Restructuring Elinar: A Case Study of
Russian Management Reform,
Decentralization, and Diversification
John Logue and Olga Y. Klepikova Russian economic reform has been fraught with difficulties. At the time of the collapse of the Soviet Union in 1991, practical experience in how to convert a state-owned planned economy into a privately owned market economy was virtually nonexistent. Theories abounded but were untried. The fact that they were unproven did not mean that they could not be espoused enthusiastically, however. By some measures, Russian privatization has been carried out successfully. The state has largely divested itself of most of the ownership of the means of production. The central planning apparatus has been dismantled. Both achievements were accomplished in an astonishingly short time and with the same vigor Russians had previously demonstrated in "storming the plan." Indeed, they did storm the voucher privatization plan, largely during the last six months of its existence.
Despite these steps, a vibrant, privately owned, market economy has not sprung from the ruins of the moribund command-and-control system. Instead, there has been a kind of economic free fall. Repeated government declarations that the economy had bottomed out and was moving upward did not reverse the economic decline. Recent governmental statements that the economy really has turned the corner may prove to be correct, but given their experience with government economic promises in the last fifteen years, ordinary Russian wage earners are inclined to skepticism. The decline of the Russian economy and of industrial production is charted in Table 3.1.
Yet amid the bleak Russian landscape of wage arrears, collapsed voucher investment funds, and general industrial ruin, there are firms that have successfully made the transition to a market economy. They pay their wages on time,