IS JOSEPH STIGLITZ EVEN AN ECONOMIST?:

A Normal Country (Andrei Shleifer and Daniel Treisman, March/April 2004, Foreign Affairs)

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. [...]

As Russian voters go to the polls in March 2004 to elect a president for the fourth time, they will do so in a country that none of them could have envisioned 20 years ago. Russia's economy is no longer the shortage-ridden, militarized, collapsing bureaucracy of 1990. It has metamorphosed into a marketplace of mostly private firms, producing goods and services to please consumers instead of planners. A few business magnates control much of the country's immense reserves of raw materials and troubled banking system, and they lobby hard for favored policies. Small businesses are burdened by corruption and regulation. Still, the economy continues to grow at an impressive pace.

The country's political order, too, has changed beyond recognition. The dictatorship of the party has given way to electoral democracy. Russia's once-powerful Communists no longer control all aspects of social life or sentence dissidents to labor camps. Instead, they campaign for seats in parliament. The press, although struggling against heavy-handed political interventions, is still far more professional and independent than the stilted propaganda machine of the mid-1980s. In slightly more than a decade, Russia has become a typical middle-income capitalist democracy.

So why the dark, at times almost paranoid, view? Why the hyperbole about kleptocracy, economic cataclysm, and KGB takeovers? A number of factors -- psychological, ideological, and overtly political -- led to the dyspeptic consensus among Russia-watchers in the West. Many Western observers simply reacted in a generous, if unreflective, way to the visible suffering of Russians dislocated by the transition. Beside the excesses of the new super-rich, the plight of impoverished pensioners seemed doubly shocking. But there were also some less pure motivations for focusing on the darker side of Russian life. First, there is sensationalism. Newspaper editors and television producers knew they could make money exploiting the anxieties of Western publics with chilling exposes of the Russian mafiya. Second, the intellectual left adopted Russia as the poster child for its crusade against globalization. With Russia's leaders embracing market rhetoric and reforms, the country's initial hardships could be portrayed as proof of the dangers of excessive liberalization. Third, Russia became a football in American politics during the late 1990s. With President Bill Clinton committed to supporting Yeltsin and Vice President Al Gore deeply involved in steering U.S.-Russia relations, bashing Moscow became a way for Republicans to score points in the 2000 election.

Exaggerated despair over Russia was also fueled by a fundamental and widespread misconception. Many Western observers thought of Russia in the early 1990s as a highly developed, if not wealthy, country. With its brilliant physicists and chess players, its space program, and its global military influence, Russia did not look like an Argentina or a South Korea. Believing that Russia started off from a highly developed base, these people saw the country's convergence to the norm for middle-income countries as a disastrous aberration. The same misconception informed some academic analyses. A recent paper by Nobel laureate Joseph Stiglitz and Karla Hoff makes the remarkable observation that, when it comes to legal institutions, "between Russia and most other developed, capitalist societies there was a qualitative difference [in the 1990s]." There was indeed a qualitative difference: Russia was never a "developed, capitalist society."

Indeed, normalcy would have been appropriate by now had Russia been allowed to continue its evolution into a liberal democracy, a process well under way early in the 20th century. But the seventy years of communism left it with unique, perhaps even lethal, challenges to overcome. Arguably, at least, this is not an appropriate time for it to even pretend to be a normal modern nation--and it was certainly nowhere near being one when Boris Yeltsin took over.

Posted by Orrin Judd at February 23, 2004 02:35 PM