Did Markets Fail in Post-Soviet Economies?

Did Markets Fail in Post-Soviet Economies?


In the last 20 years since the breakup of
the Soviet Union many post Soviet economies like my home country Russia have struggled
to reach economic prosperity. This has led some people to question the virtues of free
market capitalism. I would argue that it has not been a failure of free market capitalism,
but rather a failure to create the right conditions where capitalism could prosper. Therefore
the right question we should be asking is why did some post Soviet economies grow so
much faster than others? The more successful transition economies are
conscious like Azerbaijan and Poland with average GDP growth rates of over 4%. These
transition economies also tends to be located on the outer edge of the Soviet bloc where
corrupt Soviet [inaudible 00:00:58] institutions did not take root.
The more successful countries also tend to have more economic and political freedoms,
lower levels of corruption and inflation and more transparent government institutions.
All these features help capitalism to succeed. Conversely countries with relatively dismal
economic performance like Russia, Ukraine, Belarus and some central Asian states have
not grown this fast because they have not created a market friendly environment. These
poorly performing states tend to have high levels of corruption and inflation, low levels
of economic and political freedoms and poorly defined poor enforced property rights.
All of those problems make capitalism less successful. In addition to that oil revenues
tend to mask the economic problems these nations face and make their governments more reluctant
to reform. While many post Soviet economies now have large private markets they are still
a long way from having a true market economy. In that sense the dismal economic performance
countries like Russia is the result of inadequate reforms rather than a failure of capitalism.
Free market capitalism never had a chance to succeed in countries like Russia and it
will never will unless the market reforms are implemented.

96 Comments on "Did Markets Fail in Post-Soviet Economies?"


  1. God I hate those "In Soviet Russia" jokes. They're more annoying than Chuck Norris jokes.

    STOP USING MEMES. THEY. ARE. NOT. FUNNY.

    Reply

  2. Russia is one of the BRIC countries, and is well on its way to pass its status as an emerging nation. Time will tell how much longer they got.

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  3. @remygwaramadze He's right, relative to other post-soviet states Azerbaijan and Armenia have done much better than places like Tajikistan and Uzbekistan. There is of course much more corruption and issues in Azerbaijan than in western states but compared to the other's they're doing alright. I'm Iranian btw, they're our cousins and neighbors and I've always been a little envious of how much better off they are than us. Iran is worse. We're neither a republic or Islamic..:(

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  4. @anticosmopolitan I find this anti-Jewish rhetoric ridiculous because it implies that the rest of the world is so stupid and helpless that they are at the mercy of the Jewish money makers, every single one of whom, according to to the conspiracy, is amoral, ruthless,and can keep the secret. It really is preposterous. Some Jewish people may well control a lot of money; so what?

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  5. Lol, these are the same people that say any government interference is bad for the free market, and yet they just implied that government has to provide and enforce laws to create the right condition. And people accuse me of cognitive dissonance!

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  6. Well if free market capitalism eventually takes hold successfully in Russia, please let us know… perhaps then we'll consider trying it here in the States.

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  7. @LasNoches86 If you're depth of knowledge is as superficial as your comment was, I would not be surprised if you experience cognitive dissonance more than most.

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  8. and in the USA…government is slowly or already intervening in the market…were going there.

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  9. I'm from Poland and I can assure you that liberalising the economy has not failed my country. Obviously we have lots to do, but we will not do it as a forced collective the communist regime imposed on us, but as free people sharing exchaning goods and thought. I hope we'll habe even more of a free-market economy!

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  10. BTW, if you don't choose Ron Paul you can send him to Poland, I would gladly have him as the president of my country.

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  11. @anticosmopolitan Instinctively? Are you kidding me?! You're trying to imply that there's some kind of global Jewish gestalt that applies to financial behaviour? Jeez, and I thought theists had some strange ideas. Ordinary peole might be trusting, but money men aren't,and many of them outright hate Jews, but you still think everything is run by them? And if they are the ones who have risen to the top, so what – how are they worse than anglo saxons?

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  12. @WebPope The please elaborate, oh master of wisdom: show me your better ways and what he meant by political and economic freedoms, corruption and inflation, and define and enforced property rights. Because the way I see it, government has a hand on all of that.

    And dont say that if government had not intruded the economy would have been richer, because the US uses currency control to keep itself as rich as it is (I have more examples where that came from).

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  13. @LasNoches86 There's always more to learn, LasNoches. Don't become complacent in your knowledge.

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  14. @matbroomfield Or Germans, Russians, Romans, etc., etc. Whe has it been when the Jews were in control of the world exactly?. If you look to financial markets today, the biggest financial institutions today are run and own by many people, some of them of jewish decent, but the great mayority are of american, british, german and french decent. Does that mean that americans(anglo-saxons) in general are evil and manipulative people?

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  15. @WebPope I am not complacent with my knowledge: that is why I listen to everyone's point of view. However, I am complacent with my answer because they tend to bring the smart-ass out of people so I can say this: the next time you want to be a smart ass, make sure you follow up with smart, because although you are entitled to you own opinion, you are not entitled to your own facts.

    Back up what you say with facts or stop talking about thing you cannot explain… because I can

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  16. WHAT!!??!! You mean you didn't get millions of dollars in a bank account, a top position in a major financial institution, the keys to Fort Knox, and a posh Miami mansion when you were inducted into the INTERNATIONAL JEWISH CONSPIRACY FOR WORLDWIDE DOMINATION???????

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  17. Great topic. This video could use a drill-down follow-up lecture with deeper analysis and more supporting evidence and examples.

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  18. Labeling Russia together with Ukraine in terms of economic development? You have got to be kidding me.

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  19. @megatherium100 Even if Jewish people had some innate money-management skills, it's not their ethnicity that's the problem, it's the fact that they are financiers. It's people who deal in money that are the problem, not Jewish people per se. But I just don't see this whole Jewish conspiracy thing, and the assumption that the most powerful governments in the world are too stupid to see it too, is the product of a deluded, frightened, racist mind.

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  20. Pardon Me there Provessor Yakovlev. did i hear you say that Azerbaijan is an example of free-market growth because "corruption did not take root"???????? Azerbaijan was ranked 134 among 178 countries for corruption. also, 89% of their GDP growth is through Oil and Gas export, not through a success of the free market!!!!

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  21. @LasNoches86 Your self-assuredness is a manifestation of your complacency. So long as it rules you, you will never be free. You don't have to believe as I do but you ought to consider why your beliefs bring these feelings of smugness rather than feelings of humility for what you do not know.

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  22. @LasNoches86 No not really. Its something I strive for though. I was just trying to get you to think about your original statements. I didn't have the intention of putting you down. Rereading the comments I can see why you would think I was being rude but I never had the intention of being so.

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  23. Once the revolution is over, people get complacent, and the politicians go back to their old habbits.
    NOTHING will change until people are educated in the advantages of limited Government, and freedom of choice.

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  24. I would really like a more in depth video on this topic that explains the market reforms more specifically

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  25. Translation of the video: Libertarian views are "right" because by definition the successful economies are "capitalist" and those that fail are "non-capitalist. Thus, the result governs the use of the term, — that is, the ends justify the definition of the means. Yet, you can't retroactively define "right or wrong" on whatever best satisfies your ideology, Such "just rewrite definitions to fit libertarian views — and the rules of evidence and logic be damned" is intellectually dishonest.

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  26. @CrawlingAxle And your response is completely meaningless ad hominem. But, perhaps I should thank you as if all you can do is respond with mindless insult then I must have struck a nerve.

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  27. @Ranillon It would be ad hominem if I called you an idiot. Instead, I called your description of the video idiotic. It is idiotic, because it completely fails at summarizing correctly what the video is saying.

    No, you didn't hit a nerve.

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  28. @CrawlingAxle Sorry, but you are trying to make a difference that is no difference. "Idiotic" whether aimed at me or my ideas is still mindless, useless ad hominem.

    And, while my interpretation of the video may be cynical it is still nonetheless correct as the video makes simple-minded arguments that all too conveniently (and dishonestly) support libertarian ideology. Making de facto assumptions that you are in effect always right isn't intellectually honest.

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  29. @Ranillon Lol, your summary makes absolutely no sense. He stated measurable facts like corruption and political freedom and then applied logic to demonstrate how these facts help or hurt economies. Sadly facts don't support socialism unless you believe people claiming to want to help you actually helps you. My girlfriend is from Ukraine and will attest to the fact that every time you get pulled over you have to bribe the cops or that their media is constantly threatened by politicians.

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  30. @thebestsumoeva But, the WHOLE BASIS OF THE ARGUMENT is that this took place AFTER the fall of communism. Therefore, how does it get the blame for the failures? When you can just shout "It's socialism" as a catch all to justify your beliefs how is that somehow rational, logical, or evidence based? It's just a a priori assumption taken as FAITH.

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  31. @gamegeek2 Sadly, in America people forgot to keep their eyes on the government. Now a zillion federal agencies "study" us, monitor all of our behaviors, survey our actions with high tech military and spy suveillance, and arrest people by thousands for minor "infractions of their hundreds of thousands of laws, controls, codes, mandates. We are the new Soviet America. They won without a shot.

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  32. @PvMikhail I see what you are trying to say, basicly I am of about the same opinion. But, the thing that you think failed in Russia was not free market capitalism, but reforms intending to achieve that. Even the reforms, how do you define failure? I do agree that Washington consensus did not work as the implementers expected, and atm most economists agree that it was due to the lack of institutional environment in which free market capitalism would be able to work.

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  33. @PvMikhail So, what is necessary now is building those institutions.
    The post 91 crisis was evident, the economy was producing non-demanded goods, what else would you expect other than crisis.
    Some countries tried, and are still trying evolutionary reforms. They are not doing any better… again, I think becuase of inadequate institutional reforms.
    Causes of failure with institutional reforms is clear, would a governor fight corruption if s/he benefits from it? Presumably no.

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  34. @PvMikhail From some of your other comments I get a feeling that by "free market capitalism" you are referring to "free international trade". The video is about free market capitalism in general, noone is saying to leave all of the prices uncontrolled, and noone is telling not to protect domestic firms.

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  35. I too am an advocate of a state regulation, who isn't? Unregulated market exists only in theory, every country has a certain extent of involvement, some lower, others higher levels… You regulate where competition fails (or as you say unfair).
    Competition is fair)) You are arguing about the mode of transition, not the target of transition. If your target is market economy, how can you say that competition is not fair?
    What is fair? If competition is unfair, what is the alternative? Nothing))

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  36. @PvMikhail I too am from a transition economy, and am sympathetic about your frustration. But, if the mode of transition was not the best one, it doesn't mean free market capitalism failed. How can it be failed, before it is achieved? This is the main subject of the video.
    Again, free market capitalism is not the same thing as free international trade. They are separable. Even the most liberal US has certain level of protection and price control. Previous comment also was for you;)

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  37. @PvMikhail The overall "feeling" of LearnLiberty is ofcourse propaganda of liberty, and not everyone has to agree with them. It is an american web site, and American economists have always praised individualistic lifestyle the most happy one, i.e. when you have least of restrictions. Collective values come from culture, and therefore are nation specific. Both individualism and collectivism (depending on their extent) have own pros and cons, the best is probably some golden middle.

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  38. @PvMikhail About Azerbaijan, I also was surprised to hear that. Nevertheless, I wouldn't say they lied, I'd say the russian guy was wrong, or simply brought the wrong example. He probably judged from GDP only. Actually, there is no good example in former USSR. Some media articles claim Georgia has somewhat successfully tackled corruption, but that is just media article.
    Capitalism might not be the best system, but IMO it may qualify as the least worst. And there are varieties of capitalism too.

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  39. @toSTONEiGO Oh yes you did. You got it from your Jewish parents who, due to the values of the Jewish culture, taught you to value hard work, education, and the value of saving and investment.

    Thats a step by step instruction list on how to take over the world if I've ever seen one.

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  40. Really? my parents taught me the same thing, and I don't think the believe Irish are exactly taking over the world.

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  41. The only reason Azerbaijan might be classified as doing well is because of the BTC pipeline (which brought in high foreign, especially US, investment), which is the only pipeline that doesn't run through Russia. As far as corruption goes, it has been governed by an autocratic system since the first Aliyev came to power. I'm not disagreeing with the points he brings up, just the nations he used to exemplify good free market economies in post-soviet states.

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  42. I think he was just saying making Russia a desirable place to live. No one wants to live in a corrupt, hell hole were the government can violate peoples rights. You can have reasonable regulation. Like every place that serve food needs a food card before opening. The problem is America becoming corrupt from the inside the capitalist are also the bureaucrats selecting winners and losers. Who to give grants to. Who allowed to produce what. Making regulation so hard for the small business.

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  43. "at unregulated people will eventually act badly "

    What do you mean by that? Doing something you don't feel morally right like having sex with a prostitute or doing drugs?

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  44. I like Russia.
    Nuff said.
    Did a tour there. Was cold as shit!!! But by far funny, and fun people.
    So I don't really see any reason for being racist against them.

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  45. The point of deregulation and reduction of state power is that people DON'T get other people's money to play with at all.
    History has taught us the exact opposite of what you've said, and I'm curious as to how you came your your conclusion.

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  46. There is plenty of evidence that de-regulation does not equal prosperity. Send any libertarian to Haiti for a day, and they will reconsider their point of view. In fact, our GDP grew the strongest when the taxes on the super rich were higher.

    If anything, if you cross a map of GDP growth versus taxes; you will see that for the majority of the century, the GDP climbed when taxes were higher. There are some exceptions to this, particularly the mid-80s and 90s, but the rest of the century is solid

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  47. Well, Haiti has worse problems plaguing it then regulation. They get frequent natural disasters which prevent any sustained growth. As a result, there is little investment in Haiti because of lack of infrastructure and security. Haiti's failing economy isn't the result of regulation, but rather a mix of its checkered past and lack of sustainable growth.

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  48. Let me fix it real quick: Haiti's failing economy isn't the result of regulation or lack of regulation, but a mix of its checkered past and lack of sustainable growth due to frequent natural disasters.

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  49. Also, in regards to taxation and its effect on our GDP growth, it would be nice to have your source.

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  50. I cannot post URLs, however I can tell you where to find the information.

    Wiki History of Income Tax in the United States, or just History of Income Tax. Then, google GDP/growth, and there are numerous sources that will give you the same information. The history of income tax is rather recent, and made statute in our laws, so you can actually look at the revisions to USC and IRS Tax Code, should you feel these sources aren't legitimate.

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  51. Awesome to have a Russian talking about Russia and the Post Soviet States. Love the accent and love the information.

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  52. I don't know why people so hateful nowadays.I'm from Azerbaijan,and I completely agree with thus video except from ranking Russia and Ukraine in the same level is meaningless ..I've lived in Russia nearly 5 years and this country has better conditions and economy than Ukraine or Belarus.I have to say that Azerbaijan is much better and less corrupt than other SOVIET republics like Tajikistan,Uzbekistan & so on…

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  53. @MissSalvatore93 But Azerbaijan  economy has a lot more way to go.We are not in the same level as Western European countries,but we are better than Soviet and Eastern European countries.

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  54. I agree, Russia's economy is very successful. And they are even working to diversify their economy currently, and become less dependent on oil revenues. It takes time, but things are being done. And I also agree, that they are a far cry from Ukraine or Belarus. Totally different economic situations in my opinion.

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  55. Im willing to bet japan gets more natural disasters and is more regyulated. Same with iceland. In both you have exemplar economies.

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  56. There are plenty of instances where 'smaller government' has had economic disparity and falling GDPs, and where 'bigger government' has had the opposite. Haiti vs Sweden for Example. One is without much government interference, the other is cradle-to-grave socialism.

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  57. Small island countries always have terrible economies unless they have high levels of tourism or something special. The issue is that island countries have little land and therefore little resources. They have to import almost everything.

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  58. Lulz wrong, sweden got rich from 100s of years of near 0% tax rates pre 1980s, no involvement in wars (no lost wealth), laissez faire economies before 1980s, high natural resources, and geography.
    Google stefan molyneaux's video on the myth of scandinavian socialism. Scandinavian countries are either rich of huge natural resources like oil (norway), 100s of years of laissez faire economies (sweden–which no longer experiences that boom due to centralization), or are just downright poor(finland)

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  59. In that instance, you are correct. Capitalism always beats out socialism and I believe the success of both to be a product of being surrounded by socialist countries. Kind of like how Switzerland has had a huge advantage in the banking industry due to its privacy protection of bank accounts.

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  60. Very much true. Even now Sweden has much better protection of property rights than many other, presumably not-socialized countries. Its interesting that people point out to Sweden when trying to proove that free market capitalism is not always rigth, yet they fail to see that Sweden sucess is not thanks to the left, but despite them.

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  61. i know it is very annoying when many of them restate the same thing trying to prove a lost point

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  62. Before Capitalism will work, you have to develop a capitalist culture. Since capitalism is dependent on the business decisions of individuals, it requires that most individuals are capable of making these business decisions for themselves. You can't just snap your fingers and be a successful capitalist nation. Also, some of the factors that prevent developing nations from being successful capitalist nations, might also prevent them from being successful socialist nations.

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  63. The fundamental advantage of capitalism in today's world, is that its the way of the global economy. You can't regulate foreign countries, so international trade regulation is very limited. Capitalist societies are generally better at taking advantage of this, since their markets are adapted to this.

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  64. Why did this guy use Poland and Azerbaijan as examples of booming post Soviet Economies? He should have used the Baltic States, Estonia, Lithuania, and Latvia. Those economies grew 11.2%, 7.5%, and 11.9% respectively in their GDP's during 2006.

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  65. Germany invented the AK 47 a lowly sergeant in the Soviet army looted the plans & prototype during the invasion of Germany that is how an uneducated plowboy from the steppes of Russia suddenly understood math and engineering.

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  66. Back in 1995 I was a member of a team of U.S. and British economists and other technical experts who delivered several days of talks on privatization before the Russian Duma. As the member of the team with extensive experience in the banking and real estate finance area, I urged Russian leaders not to privatize the nation's land and natural resources; rather, the country would greatly benefit by leasing land to private entities and individuals by competitive bidding. (continued)

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  67. I observed that a major mistake of "capitalist" countries was to permit banks to extend credit for the purchase of land or accept land as collateral for other borrowing. Why? Because land markets are plagued by hoarding and speculation, dominated by the corporate and other rentier interests who use their financial power to ensure they are lightly taxed while those who actually produced goods and provide services pay for most public goods and services. Sadly, landed interests in Russia prevailed.

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  68. What a fallacy!!
    Higher taxes on drugs will also lead to underground market of drugs… like underground maket of cigarrettes!!! 

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  69. So young Russians are falling for capitalist ideology, like their grand parents fell for the lies of Lenin and Stalin hundred years ago. This time there isn't even a "we are all brothers" attitude, but "everyone for himself" sociopatic culture.

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  70. % total growth of annual real GDP per capita, 1989-2017, in post-Soviet USSR and Eastern Europe. GDP measured in US$ corrected for deviations from PPP.

    17 Russia
    67 Estonia
    55 Latvia
    58 Lithuania
    86 Poland
    50 Czech Republic
    77 Slovak Republic
    38 Hungary
    44 Slovenia
    12 Croatia
    -24 Serbia & Montenegro
    14 Macedonia
    88 Albania
    44 Romania
    50 Bulgaria
    66 Belarus
    -42 Ukraine
    -11 Moldova
    -12 Georgia
    64 Armenia
    44 Azerbaijan
    59 Kazakhstan
    76 Uzbekistan
    120 Turkmenistan
    -12 Tajikistan

    Russia, Ukraine, Moldova, Georgia, Tajikistan, and the pieces of the former Yugoslavia (Slovenia excepted) have not done well. the Ukraine is a spectacular disaster.

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