paper is an attempt to interpret recent rapid Chinese growth in a longer term perspective an... more This paper is an attempt to interpret recent rapid Chinese growth in a longer term perspective and in comparison with Russian economic performance. First, it is argued that recent economic liberalization produced spectacular results (1979-onwards) because the reform strategy was very different from the Washington consensus package (gradual rather than instant deregulation of prices, no mass privatization, strong industrial policy, undervaluation of the exchange rate via accumulation of reserves). Second, recent Chinese success (1979-onwards) is based on the achievements of the Mao period (1949-76) - strong state institutions, efficient government and an increased pool of human capital. Unlike in the former Soviet Union, these achievements were not squandered in China due to gradual rather than shock-therapy type
"Hegel once said: history is repeating itself. He forgot to mention – the first time as a tr... more "Hegel once said: history is repeating itself. He forgot to mention – the first time as a tragedy, and the second time – as a farce..." (C. Marx, The Eighteenth Brumaire of Louis Bonaparte).We have forgotten everything and have learned no lessons. The Central Bank is doing this again. We are “stepping on the same rake” a second time. Just like in 1998, we have first pushed the economy into the economic crisis living though a recession, and only after that and under the pressure of the circumstances, are devaluating the ruble tothe extent required for restoration of production growth.
This paper analyses the long-term growth and welfare impact of the transition to the market econo... more This paper analyses the long-term growth and welfare impact of the transition to the market economy in the countries of Eastern Europe. We define welfare as the average real net wage after payments of social security contributions to fund a paygo-type pension system, and of taxes to service the interests on the accumulated public debt.We examine four sets of factors that will influence growth and the welfare of wage earners up to the year 2030. First, we argue that the accumulation of physical capital will be affected by a sharp initial fall in the capital stock, by a medium-term decline in savings and investments, and by efficiency gains following marketisation. Second, the human capital stock is expected to experience a similar short-term erosion because of the recent upsurge in human capital flights and the current decline in the quality and quantity of education being provided. Third, we also argue that the transition's population crisis, which has entailed large upswings in...
ABSTRACT This paper starts with a brief description of recent Russian economic and political deve... more ABSTRACT This paper starts with a brief description of recent Russian economic and political developments and identifies the poor institutional capacity of the state as the major obstacle to growth. Then cross‐country regressions are used to provide evidence for two arguments. First, the single most important factor limiting the inflow of FDI to Russia seems to be the inefficiency of the government – its inability to enforce rules and regulations. It is not the lack of the rule of law, or high level of corruption, or insufficient democratization, or low degree of economic freedom. Second, given the poor government effectiveness, the benefits of FDI are quite weak and may be outweighed by cost (repatriation of profits, but no transfer of technology).
Le principal obstacle à la croissance de l'investissement étranger direct en Russie est la carence des institutions gouvernementales. Les régressions dans tout le pays prouvent deux choses : D'une part, le facteur le plus important qui limite le flot d'IDE en Russie semble être l'inefficacité du gouvernement – son incapacité à faire appliquer règles et règlements. Pas le refus de la primauté du droit ni le degré élevé de corruption ni encore l'insuffisance de la démocratisation ou la faible liberté économique. Deuxièmement, du fait de l'inefficacité de l'État, les avantages des IDE sont très faibles et ne font pas le poids face aux coûts (rapatriement des bénéfices sans transfert de technologie).
China and other East Asian countries were able to deal with the coronavirus pandemic much better ... more China and other East Asian countries were able to deal with the coronavirus pandemic much better than most Western countries Both the number of infections and the mortality rate were lower than in Western countries by two orders of magnitude Besides, economic recession associated with the pandemic is likely to be much deeper in the West than in the South These developments give new arguments to the views that East Asian economic and social model is more viable than the Western model This paper argues that East Asian model is superior to the other models in the Global South at least in the catch up development and possibly even in the innovations beyond the technological frontier The crucial features of the East Asian economic model are relatively low income and wealth inequalities, strong state institutional capacity (as measured by the murder rate and the share of shadow economy), high patriotism and trust in the government institutions In short, the East Asian model is based on so...
This article presents the first part of the work on how instruments and methods of the growth pro... more This article presents the first part of the work on how instruments and methods of the growth promotion should change as a country approaches the level of advanced economies in terms of welfare and the quality of institutions. We describe the evolution of economic policies in Western countries and also in countries that became known as "economic miracles" during their catch up development. Our analysis allows to trace the major directions of such evolution: from import substitution to export orientation, from regulation of import tariffs to non-selective policy of the real exchange rate undervaluation, from import of technology to domestically based research and development, from creation of large companies to support of small and medium-size firms.
International Journal: Canada's Journal of Global Policy Analysis, 2008
On 1 October 2007, two months before the parliamentary elections of 2 December 2007 and less than... more On 1 October 2007, two months before the parliamentary elections of 2 December 2007 and less than half a year before the presidential elections of 2 March 2008, President Vladimir Putin agreed to put his name on the electoral ballot sheet of the largest Russian party that had always supported him-United Russia-although he had never been a member. In December's parliamentary elections, United Russia received 64 percent of the votes, whereas Just Russia-a party that was more left-oriented but also openly supported Putin-received another eight percent of the votes. Only two opposition parties managed to overcome the seven-percent barrier in the proportional representation elections to get their deputies into parliament: Communists (12 percent) and the nationalistic Liberal Democratic party (eight percent). Other parties altogether received less than eight percent of the votes.Shortly after December 2007, Dmitry Medvedev, then deputy prime minister, became a joint presidential candidate of four parties (United Russia, Just Russia, and two minor parties not represented in parliament) and immediately offered Putin the post of prime minister in the future government. Putin accepted, making it clear he was going to stay in politics even after his second presidential term came to an end. On 2 March 2008, Medvedev was elected president by an overwhelming majority and nominated Putin as prime minister.Putin's decision to stay on board in a new administration is understandable: he is prohibited from running for a third presidential term by the constitution but he remains extremely popular-53 percent of the electorate voted for Putin in 2000, 71 percent in 2004, and over 60 percent said they would vote for him in September 2007, even though he was not going to run. The secret of his high popularity is simple: he left the country in better shape than when he came into power eight years earlier.PUTIN'S LEGACY: ECONOMIC ACHIEVEMENTSThe stabilization of the past eight years was especially impressive, if compared to the period of disarray of "the rocky 1990s." The Russian economy lost 45 percent of its output during the transformational recession of 1989-98, income inequalities increased significantly, the crime rate doubled, and life expectancy dropped from 70 to 65 years. The short-lived stabilization of 1995-98 (when the ruble was pegged to the dollar and inflation subsided) ended with the spectacular currency crisis of August 1998, when the ruble lost over 60 percent of its value in several months, resulting in the acceleration of inflation, crime, suicides, and mortality rate.However, after the 1998 currency crisis, the Russian economy started to grow. The average annual growth rate totaled about seven percent in 1999-2007, so now GDP is gradually approaching its pre-recession level of 1989. Real incomes and personal consumption increased even faster-more than doubling in 1999-2007-and have already surpassed the pre-recession level of the late 1980s. The major push was given by devaluation of the ruble in 1998 and by higher world prices for oil and gas later, but Putin can at least take credit for not ruining this growth. Inflation fell from 84 percent in 1998, when prices jumped after the August 1998 currency crisis and dramatic devaluation of the ruble, to 10-12 percent in 2004-07.Economic growth and high world fuel prices helped the government to collect more tax revenues, so the government budget moved from a deficit to surplus, and government spending as a proportion of GDP increased since 1999, allowing the partial restoration of the institutional capacity of the state that was lost in the 1990s. Moreover, high oil and gas prices in the world markets allowed Russia to enjoy high foreign trade surpluses and to accumulate foreign exchange reserves, which increased from less than $15 billion right after the 1998 currency crisis to nearly $500 billion at the beginning of the 2008.By comparative standards, Russian performance is not that impressive. …
This paper is an attempt to interpret recent rapid Chinese growth in a longer term perspective an... more This paper is an attempt to interpret recent rapid Chinese growth in a longer term perspective and in comparison with Russian economic performance. First, it is argued that recent economic liberalization produced spectacular results (1979-onwards) because the reform strategy was very different from the Washington consensus package (gradual rather than instant deregulation of prices, no mass privatization, strong industrial policy, undervaluation of the exchange rate via accumulation of reserves). Second, recent Chinese success (1979-onwards) is based on the achievements of the Mao period (1949-76) - strong state institutions, efficient government and an increased pool of human capital. Unlike in the former Soviet Union, these achievements were not squandered in China due to gradual rather than shock-therapy type
"Hegel once said: history is repeating itself. He forgot to mention – the first time as a tr... more "Hegel once said: history is repeating itself. He forgot to mention – the first time as a tragedy, and the second time – as a farce..." (C. Marx, The Eighteenth Brumaire of Louis Bonaparte).We have forgotten everything and have learned no lessons. The Central Bank is doing this again. We are “stepping on the same rake” a second time. Just like in 1998, we have first pushed the economy into the economic crisis living though a recession, and only after that and under the pressure of the circumstances, are devaluating the ruble tothe extent required for restoration of production growth.
Background: Previous research using routine data identified rapid mass privatisation as an import... more Background: Previous research using routine data identified rapid mass privatisation as an important driver of mortality crisis following the collapse of Communism in Central and Eastern Europe. However, existing studies on the mortality crisis relying on individual level or routine data cannot assess both distal (societal) and proximal (individual) causes of mortality simultaneously. The aim of the PrivMort Project is to overcome these limitations and to investigate the role of societal factors (particularly rapid mass privatisation) and individual-level factors (e.g. alcohol consumption) in the mortality changes in post-communist countries.
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Le principal obstacle à la croissance de l'investissement étranger direct en Russie est la carence des institutions gouvernementales. Les régressions dans tout le pays prouvent deux choses : D'une part, le facteur le plus important qui limite le flot d'IDE en Russie semble être l'inefficacité du gouvernement – son incapacité à faire appliquer règles et règlements. Pas le refus de la primauté du droit ni le degré élevé de corruption ni encore l'insuffisance de la démocratisation ou la faible liberté économique. Deuxièmement, du fait de l'inefficacité de l'État, les avantages des IDE sont très faibles et ne font pas le poids face aux coûts (rapatriement des bénéfices sans transfert de technologie).
Le principal obstacle à la croissance de l'investissement étranger direct en Russie est la carence des institutions gouvernementales. Les régressions dans tout le pays prouvent deux choses : D'une part, le facteur le plus important qui limite le flot d'IDE en Russie semble être l'inefficacité du gouvernement – son incapacité à faire appliquer règles et règlements. Pas le refus de la primauté du droit ni le degré élevé de corruption ni encore l'insuffisance de la démocratisation ou la faible liberté économique. Deuxièmement, du fait de l'inefficacité de l'État, les avantages des IDE sont très faibles et ne font pas le poids face aux coûts (rapatriement des bénéfices sans transfert de technologie).