ABSTRACT
Since the 1990s, Russia’s economic reforms rested on a neoliberal consensus that a free market encouraging private initiative is the most effective economic system facilitating growth and prosperity. Neoliberal policies amounted to privatization, deregulation, fiscal austerity, and cuts in government spending in order to strengthen the role of the private sector in the economy. The crisis of 1998 brought about a change in paradigm, shifting the balance in favor of public actors. The economic policy was reoriented toward greater emphasis on public ownership and re-involvement of the state in industrial affairs. Russia’s development model emerged as a result of compromises between “liberals” and “interventionists” inside the Russian government, which have been evolving since the early 2000s (Sapir, 2015). Even as the government intervened in some sectors, it opened up the Russian economy to foreign capital in others and adapted itself to financial globalization. This compromise was premised on the idea that Russia would be able to use the international financial system to promote its development. It allowed for measured use of the funds accumulated by means of commodity exports for investments in the Russian economy without creating large macroeconomic imbalances. The inherent contradiction of these policies, which were actually parts of opposite strategies, was that even though it was possible to channel investment into priority manufacturing sectors, these non-rent sectors of the economy were simultaneously penalized with high interest rates and the overvalued real exchange rate of the ruble, which were the consequences of the policies pursued by “liberals.”
