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Difficulties Exporting A Western Market Economy To Russia

December 9, 2009

A Western market economic model has been difficult to realize in Russia.
“There was an assumption that it would be possible to export capitalism in its Western form, but Russian society is more complex than that,” says Oksana Shmulyar Gr©en in a new thesis for the University of Gothenburg.

When the Iron Curtain fell 20 years ago, there was considerable hope that the countries in Eastern Europe, including Russia, would introduce a market economy and democracy matching that of the West. The idea was that all companies would operate in accordance with the market-economic principles.

“These hopes have never been fully realized. What we see in Russia now is a complex economy with a number of different elements: the remnants of the state economy, large privatized companies, a small foreign-owned sector, and a very small proportion of new companies that emerged during the latter part of the 1990s,” says Oksana Shmulyar Gr©en, who is publicly defending a sociology doctoral thesis on Russian entrepreneurship.

Whereas previous research has focused mainly on reforms during the 1990s, Oksana S Gr©en has chosen to look further back. The Russian economy of the mid 1800s and the Soviet era are compared to the conditions facing today’s entrepreneurs following the collapse of the Iron Curtain.
“Unlike many other researchers, I believe that there was entrepreneurship in Russia before the reforms of the the 1990s, but not of conventional type.”

A new generation of entrepreneurs

This thesis looks in particular at Russia’s new generation of entrepreneurs. These are young, well-educated entrepreneurs who grew up and were educated during the Soviet era, but whose first jobs and career opportunities came mainly during the latter part of the 1990s. Many of them applied to Western business schools in Russia in the hope of becoming professional entrepreneurs.
“This was the group with the most positive attitude towards the West and Western concepts of a market economy and entrepreneurship. But the theories they have been taught at various business schools have been difficult to realize in a Russian context.”

The market economy in Russia still creates numerous barriers, which new economic players must overcome. In her thesis Oksana Shmulyar Gr©en identifies formidable obstacles such as bureaucratic red tape, widespread corruption and the banking system’s inability to offer the start-up capital required.

“There are also historical patterns which mean that the state still dominates within the economic sphere and that people lack faith in private ownership. In order for a market economy to function in a Russian context, there needs to be greater transparency and predictability in relationships between the state and the economy. Entrepreneurs themselves need to have more faith in their own abilities, both developing their own business skills and encouraging greater social welfare and openness.”

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