Introduction

Post communist reforms This work examines the first two decades of post communist reforms in Russia and, in particular, the ideas that underlay and animated the reform process. It argues that the process of reform in Russia, which was intended to bring about a swift transition to capitalism, was inspired by a particular set of neoliberal ideas about the nature of markets and market capitalism, about the proper roles of law and state, and about the relationship between the economic, the legal and the political. The book suggests that despite their increasingly evident flaws, these ideas – which formed the foundation of the so-called ‘Washington Consensus’ – not only continue significantly to influence academic understandings of market economies and economic development but continue to shape the policies and thinking of many international agencies and governments. The book therefore seeks to use the Russian experience as a vehicle for exploring the neoliberal mindset and the consequences of its application to the transition from communism. To this end, it traces the intellectual history of neoliberal reform in Russia, mapping both the ideas underlying the initial reforms and the revisions to those ideas that took place in response to the difficulties into which the original reform ran, revisions that are reflected in the emergence of a so-called ‘Post Washington Consensus’. In doing this, the book seeks among other things to cast light on the complexities of the relationships between the economic, the legal and the political in a capitalist society, complexities which, as the Russian example vividly illustrates, are often understated or overlooked by neoliberal modes of thought. In its initial stages, the post communist reform effort in Russia was driven by a strikingly simple set of ideas about economic life, markets, and the role of law and state. These ideas were underlain by a fierce economic determinism in which the legal and political spheres were firmly subordinated to the economic. The reformers believed that the economic processes of ‘the market’ and market capitalism were consonant with human nature and that a transition to capitalism in Russia would, therefore, be fairly straightforward and easy to effect. In essence, all that was required was for the state radically to be shrunk and for the ‘natural’ forces of ‘the market’ to be allowed to weave their economic and organisational magic. This demanded little more than the creation of private property and

private property rights, the facilitation of market mechanisms (contract laws), the reduction of regulatory fetters to free exchange and the elimination of political involvement in economic decision making. Both law and the state were to be firmly subordinated to the economic processes of the market and were to play strictly limited roles in economic affairs. The constraints on state power required by neoliberal theory also meant, amongst other things, that limits had to be placed on the scope of democracy, especially on the capacity of democratic politics to determine economic policy. Correspondingly, the initial legal reforms focused on defining and protecting private property rights and facilitating market exchange. In a dramatic withdrawal from economic and social life, state regulation, so pervasive during communism, was reduced to instituting and maintaining what were seen as the prerequisites of a capitalist economy. For the reformers, however, the limited role to be ascribed to law and state regulation during the transition process in Russia was not merely a particular and specific response to the challenges of post communism but the basis for successful economic development worldwide, a model for the optimal organisation of all market economies. The ‘truths’ of neoliberalism, with its underlying economic determinism, were not confined to particular locations, cultures or historical periods. On the contrary, as products of a trans-historical economic logic, they extended to all times and places. It is hardly surprising, therefore, that the policy trajectory of post soviet states in general and of Russia in particular shares many characteristics with other developing countries. In the mid 1990s, however, the Russian economy nearly disintegrated and the neoliberal ideas that had become the ruling economic orthodoxy of the late twentieth century (the Washington Consensus) began to be questioned. There was a shift in policy priorities towards the promotion of so-called market supporting institutions and the rule of law, a shift that contained the seeds of a radical revision of the core assumptions of neoliberalism about human nature and the operation of market economies. While the revisions in Russian neoliberalism did not yet signify an abandonment of the sacred tenets of the reform project, they seemed to entail a growing recognition that markets and market capitalism are based on a much more complex relationship between economics, politics and the law than originally suspected. The shift from the Washington to a Post Washington Consensus and the realisation that markets are in need of considerable legal, political and institutional support has inevitably led to revisions of the ideas held by reformers about the nature of capitalism and the role of law and the state in free markets. In providing an intellectual history of the Russian reform process, this book seeks to explore the intellectual history of current, neoliberal-inspired ideas about development and the role law has to play in effecting transition and in promoting development.