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Author(s) of the publication: Alexei Ulyukayev

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What could the new Russian government do?

Forecasts and far-reaching conclusions in this country are most of the time made on the basis of simple outward appearances. Sergei Stepashin, appointed as acting prime minister, is a general and wears tinted glasses - therefore, he is a budding Pinochet and, therefore, he will use strong-arm methods to enforce order and push through reform. This ingenuous analogy rests on one widespread political/economic myth: There can be successful reform and development only under a dictatorship, a strong-arm regime, and the suppression of democracy. Chile, South Korea, Taiwan, and Singapore are cited as examples in point. It is maintained, in particular, that implementation of liberal reforms in a sluggish, inert environment is only possible through coercion - as was the case in Chile under Pinochet. Let us leave out the moral aspect of the issue and touch on its functional aspects. As a matter of fact, reform in Chile came off and produced results not only thanks to Pinochet but, rather, thanks to the "Chicago boys" who had developed a correct reform strategy and consistently carried it out, and especially thanks to the Chilean people who had enough common sense and courage to endure this rough stretch of the reform path. The military coup in Chile occurred in 1973 while reform (not counting some stabilization measures) began in 1975 - two years later. Of course, the strong-arm regime by itself did produce some positive results: It alone could stop the wave of strikes and rampant ultra-left terrorism. Yet there is no way a dictatorship can force an economy to work, which requires, on one hand, a weeding out of socialist holdovers in the tax, budget, property ownership, and social spheres, and on the other, the provision of business and investment incentives. This calls for concerted, target-specific efforts by national political, business, and scientific elites. Most important, Chilean society learned the futility of socialist experiments the hard way. It was ready for consistent capitalization and at the same time it put up with the dictatorship that went with it. The same is true of Southeast Asian countries. Sure, there have been limitations of democratic freedoms in Taiwan, Singapore, Hong Kong, and Korea, and some of them are still in place. Nonetheless, first, economic growth was ensured not by them but thanks to a fairly liberal economic policy (Singapore tops all economic freedom ratings, other Southeast Asian countries also being very near the top of the list). Subsequently, when it became clear that economic liberalism did not go very well with a prolonged suppression of democracy in the political sphere, the national elites of the aforementioned countries unequivocally opted for democratization, bringing the level of political freedom in line with the level of economic freedom. Second, after all is said and done, limitation of democratic freedoms in some successful economies and a total lack of democracy in the majority of economically underdeveloped, poor countries are two quite different things. There is a good old liberal principle: a free market and strong police. In other words, strong state power. Strong means legitimate, with a clear-cut mandate from society to pursue a certain economic policy, and with a monopoly of power in enforcing law and order, rights and freedoms, equal rules of the game for all market players, and legality of transactions and faithful execution of contracts. This is precisely what is needed to carry out liberal reforms - because property is above all responsibility, while freedom is a voluntary assumption of certain obligations and restraints. These conditions, this social mandate cannot be realized in Russia before the next presidential elections. I believe that the new acting prime minister understand this very well and will under no circumstances try to spur on history, using a "man with a gun" for the purpose. The task of the Stepashin cabinet is to move between the Scylla of the financial crisis and the Charybdis of isolationism and to address the pressing short-term tasks - balancing the budget, reaching agreements with creditors, above all, with the IMF, getting a delay on the payment of foreign debt, taking effective action to stop mounting poverty, and helping society come up with the much needed mandate of trust. What is of the essence here is not shoulder boards or dark glasses, but the experience of a lawyer, the habit of thinking in legal terms, and an understanding that you cannot be wiser than the market or more just than the law. Our laws invest our authorities with extensive rights and powers. Not even 10 percent of them are tapped. It is vital, stage by stage, to close the gap between written law, whereby we are quite European and pro-reform, and common law, whereby we are retrograde Asiatics. Any attempts now to enforce reform through some emergency measures would be to no avail, only widening the gap between pro-reform form and reactionary content and between the declared economic freedom and the impossibility of using it. Top of the agenda today are structural and institutional transformations: protection of ownership rights, restructuring of enterprises and the social sphere, tax reform, and promotion of effective competition. They can only be ensured on a firm legal foundation, contingent on cooperation between the ruling establishment and society.

Orphus

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Alexei Ulyukayev, RUSSIA'S ECONOMY DOES NOT NEED A PINOCHET // Santiago: Digital Library of Chile (LIBRARY.CL). Updated: 19.09.2017. URL: http://library.cl/m/articles/view/RUSSIA-S-ECONOMY-DOES-NOT-NEED-A-PINOCHET (date of access: 22.06.2018).

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Chile Online
Santiago de Chile, Chile
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19.09.2017 (276 days ago)
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