NCPA - National Center for Policy Analysis


June 10, 2004

Though Russian President Vladimir Putin has sometimes ruled as an autocrat -- clamping down on the media, skewing elections and renationalizing property -- he has also been a staunch advocate of reform whose policies have contributed to Russia's economic growth of 38 percent over the last five years.

Under Putin, the government has kept a lid on expenses, using gains from high oil prices to pay off its debt. But the country is not solely dependent on oil -- Russia's growth is being driven by a surge in productivity, which has increased by 14 percent each year.

Consequently, Putin's reforms laid the foundation for Russia's economic boom, say observers:

  • Putin slashed personal income taxes in favor of a 13 percent flat tax; a policy that has inspired entrepreneurship and encouraged millions of citizens out of the shadow economy and onto the tax rolls.
  • The government abolished serious restrictions on private land ownership -- farmland can now be bought, sold or mortgaged for the first time since 1917.
  • Putin designed a new pension system to encourage private pension funds and generate long-term capital for Russia's financial markets.

In addition, Putin overhauled commercial legislation and reformed the court system, creating a clearer legal environment for businesses. Businesses are also less exposed to mob violence: the number of contract killings declined from 700 a few years ago to 70 in 2002.

In his second term, Putin wants to continue his economic reform agenda: cutting the number of government employees by 20 percent, partially privatizing the electricity and railroad industries, and moving Russia's army towards an all-volunteer force.

Source: Patricia Kranz and Jason Bush, "Putin's Game," Business Week, June 7, 2004.

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