The "Tabula Rasa Syndrome" and Russian Reform
Mistakes Were Made
By Steven J. Norton and Lynda L. Maillet

Russia’s latest financial and political crisis has given new energy to the debate about what has gone wrong with Russian reform -- or, as it is more often put, who is to blame. There is plenty of blame to go around, both within and outside Russia’s borders, and among both opponents and supporters of economic reform. But for those who wish to take the long view, assigning blame is less important than understanding what happened and why. The reality, as this publication has argued consistently, is that Russia’s economy has changed far less since the collapse of central planning than most outside observers -- or even some domestic reformers -- have assumed.

In the past we have called it the “tabula rasa syndrome,” the common mistaken assumption that the collapse of communist regimes and central planning systems left the nations of the east European region like blank slates, waiting to be written upon by market reformers and investors. Usually this is coupled with an assumption that within each command economy was an embryonic market economy trying to break out, that the eventual growth of a competitive, efficient market system was more or less inevitable. These assumptions -- implying that the old system would not play a powerful role in shaping the transformation process -- were hardly accurate in central Europe, and in the nations of the former Soviet Union were simply fantasy.

This does not mean that change is not possible, or that collapse is inevitable; it simply means that economic policy and aid proposals must take into account reality -- must acknowledge the deep roots of the old system both in these nations’ institutions and in their peoples. Earlier this year, two US economists affiliated with the Brookings Institution, Clifford Gaddy and Barry Ickes, presented research that tried to apply this kind of thinking to the contemporary situation in Russia. The term they proposed in their paper to describe the current system was the “virtual economy.” Their central thesis is that much of the Russian economy, especially the manufacturing sector, produces goods that are worth less than the labor and natural resources used to make them, but that managers, workers and policy makers work under the pretense that industry is profitable.....

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