THE RUSSIAN ECONOMY: BOOM OR BUST? PART II

Next week's edition of the Carnival of the Capitalists [Editor's note: By the way: It looks like the co-founder of CotC, Jay Solo, has some problems with his domain name / blog at the moment. I hope his site will be back soon. UPDATE 01/25/05: Read Jay's post, We're Back! In More Ways Than One.] will be hosted by Dane Carlson of Business Opportunities Weblog. It gave me an opportunity to look back on my entry, THE RUSSIAN ECONOMY: BOOM OR BUST?

Putin must have been listening to his economic adviser, Andrei Illarionov. Here is a comment by Andrei Illarionov on the fact that "Russia's banks are running out of credit":

"Hiding our heads in the sand and saying there is no crisis would be totally incorrect," Interfax news agency reported him as saying. "The solution of a prob lem can only begin when the problem is identified correctly." (Carolynne Wheeler, The Guardian, 07/12/04.)

It looks like Mr. Illarionov has an aspiration to scrap much of the tax code, reduce the tax pressure, and start to compete, in an economical sense, with the rich United States of America. How successful has he been in the improvement of the economy? Here is an excerpt from article in BusinessWeek:

And Putin appears to be listening. Shortly after he appointed Illarionov--a fellow native of Saint Petersburg--in April, 2000, Putin decided to support the economist's proposal for a 13% flat income tax. That rate, introduced in January, 2001, represented a major cut from the previous sliding scale of 12% to 35%. Russia's income taxes are now Europe's lowest and the country's once-meager tax collection has vastly improved. Putin also backs Illarionov's ideas for slashing bureaucracy and creating competition for the monopolies. (BusinessWeek, 06/17/02.)

Here is another example, this time from Ivan Osorio's article, A Russian Revolution:

Reforms advocated by Illarionov and enacted by Putin's government have already yielded impressive results, giving Russia GDP growth of 9 percent in 2000, 5 percent in 2001, and 4 percent in 2002. Last month, the Russian government revised its GDP growth estimate for 2003 to 6.6 percent (Tech Central Station, 01/12/04.) (EGO, 07/25/04.)

I looks like Putin has become deaf...

From Peter Lavelle's article, Andrei Illarionov's madness?

Andrei Illarionov, longtime economic adviser to Russian President Vladimir Putin, appears to be on a mission. After strongly criticizing Kremlin economic and foreign polices in public, Illarionov has been removed from one key post of influence and, it would appear, joined the opposition. ...

There is probably a method to Illarionov's madness: It's called looking to the future.

Illarionov's influence over economics has waned recently, particularly since Putin's re-election last May. Since then, Putin has installed in own team. ...

Is Illarionov eyeing Russia's presidency, which should technically be up for grabs in 2008, or another high political position? These possibilities should not be discounted. He has government experience, is a liberal economist, and has shown himself willing and able to speak out on foreign policy issues. Illarionov may have the appeal that can help unite Russia's small liberal parties behind one candidate. He also knows how to speak to the West. (United Press International, 01/04/05.)

Here is an excerpt from the article, Putin’s Aide Andrei Illarionov Demoted After Blasting Yugansk Sale.

Illarionov has become a lone dissenter in the Kremlin, which is increasingly dominated by Putin's fellow KGB veterans. They are widely seen as a driving force behind the probe against the embattled Yukos oil giant, which has been all but crushed by a legal onslaught of back taxes and criminal charges against its owners.

Illarionov called last month's Kremlin-orchestrated auction of Yuganskneftegaz — Yukos' main production unit — the "swindle of the year" and said the government's actions "have inflicted a colossal damage to the country." (MosNews.com, 01/04/05.)