ABSTRACT
The future success of the Russian experiment depends on a successful economic transition. If the current crisis is merely a temporary detour, its implications for Russia's fundamental stability are not too severe. Russia's economic development has evolved into a new system—a virtual economy that is stable in the near term but is not conducive to sustainable economic development. This chapter offers an analysis of the evolution of Russia's current economic system, which due to its unusual (some would say unique) characteristics has been referred to here as the "virtual economy". It pays particular attention to the interaction between economic reform policies and the adaptive behavior of enterprise directors, which has blunted the efficacy of attempted reforms. Finally, the chapter explores the dire implications of the virtual economy for Russia's internal stability and development as well as for its international security.
