Mar 6, 2012
Did Markets Fail in Post-Soviet Economies?
According to Prof. Pavel Yakovlev, several post-Soviet economies have struggled to obtain prosperity since the breakup of the Soviet Union. Many argue that this is a failure of capitalism. To Prof. Yakovlev, this has not been a failure of capitalism, but rather, has been a failure to create the conditions necessary for capitalism.
To see whether or not this is true, Prof. Yakovlev looks for differences in GDP growth rates between post-Soviet countries. He finds that Azerbaijan and Poland have performed well, with average GDP growth rates of over 4% per year. These countries, in comparison to the other post-Soviet countries, have more economic and political freedoms, lower levels of corruption and inflation, and more transparent institutions. They also happen to be located on the outer edge of the soviet bloc, where corrupt Soviet style institutions did not take root.
Other post-Soviet countries like Russia, Ukraine, Belarus, Uzbekistan, and Turkmenistan have experienced dismal economic performance because they have failed to create a market friendly environment. They also, in comparison to the top performing post-Soviet economies, have high rates of corruption and inflation, low economic and political freedoms, and poorly defined and enforced property rights.
Markets did not fail in poorly performing post-Soviet economies, but rather, were never actually given a chance to succeed.
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