Association of Former Intelligence Officers

KAPITALIZM: Russia's Struggle to Free Its Economy, by Rose Bradley, Yale University Press, 1999. Russia is blessed with a wealth of natural resources, but it is on the verge of bankruptcy: last August it defaulted on $40 billion in domestic debt, and may default on $17.5 billion in foreign debt if not bailed out by the IMF in negotiations currently underway. Bradley reviews the Russians road to a market economy. The Soviet-era managers were allowed to gain control of their state-run plants in 1992, thus stifling new initiatives and encouraging robbery. Three years later Prime Minister Chubais sold off the gems of Russian state assets to well-connected banks - same results. With tax reform making meager progress, the state borrowed. When emerging markets in Asia and Latin American plunged along with oil prices, Russia could no longer pay its bills. The transition to capitalism, says Bradley, will take time.

The future is opaque, for the fate of capitalism and open markets in the Russian Federation is connected to the future of the political system. The present Russian Federation is, in Professor Paul Goble's words, a "failed state," in which the Nomenklatura opted out to enrich themselves and invest in Cyprus, Israel or London, leaving a state which is bluff and appearance rather than substance. Only Moscow and its environs are approximating an East European level of prosperity, with the rest of the country far behind or at a subsistence level, with decreasing life expectancy, birth rates and public health. Russia and the US are equals only in the number of people each country has incarcerated in prisons - the highest in the world. In terms of power projection, Russia has become a marginal consideration for US policy, as the Serbs have been discovering. (Busnss Wk Mar22 p. 22) (RoyJ)

Reviewed in AFIO Weekly Intelligence Notes #11-99, 17 March 99

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