¹ President Yeltsin, national television address, August 19, 1992; and Deputy Prime Minister Anatolii Chubais, in “Chubais Schitaet Shto Glavnaya Zadacha 1993 Goda—Perekhod k Kachestvennoy Privatizatsii,” Izvestiya-FP, March 12, 1993. See also Brzeski, Andrzej, “Post-Communism from a Neo-Institutionalist Perspective,” Journal of Institutional and Theoretical Economics 148 (March 1992), 195;Google Scholar and Fisher, Stanley and Gelb, Alan, “The Process of Socialist Economic Transformation,” Journal of Economic Perspectives 5 (Fall 1991), 98.Google Scholar

² “Gosudarstvennaya Programma Privatizatsii i Munitsipal'nykh Predpriyatii v Rossiiskoi Federatsiya na 1992 God,” in Rossiiskii Rynok Tsennykh Bumag: Privatizatsiya, Normativnye Akty, vol. 4 (Moscow: Nezavisimaya Investisionnaya Firma et al., December 1992)Google Scholar. On the necessity of outside owners to effect “real” privatization, see Lipton, David and Sachs, Jeffrey, “Privatization in Eastern Europe: The Case of Poland,” Brookings Papers on Economic Activity 1 (1990), 35Google Scholar; and the interview with Deputy Prime Minister Anatolii Chubais, in “Snova 'Fabriki-Rabochim'?” Argumenty i Fakty, April 16, 1993, p. 4.

³ There has been only one recorded bankruptcy, while official unemployment, a key indicator in discerning the level of restructuring, is still less than .5%. See Leyla Boulton, “Bankruptcy Law Claims First Victim,” Financial Times, September 17, 1993, p. 3. On credits, see World Bank, Subsidies and Directed Credits to Enterprises in Russia, 11782-RU, April 8, 1993, v. On insider ownership, see “Obzor Investii i Privatizatsii,” Kommersant', no. 7, February 15–21, 1993, p. 16Google Scholar. For an overview of the lack of re-structuring and unbundling, see Philippe Aghion et al., “Industrial Restructuring in Eastern Europe” (Manuscript, European Bank for Reconstruction and Development, London, April 1993).

⁴ This article focuses on the privatization of large state enterprises, which constitute the bulk of all Russian property, and does not address the more straightforward privatization of shops, services, and small enterprises.

⁵ The creation of private property rights (or the lack thereof) is therefore a subset or case study of the larger phenomenon of economic transformation. Regarding postcommunist transitions, other dependent variables within the larger set of economic transformation might include price liberalization, macroeconomic stabilization, or structural adjustment.

⁶ Neumann, Sigmund, “The International Civil War,” World Politics 1 (April 1949), 333-34CrossRefGoogle Scholar. The term revolution is problematic, laden with normative assumptions. Most scholars of revolutions, including Marxists, political conflict theorists, and functionalists, subsume this basic description within their definitions of revolution. Disagreements arise when other features, such as class conflict, violence, or individual relative deprivation, are added to the definition. For discussions of the different definitions of revolutions, see Skocpol, Theda, States and Social Revolutions: A Comparative Analysis of France, Russia, and China (Cambridge: Cambridge University Press, 1979)CrossRefGoogle Scholar, chap. 1; Tilly, Charles, “Revolutions and Collective Violence,” in Greenstein, Fred and Polsby, Nelson, eds., Handbook of Political Science, vol. 3 (Reading, Mass.: Addison-Wesley, 1975)Google Scholar; and two very useful survey articles, Stone, Lawrence, “Theories of Revolution,” World Politics 18 (January 1966)CrossRefGoogle Scholar; and Goldstone, Jack, “Theories of Revolution: The Third Generation,” World Politics 32 (April 1980)CrossRefGoogle Scholar.

⁷ For a broader, more diffuse definition of revolution that includes such events, see Tilly, Charles, European Revolutions, 1492–1992 (Oxford: Blackwell, 1993)Google Scholar.

⁸ Writers on democratization often do not make the distinction between changes in the polity and the simultaneous transformation of both the polity and the economy. See O'Donnell, Guillermo and Schmitter, Philippe, Transitions from Authoritarian Rule: Tentative Conclusions, vol. 4 (Baltimore: Johns Hopkins University Press, 1986)Google Scholar; and Schmitter, Philippe, “Reflections on Revolutionary and Evolutionary Transitions: The Russian Case in Comparative Perspective,” in Dallin, Alexander, ed., Political Parties in Russia (Berkeley: International and Area Studies, University of California, 1993)Google Scholar.

⁹ In choosing this definition, my purpose is not to engage in the philosophical debate about what constitutes a “real” revolution. Rather, I more modestly seek to assign an operational definition to the phenomenon to be explained and to delineate the universe of cases that can be compared. Guided by this definition, other cases of revolution would include the French Revolution, the Russian Revolution, all successful twentieth-century communist revolutions (China, Vietnam, Cambodia, Mozambique, etc.), all successful anticommunist revolutions (Poland, Hungary, Czech Republic, Nicaragua, etc.), and Iran. This definition also excludes such cases as the American Revolution, the revolutions of 1848, the Mexican Revolution, or successful national liberation struggles (India, Ghana, Zimbabwe, etc.) in which the basic ordering principles of the economic system were not changed. On the importance of this definitional exercise for the scientific method, see Nagel, Ernest, The Structure of Science (New York: Harcourt, Brace and World, 1961)Google Scholar.

¹⁰ Unlike structuralists, this article distinguishes between revolutionary situations and revolutionary outcomes to underscore the idea that not all revolutionary situations end in revolutionary outcomes. See Tilly, Charles, From Mobilization to Revolution (Reading, Mass.: Addison-Wesley, 1978)Google Scholar, chap. 9; idem (fn. 7), chap. 7; and Huntington, Samuel, Political Order and Changing Societies (New Haven: Yale University Press, 1968), 266-67Google Scholar.

¹¹ On the important role of autonomous and capacious states in carrying out economic reform more generally (that is, not only in revolutionary transitions), see Haggard, Stephen and Kaufman, Robert, “Institutions and Economic Adjustment,” in Haggard, and Kaufman, , eds., The Politics of Economic Adjustment (Princeton: Princeton University Press, 1992), 7Google Scholar; Migdal, Joel, Strong States and Weak Societies: State-Society Relations and State Capabilities in the Third World (Princeton: Princeton University Press, 1988), 4–5Google Scholar; Rueschemeyer, Dietrich and Evans, Peter, “The State and Economic Transformation,” in Evans, Peter, Rueschemeyer, Dietrich, and Skocpol, Theda, eds., Bringing the State Back In (Cambridge: Cambridge University Press, 1985), 49Google Scholar; Krasner, Stephen, “United States Commercial and Monetary Policy: Unraveling the Paradox of External and Internal Weakness,” in Katzen-stein, Peter, ed., Between Power and Plenty: Foreign Economic Policies of Advanced Industrial States (Madison: University of Wisconsin Press, 1978), 60Google Scholar; Trímberger, Ellen Kay, Revolution from Above: Military Bureaucrats and Development in Japan, Turkey, Egypt and Peru (New Brunswick, N.J.: Transaction Books, 1978)Google Scholar.

¹² On the distinction between state, government, and regime, see Lawson, Stephanie, “Conceptual Issues in the Comparative Study of Regime Change and Democratization,” Comparative Politics 26 (January 1993)Google Scholar; and Fishman, Robert, “Rethinking State and Regime: Southern Europe's Transition to Democracy,” World Politics 42 (April 1990)CrossRefGoogle Scholar. In this essay, the term government (pravitel'stvo) has an even more specific connotation. It refers to the Council of Ministers, headed by the prime minister and deputy prime ministers, appointed by the president but approved (until its dissolution) by the parliament.

¹³ Of course, many other important institutions such as the army or police are also part of the Russian state. Listed here are only those institutions that have figured prominently in the politics of privatization.

¹⁴ Peter Katzenstein, “Introduction: Domestic and International Strategies of Foreign Economic Policy,” in Katzenstein (fn. 11), 16; Nordlinger, Eric, On the Autonomy of the Democratic State (Cambridge: Harvard University Press, 1981)Google Scholar.

¹⁵ Some states define independent preferences but cannot implement them, while others have the capacity to implement independent preferences but do not.

¹⁶ The continuum between strong and weak states should not be confused with the range of regime types. While authoritarian regimes are generally considered to be more capable of achieving this internal consensus than are democratic polities, this essay does not make this assumption. Empirical comparisons of successful economic reform in the Third World have demonstrated that authoritarian regimes can be just as weak or weaker than democratic regimes in defining and implementing policies. See Remmer, Karen, “The Politics of Economic Stabilization: IMF Standby Programs in Latin America, 1954–1984,” Comparative Politics 19 (October 1986)CrossRefGoogle Scholar; Haggard, Stephan, “The Politics of Adjustment: Lessons from the IMF's Extended Fund Facility,” in Kahler, Miles, ed., The Politics of International Debt (Ithaca, N.Y.: Cornell University Press, 1986); Barry Ames, Political Survival (Berkeley: University of California Press, 1987)Google Scholar; and Haggard, Stephan and Kaufman, Robert, “Economic Adjustment in New Democracies,” in Nelson, Joan, ed., Fragile Coalitions: The Politics of Economic Adjustment (Washington, D.C.: Overseas Development Council, 1989)Google Scholar.

¹⁷ Rueschemeyer and Evans (fn. 11), 51–53; and Thomas Callaghy, “Toward State Capability and Embedded Liberalism in the Third World: Lessons for Adjustment,” in Nelson (fn. 16), 116—18.

¹⁸ Theda Skocpol, “Bringing the State Back In: Current Research,” 19; and Rueschemeyer and Evans, “The State and Economic Transformation,” 68, both in Evans, Rueschemeyer, and Skocpol (fn. 11). To argue that state and societal power are relational is not to make a tautologous statement about their variance. On the contrary, as the discussion below demonstrates, values of strength can be assigned to each independently, after which their causal relation to each other can be observed.

¹⁹ Bates, Robert, Beyond the Miracle of the Market: The Political Economy of Agrarian Development in Kenya (Cambridge: Cambridge University Press, 1989)Google Scholar; Williamson, Oliver, The Economic Institutions of Capitalism (New York: Free Press, 1985)Google Scholar.

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²³ This is the rational choice or positivist version of neoinstitutionalism. This essay does not take issue with this theoretical explanation for institutions under the conditions these theorists generally assume. On the contrary, in discussing the evolution of property rights under the Soviet system, this essay draws upon many of the insights from this perspective. It argues that conditions for the spontaneous emergence of collectively beneficial institutions do not exist during periods of revolutionary upheaval. For evolutionary or static approaches to institutions, see Hayek, F. A., “Notes on the Evolution of Systems of Rules of Conduct,” in Studies in Philosophy, Politics, and Economics (Chicago: University of Chicago Press, 1967)Google Scholar; and Alchian, Armen, “Uncertainty, Evolution, and Economic Theory,” Journal of Political Economy 58 (April 1950)CrossRefGoogle Scholar. For positivist statements about neoinstitutionalism, see Moe, Terry, “Interests, Institutions, and Positive Theory: The Politics of the NLRB,” Studies in American Political Development 2 (1987)CrossRefGoogle Scholar; and Levi, Margaret, Of Rule and Revenue (Berkeley: University of California Press, 1988)Google Scholar. Useful reviews of this literature include Moe, Terry, “The New Economics of Organization,” American Journal of Political Science 28 (November 1984)CrossRefGoogle Scholar; Cammack, Paul, “The New Institutionalism: Predatory Rule, Institutional Persistence, and Macro-Social Change,” Economy and Society 21 (November 1992)CrossRefGoogle Scholar; the opening chapters of Powell, Walter and Dimaggio, Paul, eds., The New Institutionalism in Organizational Analysis (Chicago: University of Chicago Press, 1991)Google Scholar; and Steinmo, Sven, Thelen, Kathleen, and Longstreth, Frank, Structuring Politics: Historical Institutionalism in Comparative Perspective (Cambridge: Cambridge University Press, 1992)CrossRefGoogle Scholar.

²⁴ March, James and Olsen, Johan, Rediscovering Institutions: The Organizational Basis of Politics (New York: Free Press, 1989), 64–65.Google Scholar

²⁵ This conception is consistent with the path-dependent approach to institutions and institutional change. See Krasner, Stephen“Approaches to the State: Alternative Conceptions and Historical Dynamics,” Comparative Politics 16 (January 1984)CrossRefGoogle Scholar; Putnam, Robert, Making Democracy Work: Civic Traditions in Modern Italy (Princeton: Princeton University Press, 1993)Google Scholar; Steinmo, Thelen, and Longstreth (fn. 23); and North (fn. 20).

²⁶ Huntington (fn. 10), 310; Przeworski, Adam, Democracy and the Market: Political and Economic Reforms in Eastern Europe and Latin America (Cambridge: Cambridge University Press, 1991)CrossRefGoogle Scholar, chap. 4; International Monetary Fund et al., The Economy of the USSR: Summary and Recommendations (Washington, D.C.: World Bank, 1991)Google Scholar.

²⁷ Charles Tilly (fn. 10), 19; Goldstone, Jack, Revolution and Rebellion in the Early Modern World (Berkeley. University of California Press, 1991), 9.Google Scholar

²⁸ See Lenin, V. I., State and Revolution (New York: International Publishers, 1932)Google Scholar.

²⁹ Skocpol (fn. 6). For an opposite view, see Davidheiser, Evelyn, “Strong States, Weak States: The Role of the State in Revolution,” Comparative Politics 24 (July 1992)CrossRefGoogle Scholar.

³⁰ Marx, Karl, “Critique of Political Economy,” reprinted in Freuer, Lewis S., Marx and Engels: Basic Writings on Politics and Philosophy (Garden City, N.Y.: Doubleday, 1959), 43–44Google Scholar. Even Theda Skocpol, despite her focus on the state, argues that social revolutions “are rapid, basic transformations of a society's state and class structures: and they are accompanied and in part carried through by class-based revolts from below.” Skocpol (fn. 6), 4.

³¹ On individual deprivation, see Gurr, Ted, Why Men Rebel (Princeton: Princeton University Press, 1971)Google Scholar. On demographic changes, see Goldstone (fn. 27). On modernization, see Olsen, Mancur, “Rapid Growth as a Destabilizing Force,” in Davies, James, ed., When Men Revolt—and Why (New York: Free Press, 1971)Google Scholar; and Tilly, Charles, “Does Modernization Breed Revolution?” Comparative Politics 5 (January 1973)CrossRefGoogle Scholar.

³² To the extent that they represent either perspective, Huntington (as liberal) and Skocpol (as Marxist) are the two most important exceptions. Neither author, however, devotes much attention to the role of the state in bringing about a revolutionary change in the socioeconomic system. See Huntington (fn. 10); and Skocpol (fn. 6).

³³ Structural Marxists or neo-Marxists do treat the state as autonomous. In their conceptions, however, the state is autonomous so that it can defend the existing mode of production and not just the specific interests of individuals or collectivities from the dominant class. See Poulantzas, Nicos, Political Power and Social Classes (London: New Left Review, 1975)Google Scholar.

³⁴ Krasner (fn. 25), 225.

³⁵ This essay is not about the “causes” of revolution, a subject beyond the scope of this essay. Without challenging or endorsing either Marxist or liberal theories of revolution, I nonetheless argue that neither model can explain revolutionary outcomes without bringing in the state as an independent variable.

³⁶ Theoretically, spontaneous societal forces could lead to the revolutionary transformation of a political and socioeconomic system. Similarly, a revolutionary transformation implemented by social groups outside of the state is conceivable. Empirically, however, neither of these theoretically possible modes of revolutionary change has occurred. Beginning with the model of the French Revolution and then codified by Lenin's writings on the strategy of revolution, all successful revolutionaries have seized control of the state as a means to implement or facilitate the organic process of socioeconomic change. See Lenin (fn. 28); and Immanuel Wallerstein, Revolution as Strategy and Tactics of Transformation (Working paper, Fernand Braudel Center for the Study of Economics, Historical Systems and Civilizations, State University of New York at Binghamton, 1992).

³⁷ Huntington's distinction between Western and Eastern revolutions highlights the fact that Eastern revolutions (i.e., peasant guerrilla movements) tend to begin the process of economic transformation within the territories they control before they actually seize the state apparatus in the capital. It is my contention, however, that the “state” in these liberated territories is in fact effectively controlled by the guerrilla movement at the time of economic transformation. Moreover, national economic transformation is only undertaken once the capital has fallen. See Huntingdon (fn. 10); Ranger, Terence, Peasant Consciousness and Guerrilla War in Zimbabwe (Berkeley: University of California Press, 1985)Google Scholar; and Davidson, Basil, The People's Cause: A History of Guerrillas in Africa (Essex, England: Longman, 1981)Google Scholar.

³⁸ During revolutionary situations the internal organization of states changes, as do states' capacities. Not surprisingly, the imperative to achieve socioeconomic change has often led to the emergence of more centralized, more powerful regimes. See Tocqueville, Alexis de, The Old Regime and the French Revolution, trans. Stuart Gilbert (Garden City, N.Y.: Doubleday, 1955)Google Scholar; Skocpol (fn. 6).

³⁹ Lai, Deepak, The Poverty of “Development Economics” (London: Institute of Economic Affairs, 1984)Google Scholar.

⁴⁰ Bates (fn. 19), 5; Buchanan, James, Tollison, Robert, and Tullock, Gordon, eds., Toward a Theory of Rent-Seeking Society (College Station: Texas A 8cM University Press, 1980)Google Scholar. For this perspective with specific reference to postcommunist transitions, see Aslund, Anders, Post-Communist Economic Revolutions: How Big a Bang? (Washington, D.C.: Center for Strategic and International Studies, 1992), 21Google Scholar.

⁴¹ The danger, of course, is that a state which is capable of destroying the old institutional order is also strong enough to destroy or distort the new institutional order. This dilemma, as it relates to Russia, is discussed in the conclusion.

⁴² Pereira, Luiz Carlos Bresser, Maravall, Jose Maria, and Przeworski, Adam, Economic Reforms in New Democracies (Cambridge: Cambridge University Press, 1993), 207Google Scholar.

⁴³ Linz, Juan and Stepan, Alfred, “Political Identities and Electoral Sequences: Spain, the Soviet Union, and Yugoslavia,” Daedalus 121 (Spring 1992), 123Google Scholar; and Offe, Claus, “Capitalism by Democratic Design? Democratic Theory Facing the Triple Transition in East Central Europe,” Social Research 58 (Winter 1991), 876Google Scholar.

⁴⁴ See Lapidus, Gail, “State and Society: Towards the Emergence of Civil Society in the Soviet Union,” in Bialer, Seweryn, ed., Politics, Society, and Nationality: Inside Gorbachev's Russia (Boulder, Colo.: Westview Press, 1989)Google Scholar.

⁴⁵ Failure to make this distinction between social units organized outside the state and social units still within the Party-state has resulted in a great deal of confusion in assessments of the strength of Soviet (and now Russian) society. Those who understood these within-regime social groups to be the equivalents of units of civil society erroneously portrayed the Soviet Union as a pluralist regime, for example, Hough, Jerry, The Soviet Union and Social Science Theory (Cambridge: Harvard University Press, 1977), 8CrossRefGoogle Scholar. Equally inaccurate, however, were descriptions that treated the Soviet regime as a unitary actor in which these within-regime social groups were considered insignificant, nonautonomous actors. Because the lines between state and society were so blurred, neither approach to Soviet state-society relations (often politicized in American domestic debates) was very useful.

⁴⁶ Much of the information in the following section was derived from extended interviews (more than twenty hours each) with Nikolai Ryzhkov and Vitalii Vorotnikov, two industrial directors who later worked in state ministries and finally the CPSU Politburo. In 1985 Ryzhkov became prime minister of the USSR. The interviews were conducted during the summer of 1992 as part of the Hoover Archives Oral History Project on the former Soviet Union. Interviews conducted by the author between June 1992 and July 1993 with directors at the following large state enterprises also inform this section: in Moscow Oblast—Tsagi, Troitsk, Khrunichev, Almaz, Vympel, Impuls', Mikron, Machinostroenie, SPARC; in St. Petersburg—Svetlana, Ferrite, Leninetz, Arsenal, and Klimov Works; in Saratov—Saratov Aviation Plant, Saratov Electrounit Production Amalgamation, SEPO; in Nizhnii Novgorod—Ulyanov Works; and in Ekaterinburg—START, Ural Electromechanical Works, Nevyansk Mechanical Works, Uralkhimmash, Egorshinsky Radio Plant.

⁴⁷ Barzel, Yoram, Economic Analysis of Property Rights (Cambridge: Cambridge University Press, 1989), 5Google Scholar.

⁴⁸ Eggertsson, Thrainin, Economic Behavior and Institutions (Cambridge: Cambridge University Press, 1990), 40–45CrossRefGoogle Scholar; Levinthal, Daniel, “A Survey of Agency Models of Organizations,” Journal of Economic Behavior and Organizations 9 (March 1988), 155.CrossRefGoogle Scholar

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⁵¹ For instance, the weight of the truckload of meat was more important than the quality of the cuts. A director of a meat factory could therefore fill his production quota with fatty, bony products while setting aside choice cuts for his own personal use. Directors of meat factories then consumed, bartered, or sold these choice meat cuts. See Naishul, Vitaly, The Supreme and Last Stage of Socialism (London: Centre for Research into Communist Studies, 1991)Google Scholar. On shirking, see Alchian, Armen and Demsetz, Harold, “Production, Information Cost, and Economic Organization,” American Economic Review 62 (December 1972)Google Scholar.

⁵² Author interview with Nikolai Ryzhkov. According to Ryzhkov, who worked in Gosplan during the last years of the Brezhnev regime, the Politburo took less than forty-five minutes to approve the annual plan for the entire Soviet economy.

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⁵⁶ Ratchet effects on production goals and worker performance standards provided agents with these margins of opportunity. Litwack, John, “Ratcheting and Economic Reform in the USSR,” Journal of Comparative Economics 14 (June 1990)CrossRefGoogle Scholar.

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⁶⁰ Overhead and many externalities of these small firms were paid, directly and indirectly, by the state. Government subsidies (i.e., artificially low prices for inputs, extremely low caps for wages, free rent, or negative interests rates on credit lines) were critical to these schemes. In extreme cases, resources transferred from the state to enterprises at low or negligible costs were simply laundered by directors through these cooperatives and joint ventures.

⁶¹ Sales of Soviet assets abroad was the one instance when this right was available to the state.

⁶² Berliner, Joseph, Factory and Manager in the USSR (Cambridge: Harvard University Press, 1957), 230CrossRefGoogle Scholar; Kornai (fn. 50), 218–22; Jowitt, Ken, New World Disorder: The Leninist Extinction (Berkeley: University of California Press, 1992), 289-90Google Scholar; Puffer, Sheila, ed., The Russian Management Revolution (Armonk, N.Y.: M. E. Sharpe, 1992), 41–51Google Scholar; and Willerton, John, Patronage and Politics in the USSR (New York: Cambridge University Press, 1992)Google Scholar.

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⁶⁵ Atta, Don Van, “The USSR as a 'Weak State': Agrarian Origins of Resistance to Perestroika,” World Politics 42 (October 1989)CrossRefGoogle Scholar. For an opposite view, see Hough, Jerry, “Gorbachev's Endgame,” World Policy Journal 7 (Fall 1990)Google Scholar.

⁶⁶ In February 1990 Article Six of the Soviet Constitution was amended to remove this phrase.

⁶⁷ McFaul, Michael and Markov, Sergei, The Troubled Birth of Russian Democracy: Parties, Personalities, and Programs (Stanford, Calif: Hoover Institution Press, 1993)Google Scholar, chap. 1.

⁶⁸ Dunlop, John, The Rise of Russia and the Fall of the Soviet Empire (Princeton: Princeton University Press, 1993)Google Scholar.

⁶⁹ Between August and December 1991, the distinctions between Soviet and Russian state institutions were blurred. When Yeltsin moved into the Kremlin in December, most formal Soviet institutions in operation on Russian territory were either abolished or subsumed by the Russian state.

⁷⁰ On the importance of such political transformations for successful revolutionary outcomes, see Skocpol, Theda, “Social Revolutions and Mass Military Mobilization,” World Politics 40 (January 1988)CrossRefGoogle Scholar.

⁷¹ Skocpol (fn. 6).

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⁷³ Polling by Democratic Russia indicated that with Yeltsin's backing the organization would win a majority within the Congress of People's Deputies. At the time, Democratic Russia was the only legal party or social movement of national status. Having just organized Yeltsin's electoral victory in June 1991 and then spearheaded the popular resistance to the coup in August, leaders of Democratic Russia were quite certain of their next victory. Author's interviews with Democratic Russia leaders Vladimir Boxer, Victor Dmitriev, Yurii Afanasiev, Ilya Zaslavskii, Mikhail Schneider, and Lev Pono-marev, Moscow, October 1991.

⁷⁴ “It's the economy, stupid” was the overriding theme of the new Russian government in the fall of 1991. There were other factors, however, that dissuaded Yeltsin from undertaking political reform. First, Russia emerged from the August 1991 events with few political institutions, good, bad, or otherwise. While imperfect, the Congress and Soviets at other levels had at least the appearance of a legislative organ. Sunk political costs in this set of institutions militated against the creation of new ones. Second, Yeltsin and most of the other “democrats” made a strategic decision in 1989 and again in 1990 to participate in elections to these institutions. While disputed at the time within the democratic camp, this strategic decision served to legitimate the Soviets as organs of Russia's nascent governmental apparatus. Third, the subsequent participation of Yeltsin and most of his revolutionary entourage in these Soviets also bolstered their institutional standing. Yeltsin made his political comeback as a people's deputy. Only two months before the coup Yeltsin was still chairman of the Russian Congress. Fourth, the critical symbolic role played by (in) the Russian Congress of People's Deputies in resisting the coup added yet another barrier to abolishing the institution. The defense of the White House was the defining moment of the resistance to the coup. During the three dramatic days in August, emergency laws passed by the Congress in contradiction to decrees issued by the Soviet Emergency Committee gave Russian citizens, both civilian and military alike, an option for their loyalty. Thus, disbanding the Congress and closing down the White House would undermine the whole coup resistance experience as a nation-defining moment. Finally, at the time the Congress and other Soviets did not appear to pose a threat to Yeltsin's autonomy. Given that the Congress voted to give him virtually unlimited powers, Yeltsin assumed that this set of institutions would continue to support him. Uncertainty about what newly elected deputies might do was in fact one of the arguments used against holding new elections. To cement this relationship, Yeltsin urged that his (then) dependable ally, Ruslan Khasbulatov, become chairman.

⁷⁵ Gennadii Burbulis, former deputy prime minister and secretary of state (Public lecture, Institute of History, Moscow, February 5, 1993).

⁷⁶ Lyudmila Pertsevaya, “Rodina Prezidenta Khochet Stat' Respublikoi,” Moskovskie Novosti, July 4, 1993, p. 9a.

⁷⁷ The Russian Congress amended the Russian Constitution (the amended Soviet Constitution of 1977) to include this phrase, thereby de jure subordinating the office of the president to the Congress.

⁷⁸ On the last major war of laws on privatization between the parliament and president before the disbanding of the Congress, see Karpenko, Igor', “Chek ili Schet,” Izvestiya, July 17, 1993, p. 4Google Scholar; and Mostovoi, Pyotr, “Privatizatsiya v Strane Pod Vliyaniem Reshenii Parlamenta Priobretaet Zavedomo Nomenklaturnyi Kharakter,” Rossiskie Vesti, August 11, 1993, p. 2Google Scholar.

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⁸² On the negative consequences of closed joint-stock companies from the government's point of view, see the interview with Deputy Prime Minister Anatolii Chubais (fn. 2).

⁸³ Lipton and Sachs (fn. 2), 35; emphasis added.

⁸⁴ Presidential Decree no. 914, “O Vvedenii v Deistvie Sistemy Privatizatsionnykh Chekov v Rossiiskoi Federatsiya,” August 14, 1992, in Privatizatsiya Gosudarstvennykh i Munitsipal'nykh Predpriyatii (Moscow: “Republika,” 1992), 139-41.Google Scholar

⁸⁵ “Grazhdanskii Soyuz i Idyet na Vi',” Nezavisimaya Gazeta, July 17, 1992, p. 2.

⁸⁶ Grazhdanskii Soyuz, “Dvenadtsat' Shagov ot Propasti” (Mimeo, 1992), 3; and author interview with Alexander Vladislavlev, cochairman of Civic Union, Moscow, July 1992.

⁸⁷ See Point Eight in “Trinadtsat' Punktov Programmy Vol'skogo,” Izvestiya, September 30, 1992, p. 2Google Scholar; and Vladislavlev, Alexander, “Russia Will Not Overcome the Crisis without Civic Accord,” Business World, no. 34, September 6, 1992, p. 3.Google Scholar

⁸⁸ Cawson, Alan, “Is There a Corporatist Theory of the State?” in Duncan, Graeme, ed., Democracy and the Capitalist State (Cambridge: Cambridge University Press, 1989)Google Scholar.

⁸⁹ On corporatist systems of interest intermediation, see Schmitter, Philippe, “The Consolidation of Democracy and Representation of Social Groups,” American Behavioral Scientist 35 (March-June 1992)CrossRefGoogle Scholar; idem, , “Still the Century of Corporatism?” in Schmitter, Philippe and Lehmbruch, Gerhard, Trends toward Corporatist Intermediation (Beverly Hills, Calif.: Sage, 1979)Google Scholar; and Katzenstein, Peter, Small States in World Markets: Industrial Policy in Europe (Ithaca, N.Y.: Cornell University Press, 1985)Google Scholar.

⁹⁰ At the Sixth Congress in April 1992 the Russian Congress pressured the president to reshuffle his cabinet and add three industrialists (Victor Chernomyrdin, Georgii Khizha, and Vladimir Shumeiko) to balance the neoliberal team of Gaidar reformers. At the Seventh Congress in December 1992 the Congress successfully forced Yeltsin to remove his acting prime minister, Yegor Gaidar, and replace him with Victor Chernomyrdin.

⁹¹ See the remarks of Deputy Prime Minister Vladimir Shumeiko, in Pravda, October 29, 1992, in FBIS-SOV-92–213, November 3, 1992, p. 36; Zaichenko, Alexander, “Governing without Power,” Delovie Lyudi, 32, April 1993, p. 3Google Scholar; interview with Arkadii Volsky, Rossiiskaya Gazeta, October 31, 1992; and remarks by Boris Yeltsin in Nezavisimaya Gazeta, November 5, 1992, p. 1. The remaking of the privatization program, then, was not an entirely nonvoluntaristic outcome of the institutional forces left behind from the Soviet era. Rather, the state officials made “politically driven choices” from a set of choices defined by previous institutional arrangements. Outcomes, however, were not determined, because other responses, albeit costly ones, were available. See Haggard, Stephan, Pathways from the Periphery: The Politics of Newly Industrializing States (Ithaca, N.Y.: Cornell University Press, 1990), 3–4Google Scholar, 34, 45.

⁹² Yegor Gaidar, former acting prime minister, in Kommersant-Daily, May 12, 1993, p. 10, quoted in FBIS-SOV-93–091, May 13, 1993, p. 30; “Gaidar vs. Gaidar?” New Times 17 (April 1993), 18.Google Scholar

⁹³ On the politics of this initial compromise, see “Kollektivi Khotyat Poluchit' Bezplat'no 25% Sobvennosti. Dlya Nachala,” Izvestiya, February 8, 1992, p. 1.

⁹⁴ See, for instance, the interview with Chubais, “Daravaya Sobstvennost' ne Delaet Chelovek Khozyainom,” Izvestiya, February 26, 1992, p. 2.

⁹⁵ Ibid. See also Chubais's remarks, quoted in ITAR-TASS, February 9, 1993, in FBIS-SOV-93–025, February 9, 1993, p. 22; and the comments by Dmitrii Vasil'ev, GKI deputy chairman, in “Privatizatsiya: Voprosy i Otvety,” Izvestiya, September 29, 1992, p. 2.

⁹⁶ Interview with Chubais (fn. 2). Interfax, June 10, 1992, in FBIS-SOV-92–113, June 11, 1992, p. 51. See also comments by Pyotr Filippov, “Privatizatsiya Mozhet Prinyat' Udelnyi Kharakter,” Rossi-iskie Vesti, January 28, 1993, p. 3; and excerpts from a Democratic Russia press conference on privatization in Izvestiya, September 11, 1992, p. 2.

⁹⁷ Privatizatsiya, , Dykhanie, Vtoroe, Ekonomika i Zhizri, no. 24, June 1992, p. 1Google Scholar; Kras-noselskii, Alexander (former adviser to Prime Minister Gaidar), “Transformatsiya Gosudarstevennogo Sektora i Kapitalla v Usloviyakh Razvernutikh Privatizatsionnykh Protsessov” (Manuscript, 1993)Google Scholar.

⁹⁸ First, 25% of the shares were given away to workers in Option 1, and an additional 10% were sold at a reduced rate. Under Option 2 the workers' collective had to purchase all 51% of the shares at full value. For very large enterprises workers' collectives had no possibility of raising this initial capital outlay. The state, moreover, offered no special credit lines to workers collectives seeking to borrow these sums. Second, the nominal value of the enterprise as assigned in Option 1 was multiplied by 1.7 if they opted for Option 2. The GKI also discouraged adoption of this second option by regulating very closely the first, closed stage of subscription for shares. If 51% was not purchased by members of the workers' collectives after the initial period, the enterprise in question was immediately privatized according to Option 1. Finally, GKI regulations required that Option 2 or Option 3 be approved by two-thirds of the workers' collective. If a two-thirds majority was not garnered, the enterprise in question was automatically privatized according to Option 1. GKI officials, including Chubais himself, predicted that most enterprises would privatize according to Option 1. See remarks by Chubais quoted in Pravda, June 30, 1992, p. 2, in FBIS-SOV-92–132, July 9, 1992, p. 38.

⁹⁹ Of the 46, 815 enterprises that had been privatized by the end of 1992, 63.7% had chosen Option 2, while only 34.5% had chosen Option 1, the original privatization design. Less than 2% had chosen Option 3. “Obzor Investii i Privatizatsii,” Kommersanf, 7, February 15–21, 1993, p. 16Google Scholar; and “Chubais Schitaet Shto Glavnaya Zadacha 1993 Goda—Perekhod k Kachestvennoi Privatizatsii,” Izvestiya-FP, March 12, 1993).

¹⁰⁰ Quoted in Le Soir, June 5–6, 1993, p. 2, in FBIS-SOV-93–108, June 8, 1993, p. 34.

¹⁰¹ Author's interview with Mikhail Kallinin, assistant to the GK1 deputy minister for large enterprises, Moscow, April 1993. Examples of such deals include “Leninitz,” Saratov Aviation Plant, “Moskvich,” “Energiya,” “Vympel,” and “Sukhoi.” See, respectively, “Holding Company Leninetz” (Mimeo, September 1992); Battilega, John, “The Saratov Aviation Plant,” in McFaul, Michael, ed., Can the Russian Military Industrial Complex Be Privatized? Evaluating the Experiment in Employee Ownership at the Saratov Aviation Plant (Stanford, Calif: Center for International Security and Arms Control, 1993)Google Scholar; Demchenko, Irina, “Moskvich Poluchil Nevidannye L'goty,” Izvestiya, August 27, 1993, p. 1Google Scholar; “VPK i Preobrazovaniya v Rossii,” Nezavisimaya Gazeta, May 27, 1993, p. 4; and Boris Rybak, “Russians Advance Privatization Plans,” Aviation Week and Space Technology, March 29, 1993, p. 60.

¹⁰² Information asymmetries between new boards or shareholders on the one hand and old directors with decades of experience at the enterprise on the other will dramatically impede the rational and efficient use of enterprise resources. If a manager has been working for twenty or thirty years at a given enterprise, it is highly unlikely that this individual will immediately submit to the goals and interests of outside and unknown owners. Moreover, the very notion of incentivized, contractual relationships is alien to Russian economic organization. Contracts for directors designed to limit shirking and encourage profit-seeking behavior simply do not exist yet. See Kirchner, Christian, “Privatization Plans of Central and Eastern European States,” Journal of Institutional and Theoretical Economics 148 (1992), 15.Google Scholar

¹⁰³ The recent battle for control of Vladimir Tractor Factory is illustrative. The inside shareholders—the majority of owners in the Option 2 privatization—voted to retain their old director, Anatolii Grishin, who had forty years in the tractor business, over the other candidate, a young, Harvard-trained international banker, Iosif Bakaleinik. While Bakaleinik guaranteed high dividend returns to shareholders, Grishin guaranteed employment. According to Bakaleinik, the old managers coerced workers to support their candidate. One worker was fired for voting for Bakaleinik. Author's interview with Iosif Bakaleinik, Washington, D.C., September 1993. See also Winestock, Geoff, “Tractor Plant Picks the Devil It Knows,” Moscow Times, June 26, 1993, p. 1.Google Scholar

¹⁰⁴ World Bank and the Government of the Russian Federation, Structural Reform in the Russian Federation: Progress, Prospects, and Priorities for External Support (Washington, D.C.: World April 20, 1993), 19Google Scholar.

¹⁰⁵ Bank, World, Russian Economic Reform: Crossing the Threshold of Structural Change (Washington, D.C.: World Bank, 1992), 94Google Scholar.

¹⁰⁶ See Oborotova, Ludmila and Tsapin, Alexander, “The Privatization Process in Russia: An Optimistic Color in the Picture of Reform,” Occasional Paper (Columbus: Mershon Center, Ohio State University, July 1993), 16–18.Google Scholar

¹⁰⁷ Kornai (fn. 50), 142–45.

¹⁰⁸ Until Yeltsin's ban of the Congress in September 1993, the bank was under the purview of the Congress, not the president.

¹⁰⁹ Gerashchenko also allowed credit emission from the Central Bank to increase by 40% during his first month in office. See Erlanger, Steven, “Russian Aide Says Central Bank Is Trying to Undermine Reforms,” New York Times, September 15, 1992, p. A6.Google Scholar

¹¹⁰ See Ost, David, “Introduction: Shock Therapy and Its Discontents,” Telos 92 (Summer 1992), 108Google Scholar; Ickes, Barry and Ryterman, Randi, “The Interenterprise Arrears Crisis in Russia,” Post-Soviet Affairs 8 (October-December 1992)Google Scholar.

¹¹¹ Zasurskii, Ivan, “Skol'ko Biudzhetov u Rossii?” Nezavisimaya Gazeta, September 2, 1993, p. 1.Google Scholar

¹¹² Ickes and Ryterman (fn. 110), 331.

¹¹³ World Bank (fn. 3), v.

¹¹⁴ Boulton (fn. 3).

¹¹⁵ See the interview with Deputy Prime Minister Boris Fyodorov, in Kommersant-DAILY, April 28, 1993, p. 3.

¹¹⁶ Ministry of Economics of the Russian Federation, 0 Kriteriyakh Otsenki Programm, Otraslei i Predpriyatii, Nuzhdayushchikhsya v Gosudarstvennoi Podderxhki, Raspolozhenie Soveta Ministrov-Prvitel'stva Rossiiskoi Federatsii, no. 519 (April 1, 1993)Google Scholar.

¹¹⁷ McKinnon, Ronald, “Financial Control in the Transition from Classical Socialism to a Market Economy,” Journal of Economic Perspectives 5 (1991)CrossRefGoogle Scholar; Weingast, Barry, “The Economic Role of Political Institutions” (Manuscript, Hoover Institution, 1993)Google Scholar; Przeworski (fn. 26).

¹¹⁸ European Bank for Reconstruction and Development, Privatisation, Restructuring, and Defence Conversion, Discussion Paper 1 (London: EBRD, 1993), 4.Google Scholar

¹¹⁹ Author interview with Vladimir Boxer, deputy head of the Moscow Anti-Monopoly Commission, December 1992.

¹²⁰ For an assessment, see Barr, Nicholas, Income Transfers and the Social Safety Net in Russia (Washington, D.C.: World Bank, 1992)Google Scholar.

¹²¹ Adam Przeworski, “Economic Reforms, Public Opinion, and Political Institutions: Poland in the Eastern European Perspective,” in Pereira, Maravall, and Przeworski (fn. 42).

¹²² Bankruptcies, too, would of course release poorly utilized capital assets, and first and foremost real estate, on to the market. The rational allocation of these newly released assets would in turn create newjobs and thereby help alleviate the unemployment created by the initial bankruptcies.

¹²³ See the essays by Klyamkin, Igor and Migranyan, Adrannik, in Sotsializm i Demokratiya: Diskussionaya Tribuna 2 (Moscow: Institut Ekonomiki Mirovoi Sotsialisticheskoi Sistemy, 1990)Google Scholar. See works cited in fn. 16. The evidence for such a claim is inconclusive. Despite Yeltsin's recent decisive actions against his opponents, the overall weakness of the Russian state still suggests that authoritarianism may no longer be a viable option. The last authoritarian attempt to restore state power—the August 1991 putsch—resulted in the dissolution of the Soviet Union. A similar move by Russian central authorities could precipitate the collapse of the Russian Federation.

¹²⁴ On the importance of counterfactuals for single-case studies, see Fearon, James D., “Counterfac-tuals and Hypothesis Testing in Political Science,” World Politics 43 (January 1991)CrossRefGoogle Scholar.

¹²⁵ In the Soviet system the Central Bank had not performed this role but only took on this function when enterprises had no other institution from which to receive state support.

¹²⁶ This scenario, in fact, is one that might eventually play itself out in Russia.

¹²⁷ On why such behavior would be irrational for regime rulers, see Levi, Margaret, Of Rule and Revenue (Berkeley: University of California Press, 1988)Google Scholar, chap. 11.

¹²⁸ Weingast (fn. 117).

¹²⁹ This usually means that the procedures for decision making and execution are clearly delineated. For instance, the vote on U.S. military action against Iraq in the United States Senate was split almost evenly. Once the vote passed by its narrow margin, the American state implemented the policy decision coherently and effectively.

¹³⁰ Weingast (fn. 117).

¹³¹ As privatization, whether insider or outsider, proceeds, the directors' corps will have increasingly different interests as a result of the kind of assets they inherit. For instance, directors who become CEOs of potentially profitable enterprises will want to decrease state subsidies—the engine of inflation in the Russian economy—while those at unprofitable enterprises will have an interest in sustaining them. Compare, for instance, the platform of the Association of Privatized and Private Enterprises, a lobby organization chaired by Gaidar, Yegor (Materialy Uchreditei'nogo S'ezda, April 2–3, 1993)Google Scholar, with Civic Union's program (Dokumenti Foruma Obshchestvennikh Sil, Moscow, June 21, 1992Google Scholar).

¹³² The correlation between democracy and capitalism is well established. The process for creating and consolidating both, however, is not. On the well-established correlation, see Lipset, Seymour Martin, Political Man: The Social Bases of Politics (Garden City, N.Y.: Doubleday, 1960)Google Scholar; and the review of this literature by Diamond, Larry, “Democracy Reconsidered,” American Behavioral Scientist 35 (March-June 1992)CrossRefGoogle Scholar.

¹³³ Even two years into what has been a very painful transition period, the majority of Russian citizens still support the transformation of the Soviet command economy. In November 1993 a nationwide poll of over two thousand people indicated that 45.9% of those surveyed thought a transition to a market economy was a correct course for Russia, while only 27.4% thought the opposite; Tsentr Sotsioekspress, Institut Sotsiologii Rossiiskaya Akademiya Nauk, Zerkalo Mnenii (Moscow: Tsentr Sotsioekspress, 1993), 6Google Scholar. While voters in December 1993 were undoubtedly expressing their dissatisfaction with the existing government, the outcome of these elections should not be interpreted as a rejection of market reforms altogether. After all, no electoral bloc running in the December elections advocated a return to the Soviet system, whereas the biggest winner, Vladimir Zhirinovsky's Liberal Democratic Party, hardly mentioned economic issues during the campaign. Significantly, Civic Union, the electoral bloc most closely associated with the directors' corps, which had dominated the Congress of People's Deputies for the previous two years, received only 1.8% of the popular vote. For an analysis of the December 1993 elections, see the symposium in the Journal of Democracy 5 (April 1994)Google Scholar.

¹³⁴ Pereira, Maravall, and Przeworski (fn. 42), 212; Rueschemeyer, Dietrich, Stephens, Evelyne Huber, and Stephens, John, Capitalist Development and Democracy (Chicago: University of Chicago Press, 1992), 296Google Scholar.

¹³⁵ Krasner (fn. 25), 242; Putnam (fn. 25), 8; Kathleen Thelen and Sven Steinmo, “Historical Insti-tutionalism in Comparative Politics,” in Steinmo, Thelen, and Longstreth (fn. 23).

¹³⁶ Barr (fn. 120).

¹³⁷ Elections in December 1993 may have marked a positive step toward this end. While the composition of the State Duma, the new parliament, is as conservative as the Congress of People's Deputies after this election, Russian voters also ratified a new constitution. So far, this new fundamental law has facilitated, regulated, and normalized relations between the president, the government, and the legislature. Perhaps most importantly, the new constitution has helped to prevent political intervention concerning economic issues as the new constitutional configuration of the Russian state delegates to the Russian parliament a consultative role, rather than a primary responsibility for reforming and managing the economy. In the long run, an antireformist or fascist president could use these new rules for very different ends. In the short run, however, this political reform has served to further economic reform. While still too early to assess the implications of this new institutional configuration for economic reform, this new period will provide an important contrasting case to the period examined in this article.

¹³⁸ Offe (fn. 43), 866–67.