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Wednesday, October 13, 2010


Do Rise and Fall Theories Apply to Russia?

As discussed in Rise and Fall, the countries Germany, France, and Japan all thrived post WWII partly because the rebuilding of the nation eliminated a lot of the organization that had hindered economic growth. These organizations are what has also hindered economic growth in countries like Britain. Although Olsen mainly discusses these three countries I am quite interested in how Olsen theories apply to other countries, mainly Russia.

Russia is a different case than most because of the nature of their communist economy. If totalitarianism, instability, and war reduce special interest organizations and lead to prosperous growth in a new regime like Olsen says happened to Japan and Germany, Russia should also be examined. Between being a communist country, having a horrific revolution in the early 1900's, and being decimated in both WWI and WWWII, Russia definitely fits the bill for Olsen's theories. While I could not find in my research whether Russia allowed labor unions or organizations, I highly doubt that they existed under communist rule. I did find that the government had many subgroups or subcommittees that regulated specific parts of the economy. During the Soviet Union era most of the economic information was kept secret so I do not have much information on communist performance. Looking at Olsen's theories, most of them could only apply to an economy where there is freedom of opportunity, or basic freedoms that are natural to human life. Communism goes against many of the Olsen's assumptions.

Right after the wall fell and communism went away Russia adopted a market economy. Their economy struggled mightily at first, which partly goes against Olsen's theory. A lot of this has to do with the still prevalent culture of a command economy. Around 1998 the Russian economy showed sign of perking up. Perhaps this was due to the complete embracing of the market economy, although this is highly doubtful because Russia to this day still has many command market features in their economy. The more likely reason is that many the big organizations prevalent in older countries had not had time to form yet in the new type of economy, which gives validity to Olsen's theory. Around 2004 the Russian economy took a sharp turn for the worst. Although not involved in any sort of major conflict the upcoming presidential elections and the ever nearer absence of President Putin did provide some instability for the Russian population. As of now Russia's GDP Real Growth Rate is almost quadruple that of Germany, Japan, and the United States. All of this evidence suggests that Olsen's theories do not necessarily apply to communists countries and that eventually Russia's economic behavior doesfall in line with Olsen's Rise and Decline theories.

What is really interesting about Russia's recent success compared to Japan or Germany's success is that the number of Russians that died in WWII has been estimated around 46 million people (military and civilian). Thus far the Rise and Decline of nations has net yet discussed what effects that a huge reduction in population will have on a country. It seems as though the economic development of the 2000's in Russia could possibly be due to the population finally recovering from the tragic loss of so many lives. I do not have a full understanding of how Russia and Olsen's theories apply but I'm sure as we progress through the Rise and Decline of Nations a more thorough understanding will be had.

The lack of growth in Communist countries is an interesting topic. I also wondered how they fit with Olson's theory since they have few distributional coalitions but no growth. However, in Chapter 6, Olson says that an analysis of Communist nations "must be left for another publication" (165). He adds that in order to understand these nations, we first have to understand "the theory of collective action by small groups" as well as "the limited role of markets in these societies" (165).
I think that Olson's theory, however, does apply to Communist nations. First of all, the group is held together by force. Secondly, the leaders are a small, exclusive group that is trying to increase its own share of the pie, and, in its effort to do so, reduces the size of the overall pie. Thirdly, this group restricts most if not all trade, which is an important aspect of a country's growth.
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