Why Russia's Politics Matter

Abstract

The results of Russia's first post-communist election in Decem ber 1993 sent a shock wave through world. Vladimir Zhirinovsky, nationalist demagogue of Liberal Democratic Party, captured almost a quarter of popular vote. The pro-reform bloc, Russia's Choice, came away with only 15 percent. Provoked by this dramatic outcome, Prime Minister Victor Chernomyrdin promised a new eco nomic course, declaring that election marked the end to market romanticism. In resigning as finance minister, Boris Fyodorov pre dicted new course would result in rampant inflation, return of price controls, and arrest of privatization, leading to collapse of Russian economy by end of 1994. A year later, this nightmarish scenario has yet to unfold. Backing away from earlier threats, Chernomyrdin has refrained from reintro ducing price controls. Meanwhile, privatization has marched furi ously forward, transferring 100,000 enterprises into private hands by end of 1994. A booming stock market suggests that not all of these privatizations are mere paper transfers. Perhaps most surprisingly, inflation rates remained in single digits for most of year. Admittedly, industrial production continues to decrease, gross domestic production is contracting, and serious enterprise restructur