Roadblock to Economic Reform: Inter-Enterprise Debt and the Transition to Markets

Abstract

Two American specialists on Soviet and East European economies examine the relationship between inter-enterprise payments for goods and services and economic reform in Russia. Based on extensive interviews with Russian governmental officials and enterprise directors, as well as unpublished documents, the authors trace and discuss the unsuccessful policies of the government and Central Bank of Russia to eliminate arrears during 1992-93. They also explain why financial underdevelopment poses a serious obstacle to economic reform, and why an effort to sharply tighten credit in 1993-94 could lead to cascading enterprise failures. The analysis includes references to the change after October 1993. Journal of Economic Literature Classification Numbers: P21, O17, G20.