A Research On The Restraints Of Government Pursuit Upon Russian Transitional Economic Policies

It has been sixteen years since the economic transition began to take place in Russia. Sixteen years is only a very short period of time in the history of mankind, however, for Russia, this is a historical phase in which great transition in the nation's fate has taken place. During this period, two presidents who have brought different fates to Russia have been in power. The Yeltsin period witnessed the continuous slump in economy and the occurrence of full-scale crisis, whereas in the Putin period, the economy has grown at a rapid speed, the political and economic situations have taken a favourable turn in an all round way. As for the two phenomena, Some scholars hold that the wrong transitional economic policy made by the Yeltsin government, especially the application of shock therapy to the economic transition, is totally a wrong decision. The Putin government has formulated correct economic policies and measures, thus leading to the improvement in the economic situation. This is an over-simple understanding with which rigorous scholars would evidently disagree. Therefore, they proceeded from the perspectives such as initial condition and the political restriction, focusing their research on the objective condition and the historical causes behind the policy, so as to obtain a more objective and reasonable explanation. Nevertheless, questions over the Russian transitional policy still exist, such as how to evaluate the shock therapy at the early stage of the transition, on which the academic circle has not reached a consensus. This is because the current explanations cannot present a full picture of the facts, and therefore, the evaluation still does not seem to be objective and reasonable. Some key issues are obviously neglected in the current research. Why did the Yeltsin government formulate the radical transitional policy of shock therapy? Why has the Putin government set up a controllable market economy? What are the motivations for the government to make those decisions? What has caused these motivations? The government is the propellant and the decision-maker of the economic transition, as well as the subject in formulating the economic policy. It is definite that the goal of the government would directly influence the economic policy; hence the key to the understanding and evaluation of the transitional economic policy is to explain and pay attention to the government's motive and goal, which lie behind the economic policy. This dissertation proceeds from the goal of the government, proposes the new theory of government appeal, and uses the theory to re-interpret the transitional economic policy in Russia. Only when examined from various perspectives, could the physiognomy of the economic transition in Russia be more complete, its features more distinct, and the evaluation be more comprehensive, objective, and more scientific.The necessity of analyzing the motive and the goal of the government originates from the features of it. According to Public Choice Theory, government is a rational economic man, whose goal of formulating economic policy is to gain the maximum private interests. The private interests of the government lie in safeguarding and stabilizing the regime, seeking the successive term, etc. The theory holds that when formulating economic policies, the government is influenced by interest groups in pursuing its private interests, which results in the impairment of economic efficiency and the failure of the government. Therefore, the government's interference in economy does more harm than good. The Government Pursuit Theory still holds the theoretic base that the government is an economic man, but it believes that the interest group is the subsystem of the political system and can not be the leading power in making economic decision, and that the government plays a decisive and dominant role in making economic decisions. Meanwhile, Government Pursuit Theory holds that the government, as a rational economic man, will pursue private interests, while as the carrier of the nation, the government can exceed the self-interest of the economic man and has a higher pursuit __ the pursuit of the public and national interests."The government should take the ultimate responsibility of its economic growth, stagnation or recession."The duty towards the nation prompts the government to safeguard and promote public and national interests. Meanwhile, determined by the special status and influence of the government, its goal should not merely be the pursuit of private interests. Maintaining and promoting the collective social interests and national interests is also the goal of the government. To safeguard and promote public interests means that government will have the support of the people, which makes the regime legitimate. A legitimate regime means that it is consolidated and stabilized. It is clear that as a special economic man, the government must take public interests into consideration when pursuing its private interests. The government cannot do whatever it wants at random. The government is not omnipotent. Due to the restriction of the actual conditions, the government often balances and makes a choice between different interests. Government Pursuit is not the goal of the government in its general sense. It is the significant goal of the government after balancing the private and collective interests, minority and majority interests, social and national interests, especially political and economic interests. Government appeal is not fixed. It is always in the dynamic process of formation and adjustment. The factors that decide and influence the emergence and the change of government Pursuit are as follows: ideology, political environment, economic condition and economic situation, as well as external environment. These factors, in different objective conditions and historical environment, have various influences on government appeal, and their functional positions change continuously, thus leading to the consistent change in government pursuit. Government pursuit determines the direction and content of economic policy, and indirectly influences the result of economic policy.Based on the above-mentioned theory, this dissertation builds the analytical framework of applying government pursuit to the explanation of transitional economic policy. Namely, the government appeal in transitional economic policy is firstly proposed, which is not only the goal set by the government, but also the intention of the government implied behind the economic policy. The government pursuit is inherent, thus it can be substantiated. Therefore, the formation of government pursuit is demonstrated respectively in the following four aspects: ideology, political environment, economic condition and economic situation, as well as external environment, which are the factors that restrict and influence the emergence and the change of government appeal. Finally, from the perspective of government pursuit, the economic and political result brought about by transitional economic policy is understood and evaluated. The goal of this dissertation is to apply the theoretical framework to the analysis of government pursuit in different periods of Russia as well as its direct influences of transitional economic policy and indirect influences of economic political result. Since government pursuit is not the goal of the government in its general sense, the research concentrates on the significant transitional economic policy in the transitional period of Russia.These economic policies not only determine the features of fundamental institutional structure such as property order, but also reflect the transitional economic modes and the development of the nation. The shock therapy and the privatization policy of exchanging equity with loan at the early stage of the transition, the decision of controllable market economy as well as New Energy Policy in the Putin period all conform with the implication mentioned above, thus becoming the objects of empirical analysis of government pursuit.This dissertation has drawn conclusions and insights from the empirical analysis. Great changes which took place in the economic situation of Russia from the reign of Yeltsin to Putin are closely related to the different transitional economic policies and measures in these two periods. The policies and measures have shown the significant transition in the transitional mode and the development of Russia from Yeltsin to Putin. The key factor that determines the significant transition is the change in government pursuit, which is transformed from the political goal of irreversible reform set up during the Yeltsin period to the developmental goal of making Russia and its people more prosperous by setting up a controllable market economy in the Putin period. It is the different historical environments and the objective conditions that lead to the change in government pursuit. Various factors, from ideology to political environment, from economic condition and economic situation to external political economic environment, have exerted their influences on the government and have become the restraint factors to some degree. The analysis from the perspective of government pursuit has enhanced our understanding of the economic transition in Russia. Take the radical shock therapy adopted at the early stage of transition for example, when explained by Government Pursuit Theory, this economic policy has shown its objective rationality and inevitability. As some scholars have pointed out,"even though the radical way of economic transition in Russia is not suitable, it is inevitable."Government Pursuit Theory is of great significance in economics, especially in political economics. Firstly, it has broadened the horizon and increased the paradigms of research in this field. The government is a dominant force in making the economic policy. As a rational economic man, the government has the motivation and the goal to realize its maximum private interests. Any study that overlooks the motivation and the goal of government would be unilateral or subjective. Secondly, proceeding from the distinctiveness of government as an economic man, Government Pursuit Theory rectifies the bias and unilateral Public Choice Theory, by pointing out that the goal of the government is not only to pursue its private gain, but to safeguard and promote public interests as well. Therefore, as Government Pursuit Theory indicates, a more significant point is that it is essential and beneficial for the government to intervene in economy. Under certain historical conditions, it is necessary for the government to intervene in economy, such as the economic intervention and renovation in the energy sector by the Putin government, which was a key factor of transforming a beneficial external market into the overall improvement in Russian economy. Government Pursuit Theory demonstrates the significance of governmental economic intervention.The emergence of Government Pursuit Theory has made new requests to economists. Firstly, when presenting policy proposal to the government, economists should propose pure-economic policy objectives and instruments, which is a necessary reference frame. Meanwhile, if economists have government pursuit in mind and propose a further and moderate suggestion, or describe possible results of the policy for its makers, meanwhile putting themselves in the position of the government, then the proposal might be more realistic, thus more likely to be adopted by the government. Secondly, one of the responsibilities of economists is to give an overall, objective and scientific explanation to the economic policy. Any understanding and evaluation of economic policy with the above-mentioned implication should not neglect investigation and research in government pursuit, otherwise, it would be unilateral and dishonest, and therefore, unscientific.