Russia's retreat to statization and the implications for business

Despite the many problems that emerged during Russia's experiment with a market economy in the 1990s, Western firms are not likely to forego the lure that still exists in that market of 150 million people. Understanding the economic and political developments of that decade, and their effects upon business, can provide insights into the potential for business opportunities in the coming years. This article is based on a longitudinal field study of the political and economic environment for businesses in Russia, supplemented by statistical data and other information from published sources. We analyze the major economic and political developments during the 1990s and classify them in four stages --commercialization, privatization, nomenklatura, and statization. A scenario is then presented in which the statization stage, a period of increased state involvement in the economy, will likely continue in the next decade. An enlarged state role, however, is expected to coexist with a still evolving private sector. The article concludes with implications for Western firms doing business in Russia's mixed economy.