#13 - JRL 8393 - JRL Home
From: "Ed Dolan" <dolanek@rockisland.com>
Subject: Kimmage, Conventional Wisdom, Economics
Date: Mon, 4 Oct 2004

I thought Daniel Kimmage (JRL 8391 #9) was right on the mark in his description of "Russia's schizophrenic and dysfunctional political system, which creates the illusion of concentrating power in formal institutions, while clannish informal groups exercise real power in a chaotic, never-ending struggle for personal gain." Much the same can be said about Russia's economic system.

Back in Soviet times, Western textbooks presented elaborate descriptions of the "Planned Economy." According to these descriptions, economic decision-making was centralized in the Gosplan bureaucracy (guided by strategic decisions from the council of ministers and the Party). Gosplan was shown as gathering information about economic opportunities and input-output ratios, and then pulling levers that were connected by wires called "plans" to factory floors throughout the USSR. However, a minority of Western researchers recognized that the "plan" levers were connected to nothing and real economic decisions were made by . . . well, it is too bad no one thought of such a felicitous phrase back then . . . by "clannish informal groups exercising real power in a chaotic never-ending struggle for personal gain."

Today the same thing persists in Russia's opaque corporate world where real power seems to have little to do with the formal structures of corporate governance, shareholder rights, minority shareholder protections, and the like.

I hope Kimmage's analysis reaches the wide readership it desesrves.

Ed Dolan
Stockholm School of Economics, Riga
and American University in Bulgaria