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Cambridge Journal of Economics 28:307-318 (2004)
Cambridge Journal of Economics, Vol. 28, No. 2, © Cambridge Political Economy Society 2004; all rights reserved

Commentary

This section is designed for the discussion and debate of current economic problems. Contributions which raise new issues or comment on issues already raised are welcome.

Fiscal federalism in Russia: a critique of the OECD proposals

Steven Rosefielde and Natalia Vennikova*

Address for correspondence: Steven Rosefielde, Professor of Economics, University of North Carolina, Chapel Hill, NC, USA; email: stevenr{at}email.unc.edu

Abstract

The OECD proposes to kill two birds with one stone in Russia by simultaneously improving fiscal federalism, and using the financial reform process to press for full market liberalisation. This paper scrutinises the initiative and finds it wanting because the consensus reforms advocated conflate the re-centralisation of fiscal authority with optimal ownership, property rights and effective market building, perpetuating the illusion that there are no bad market systems. The G-7 and Putin must do better. Yeltsin's mis-privatisation and mis-liberalisation, which spawned rent seeking, asset stripping, asset seizing and a disregard for profit maximising from current operations, have proved to be path dependent and need to be rectified. Putin's increasingly visible efforts to rein private property rights must also be taken into account in designing on optimal fiscal federalist regime.

Key Words: Russia • Fiscal federalism • Comparative systems • Transition

JEL classifications: H73, H79, P35

Manuscript received January 15, 2002; final version received October 31, 2003.


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