Adam Smith, Advisor on the Russian Transition

Abstract

Adam Smith defeats Karl Marx: this shorthand summary of the collapse of socialism in Eastern Europe and the former Soviet Union was not uncommon during the early years of reform. But would Adam Smith approve of the nature of the economic transition in Russia? This essay, drawing intensively upon Smith's writings, purports to reveal the advice that Adam Smith provides to policymakers in Russia and other post-socialist transitional countries. Smith argues that: economic reform can precede and even enhance political reform; protection of private property rights and contractual enforcement are necessary for long-run growth; industrial policy is to be avoided, although existing sectoral preferences should be gradually eliminated; and, the judicial branch of government should be independent of the executive, if investment is to be promoted.