ABSTRACT

This chapter presents the dynamic of the state through a number of simple quantitative indicators and then adds qualitative details, describing major events and, where possible, practices related to state failure and different aspects of state-building. Legitimacy, the willingness of the citizens to comply with state orders and its laws, is one of the key attribute of the state. The early ideology of market reforms rested on a set of nave beliefs in the invisible hand of the market and its capacity for self-regulation. Russian reformers absorbed much of conventional wisdom of their Washington-consensus advisors that fit well with their own anti-communist and anti-statist persuasion. The massive switching to barter finalized the erosion of constitutive monopolies of the state, as the latter could no longer control the national currency and use it as a fiscal and regulatory instrument. Business failures and shortages of cash led to multiplication of mutual debts between enterprises. Central government policies only deepened the nonpayments crisis.