The Russian economy after systemic change

AT LONG LAST, the summer of 1995 brought the first signs of what may turn out to be a process of recovery in the Russian economy. In June industrial production increased by 2% compared with May. From July onwards, monthly inflation rates fell steadily, reaching a low point of 3.2% in December. The rate of decline in GDP also decreased, from double digits in the years 1992-94 to a fall of merely 4% in 1995. In October the OECD released a study of the Russian economy which indicated that both inflation and the budget deficit were under control, looking forward to a possible real growth rate of 10% for 1996.1 The time would thus seem ripe to summarise what has happened, and to analyse why it happened in the way that it did. So far, the debate on Russian economic reform has been marked by two characteristics which have combined in a rather unfortunate manner to block traditional