Russia’s Intactable Economic Problems and the Next Steps in Legal Reform: Bankruptcy and the Depoliticization of Business

Kratzke, William P. | January 1, 2000

Law reform in Russia proceeds on many fronts. This paper takes the position that the most important legal reforms for Russia are those that eliminate the reward system that encourages economic activity that can be highly inefficient. These legal reforms are an effective bankruptcy law and the de-politicization of business. The two go hand-in-hand. It is the politicization of business that renders Russia’s bankruptcy laws ineffective by making non-viable business entities .appear to be solvent. These two reforms, were they adequately implemented, would eliminate rewards for inefficiency. Only when the Russian government-and its people-have removed this reward system can conditions affirmatively conducive to growth be fostered and a business environment competitively attractive to foreign investment established. This position is by now uncontroversial, but the paper examines such reform in the context of the obstacles to its achievement.