ABSTRACT
The Parliamentary elections of December 1993 marked a watershed in the process of economic reforms in Russia Although they reelected Boris Yeltsin as president, the voters seemed to reject the reform program his government had pursued since the formation of an independent Russian state in late 1991. There are two aspects to Russia's production problems: flows and stocks. The root of the flows problem is that the set of incentives that led to the misallocation of resources under central planning is largely in place. The Gorbachev government attributed traditional control problems to the centralization of the economy. Its solution was decentralization, but leaving in place all the incentives of the socialist economy. In summary, the main problems in the financial sector, as evidenced by the increase in arrears by all kinds of borrowers in Russia, stem from rigidities in the domestic transformation process. The decline in production is already occurring, mainly through the collapse of the centralized marketing system.
