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An Impetus to End Rent-Seeking

An editorial in today’s Moscow Times explores the reasons why Russia’s economy has failed to diversify, despite many consecutive years of impressive growth.  The answer – rent-seeking by the state, which may finally become less desirable as a result of the economic crisis.

The second form of economic rent, through control of public institutions, has arguably had the more stifling effect, in the form of corruption and untrammeled bureaucratic impediments to innovation and the establishment of new businesses.

The cost in bribes and time spent negotiating the country’s bureaucratic labyrinth has proven too hefty for many businesspeople.

The biggest beneficiary of this system has been the state, and as long as commodities revenues kept pouring in, there was little impetus, or even opportunity, for the government to change things much.

With those revenues drying up and the ruble weakening, the impetus may finally be there.