But the stability comes with a big hidden cost, since the virtual economy undermines the future competitiveness of the economy. It does not modernize either its physical or human capital. This means that the economy continues to grind down. The further it goes, the less competitive it is. The virtual economy has a curious relationship to the private sector. It will not eliminate it, since it needs a private sector in order to survive itself.
It needs cash. And it needs the private sector as a social safety valve, for both consumers and workers. But in general, the dominance of the virtual economy is incompatible with a genuinely independent, prosperous private sector. Consequently, small businesses will be permitted to exist. But they will be constrained in the market, not allowed to supply to public sector customers. They will not be allowed to develop as subcontractors for the large enterprises. More seriously, as value-adders producing for the market i.
The virtual economy will therefore squeeze the private sector to get the cash it needs taxes , and it will constrain the private sector to protect the market it needs.
The virtual economy has a natural tendency to fragment the national economy into smaller, self-contained local economies. This trend is evident in Russia. Local governments protect the local market for the benefit of their local virtual economies. In the post-August crisis, regional and local governments intensified the tendency towards localism by introducing measures to hoard goods locally and ban exports, especially of food, even to other regions of Russia.
The public sector will be smaller and more demonetized and, as stated above, more localized. The federal government budget is key. Look at the recent record. That is, this is what it raised on its own, not counting the borrowing at home and abroad. With a highly-publicized tax collection campaign at the beginning of , the government was slightly more successful in raising cash for a while. But as the virtual economy model predicted, the extra cash to the budget came at the expense of the rest of the economy and helped precipitate the August 17 financial collapse.
Since the default, tax collection in real terms has been below levels. This is clearly not enough for the country to stay current on its foreign debt. It also means that the government will continue to fall far short of providing the basic public services for which it is responsible. Failure to adequately fund government agencies at all levels has meant that these agencies are becoming the bureaucratic analogues of self-subsistence farms. Government employees use government assets real estate, etc.
Little or nothing is left to serve the public. A large amount of their time is spent not on providing public goods at all, not even inefficiently. It is spent on earning money, or growing food, and so on, to finance sheer survival. In the case of some civil servants, whose jobs serve no useful purpose, this may be acceptable. For many others, it is damaging, both for their own health and well-being and for the citizens they are supposed to serve.
And for some critical categories—the military is the best example—it may be disastrous. Consider the following scenarios. They differ in the roles government plays.
The first scenario is that of Russia today. This especially results in minimal central government control over the regions. The problem here is that value will tend to be kept locally. This means big gaps among regions, ultimately threatening national integrity. There will likely also be a lot of leakage looting , because the government plays a minimal role in stopping it. The danger is inequity, an even more fragile public sector, and continued looting and corruption.
This scenario is unlikely to continue but rather either lead either towards disintegration or generate a backlash and a demand for recentralization. It is theoretically possible that a strong and purposeful enough leader could act to avoid the negative consequences. Since it would be more conducive to social peace and territorial integrity, this sort of peaceful virtual economy development might be sustainable for quite a long time. Unfortunately, a much more likely scenario is, as many observers have noted, a revival of support for strong central authority based on a real or perceived threat to national survival.
This scenario is one for a militarized virtual economy. There would be priority and nonpriority sectors of the economy, as in the Soviet system.
But it would differ from the Soviet system in the relations between the two. In the Soviet system, the priority sector exploited the nonpriority sector. Compulsion was necessary. It would be for all intents and purposes outside of the state. There would be, at least initially, less compulsion than in the Soviet system. While there would undoubtedly be some elements of forced requisitioning of materials, forced labor would be less likely.
But even this is not a long-term situation. It could not last very long. Especially if there is pressure to resurrect large-scale conventional arms production as opposed to a more limited concentration on, say, nuclear and space weapons , it will almost inevitably evolve into a full-scale command-administrative economy.
Such a system cannot afford to leave any potential resource out, and that will require compulsion. The scenarios I have outlined are admittedly highly speculative. They surely will appear to many to be overly dramatic. I think that this is in part because they attempt to look ahead for more than the immediate future.
It is comfortable to think in terms only of what might happen in the next years, since the probability that Russia will somehow muddle through for that time is indeed very great. As far as policy is concerned, we can continue as we now are doing: keep bailing Russia out, doing just enough to keep it above water, and pretend that some day, somehow, the country will resume and then successfully complete its progress towards the market.
However, I think policy would be better served by acknowledging that Russia is not on the path towards becoming a modern market economy.
It will have to be dismantled. That task may be as big a one and require, from both inside and outside Russia, as much commitment to solve, as the original task of replacing the command economy with a market economy. We should have no illusions that it will be cheap. Related Books. Starting in , with Joseph Stalin's rise to power, a command economy characterized by totalitarian control over political, social, and economic life would define the Soviet Union for most of the remaining 20 th Century.
The Soviet command economy coordinated economic activity through the issuance of directives, by setting social and economic targets, and by instituting regulations. Soviet leaders decided on the state's overarching social and economic goals. In order to achieve these goals, Communist Party officials assumed control over all of the country's social and economic activities.
The Communist Party legitimized its control by claiming it had the knowledge to direct a society that would rival and overtake any Western market economy. Officials managed the significant amounts of information necessary for centralizing the planning of both production and distribution.
Hierarchical structures were instituted at all levels of economic activity, with superiors having absolute control over the norms and parameters of planning assignments, as well as setting regular performance evaluations and rewards. At first, the Soviet Union experienced rapid economic growth. While the lack of open markets providing price signals and incentives to direct economic activity led to waste and economic inefficiencies, the Soviet economy posted an estimated average annual growth rate in gross national product GNP of 5.
There was a dip to a 2. The impressive performance was largely due to the fact that, as an underdeveloped economy, the Soviet Union could adopt Western technology while forcibly mobilizing resources to implement and utilize such technology.
An intense focus on industrialization and urbanization at the expense of personal consumption gave the Soviet Union a period of rapid modernization. However, once the country began to catch up with the West, its ability to borrow ever-newer technologies, and the productivity effects that came with it, soon diminished. The Soviet economy became increasingly complex just as it began running out of development models to imitate.
With average GNP growth slowing to an annual 3. The Soviets had been aware since the s of such long-term problems as command economy inefficiencies and how adopting the knowledge and technology of developed economies could come at the expense of fostering an innovative domestic economy.
Piecemeal reforms like those of the Sovnarkhoz implemented by Nikita Khrushchev in the late s attempted to begin decentralizing economic control, allowing for a "second economy" to deal with the increasing complexity of economic affairs.
But with economic growth declining and inefficiencies becoming increasingly more apparent, partial reforms to allow for more decentralized market interactions were reintroduced in the early s. The quandary for Soviet leadership was to create a more liberal market system in a society whose core foundations were characterized by centralized control.
These early reforms failed to revive the increasingly stagnant Soviet economy, with productivity growth falling below zero by the early s. This ongoing poor economic performance led to a more radical set of reforms under the leadership of Mikhail Gorbachev. While attempting to maintain socialist ideals and central control over primary societal goals, Gorbachev aimed to decentralize economic activity and open the economy up to foreign trade.
This restructuring, referred to as perestroika , encouraged individual private incentives, creating greater openness. Perestroika was in direct opposition to the previously hierarchical nature of the command economy. But having greater access to information helped foster critiques of Soviet control, not just of the economy, but also of social life. When the Soviet leadership relaxed control in order to save the faltering economic system, they helped create conditions that would lead to the country's dissolution.
While perestroika initially appeared to be a success, as Soviet firms took advantage of new freedoms and new investment opportunities, optimism soon faded. A severe economic contraction characterized the late s and early s, which would be the last years of the Soviet Union. Soviet leaders no longer had the power to intervene amidst the growing economic chaos.
Newly-empowered local leaders demanded greater autonomy from central authority, shaking the foundations of the command economy, while more localized cultural identities and priorities took precedence over national concerns. With its economy and political unity in tatters, the Soviet Union collapsed in late , fragmenting into fifteen separate states. The early strength of the Soviet command economy was its ability to rapidly mobilize resources and direct them in productive activities that emulated those of advanced economies.
Yet by adopting existing technologies rather than developing their own, the Soviet Union failed to foster the type of environment that leads to further technological innovation. After experiencing a catch-up period with attendant high growth rates, the command economy began to stagnate in the s. Rather than saving the economy, various piecemeal reforms instead only undermined the economy's core institutions.
Accessed Oct. Department of State. Library of Congress. British Library. International Markets. Your Privacy Rights. To change or withdraw your consent choices for Investopedia.
At any time, you can update your settings through the "EU Privacy" link at the bottom of any page. These choices will be signaled globally to our partners and will not affect browsing data. We and our partners process data to: Actively scan device characteristics for identification.
I Accept Show Purposes. Your Money. Personal Finance.
0コメント