ABSTRACT
The question of entrepreneurship is frequently raised in connection with the prospects for Russia and the other former Soviet republics making a successful transition from a state-owned, command economy to a privatized, market economy. Skeptics argue that there is little historical basis for entrepreneurial activity, and that what existed prior to 1917 has been virtually extinguished by 70 years of Communist rule. They also cite contemporary evidence, largely anecdotal, in contending that Russian society will not support entrepreneurial activity on a scale sufficient to achieve and maintain a market economy.
This paper takes an opposing view. A review of Russian economic history demonstrates that entrepreneurial activity has deep roots extending to all social classes. Trends in Soviet society over the past thirty years—the same trends that led to the overthrow of the old political order—also favor the expansion of entrepreneurship. And a survey of contemporary economic activity offers abundant evidence that it is indeed spreading rapidly and is taking an increasing variety of forms.
Some caveats are in order. The prospects for entrepreneurial activity vary by region and republic, and for the next several years entrepreneurs will face a number of obstacles. These include an undeveloped legal and financial framework and continuing opposition to privatization from advocates of the old order. The demands of labor organizations and environmentalists will also pose challenges, 331but these movements will also have incentives to work in partnership with new enterprises. An additional challenge for entrepreneurs will be to meet the rising expectations of consumers.
The threat of political instability is a particularly daunting prospect for entrepreneurs, but the experience of recent years offers some grounds for reassurance. The former Soviet Union has weathered epic change without the widespread disorder that many foreign and domestic observers had feared. The violence that has occurred has been localized and mostly sporadic. The principal leaders of the various republics have taken a pragmatic line, and no politician has attracted broad support by appealing to ethnic animosity. The vast majority of ethnic groups continue to coexist peacefully, and the public has displayed remarkable forbearance in the face of hardship. Economic ties are likely to transcend further political change, including boundary changes, and over time the impact of successful entrepreneurial activity will itself contribute to stability.
Foreign investment can play a significant but not decisive role in determining the prospects for entrepreneurial activity. Foreign investors can provide badly needed capital, technology and expertise, but they will encounter a mixed reception, including opposition from enterprises fearful of foreign competition and from a public traditionally suspicious of foreign exploitation. The critical variables in determining the outlook for entrepreneurial activity lie within the former Soviet Union. The conclusion of this paper is that there exists a solid basis for success.
