Vlad Ryzhkov’s latest article over in the Moscow Times is worth a read, as it delves into that familiar and beloved topic of the comparative authoritarian models of Russia and China, and the challenged assumption that democracy is good or bad for economic growth. I am not sure I buy Ryzhkov’s argument that the Chinese wage a honest fight against corruption, but, as he rightly points out below, Russia could grow its economy quite a lot more without having to relinquish power to the democratic whims of its people if the government just tried to steal a little less from the private sector. Investors certainly don’t care about the political model, only if they can count on a certain minimum level of predictable and fair treatment.
China has been able to modernize successfully because business has been free to operate without interference from political forces or abuse by bureaucrats. For 30 years, China has conducted a policy of openness, attracting foreign investments, maintaining a high level of competition in the market, defending ownership rights and the integrity of contracts. In Russia, private business is choked by monopolization, heavy state control in key sectors, a lack of transparency, poor private property protection and rampant corruption. Russia is probably the world’s best example of how “bureaucratic capitalism” stunts private business.