A Normal Country

Andrei Shleifer and Daniel Treisman

From Foreign Affairs, March/April 2004

Summary:  Conventional wisdom in the West says that post-Cold War Russia has been a disastrous failure. The facts say otherwise. Aspects of Russia's performance over the last decade may have been disappointing, but the notion that the country has gone through an economic cataclysm and political relapse is wrong--more a comment on overblown expectations than on Russia's actual experience. Compared to other countries at a similar level of economic and political development, Russia looks more the norm than the exception.

Andrei Shleifer is Whipple V.N. Jones Professor of Economics at Harvard University. Daniel Treisman is Associate Professor of Political Science at the University of California, Los Angeles. For full references and data sources see http://papers.nber.org/papers/w10057.

RETHINKING RUSSIA

During the last 15 years, Russia has undergone an extraordinary transformation. It has changed from a communist dictatorship to a multiparty democracy in which officials are chosen in regular elections. Its centrally planned economy has been reshaped into a capitalist order based on markets and private property. Its army has withdrawn peacefully from both eastern Europe and the other former Soviet republics, allowing the latter to become independent countries. In place of a belligerent adversary with thousands of nuclear missiles pointed at it, the West finds a partner ready to cooperate on disarmament, fighting terrorism, and containing civil wars.

Russia's reinvention would seem cause for celebration. Twenty years ago, only the most naive idealist could have imagined such a metamorphosis. Yet the mood among Western observers has been anything but celebratory. Russia has come to be viewed as a disastrous failure and the 1990s as a decade of catastrophe for its people. Journalists, politicians, and academics have described Russia not as a middle-income country struggling to overcome its communist past and find its place in the world, but as a collapsed state inhabited by criminals and threatening other countries with multiple contagions.

As the 1990s drew to a close, the left and the right in the United States were united in this view. To Republican Dick Armey, then House majority leader, Russia had by 1999 become "a looted and bankrupt zone of nuclearized anarchy." To his colleague, House banking committee chairman James Leach, Russia was "the world's most virulent kleptocracy," more corrupt even than Mobutu Sese Seko's Zaire. From the left, Bernard Sanders, the socialist member of Congress from Vermont, described Russia's economic performance in the 1990s as a "tragedy of historic proportions." A decade of reform had earned the country only "economic collapse," "mass unemployment," and "grinding poverty."

More recently, a glimmer of optimism briefly broke through the gloom. As the economy grew rapidly and a young, disciplined president replaced the ailing Boris Yeltsin, some saw hints of an emerging stability in Russia. President George W. Bush, in late 2003, praised President Vladimir Putin's efforts to make Russia into a "country in which democracy and freedom and the rule of law thrive." But the happy talk did not last long. When Russian prosecutors arrested the oil tycoon Mikhail Khodorkovsky in October 2003, threw him in jail, and froze his shares, the critics' worst fears of an authoritarian revanche seemed to be coming true. Russia, according to the New York Times columnist William Safire, was now ruled by a "power-hungry mafia" of former KGB and military officers, who had grabbed "the nation by the throat." When the pro-Putin United Russia Party was announced to have won more than 37 percent of the vote in the December 2003 parliamentary elections, Safire lamented the return of "one-party rule to Russia" and declared the country's experiment with democracy "all but dead."

Yet data on Russia's growth, macroeconomic stability, income inequality, and corporate finances -- as well as on its elections, press freedom, and corruption -- suggest there is a large gap between the overwhelmingly negative assessments of the country and the facts. Although Russia's transition has been painful in many ways, the country has made remarkable economic and social progress since the end of communism. It began the 1990s as a highly distorted and disintegrating centrally planned economy, with severe shortages of consumer goods and a massive military establishment. It ended the decade as a normal, middle-income capitalist economy. Although economic output fell initially after the Soviet Union collapsed, plausible estimates suggest that the decline had been reversed by 2003. Politically, Russia started out as a repressive dictatorship, dominated by the Communist Party and security services. Within a decade, its political leaders were being chosen in generally free -- if flawed -- elections, citizens could express their views without fear, and more than 700 political parties had been registered.

Russia's economic and political systems remain far from perfect. But their defects are typical of countries at a similar level of economic development. Russia was in 1990, and is today, a middle-income country, with GDP per capita around $8,000 (at purchasing power parity) according to the UN -- comparable to Argentina in 1991 and Mexico in 1999. Almost all democracies in this income range are rough around the edges: their governments suffer from corruption, their judiciaries are politicized, and their press is almost never entirely free. They have high income inequality, concentrated corporate ownership, and turbulent macroeconomic performance. In all these regards, Russia is quite normal. Nor are the common flaws of middle-income capitalist democracies incompatible with further economic and political progress -- if they were, western Europe and the United States would never have left the nineteenth century.

To say that Russia has become a "normal" middle-income country is not to overlook the messiness of its politics and economics, nor to excuse the failures of its leaders. The average middle-income country is not a secure or socially just place to live. Nor is it to say that all middle-income countries are exactly alike. No other such country has Russia's nuclear arms or its pivotal role in international affairs. Yet other countries around Russia's level of income -- from Mexico and Brazil to Malaysia and Croatia -- face a common set of economic problems and political challenges, from similarly precarious vantage points. Russia's struggles to meet such challenges strikingly resemble the experiences of many of its peers.

The popular vision of Russia resembles the reflection in a distorting mirror: its features are recognizable, but they are stretched and twisted out of proportion. To see Russia clearly, one must return to the facts.