NTLS is very dependent upon economic liberalisation, removing as much as state intervention as possible such as price control; stabilisation, maintaining market order by controlling high inflation caused by marketisation in the short run; and privatisation, making State owned enterprises3 more efficient by exposing them to market fluctuations and making them profit-orientated
Privatisation and liberalisation are the two key elements of Russia's experience that significantly differ to China's.
Privatisation in the post-USSR Russia was a simultaneous process and resulted in an economic disaster that would take years to be reversed. Almost all the SOEs were privatised at the same time by redistributing and defining property rights however, the overlapping.
1 NLTS.
2 SLTS.
3 SOE.
AN447 Assignment 3 Larry Ren 200902446.
2.
and complicated ownerships of those enterprises made it difficult to do so especially because there were no procedures to solve the conflicts between the parties involved (Shleifer & Vishny, 1994). It has been argued that rather than the central or local governments being the sole shareholder of the SOEs like it is in China. Factory owners, local cadres, governments and the state all had their shares of a state owned enterprise. Despite the internal disputes, non-state businesses made up 78.5 per cent of total industrial output by the end of 1994 and government spending dropped from 47.9 per cent of GDP to 26.9 per cent between 1991 and 1995 (Statisticheskoe Obozrenie, 1995). However, complexity over ownerships did not link such experience with success. Shock therapy did not bring what many Chicago School economists had hoped for. Rather than improving productivity through market competition as liberal economics suggests, the new owners of Russian SOEs set up a parallel private firm to the SOEs they own and made profits by buying goods at a capped official price and sold at the market price, the profits made from which were possessed by owners.
