Political Economy of Institutions and Development: The Importance of Being Inclusive. Reflection on "Why Nations Fail" by D. Acemoglu and J. Robinson. Part II. Institutional Change and Implications for Russia

We discuss the evolving views on institutions and development in modern political economy, and in particular the contribution to the field by D. Acemoglu and J. Robinson, explaining root causes of successes and failures in economic development. The focus of discussion is on inclusive and extractive institutional regimes - the former sustain economic growth, whereas the latter enable the elites to expropriate the rest of society. Although extractive institutions are inefficient and obstruct development, they are preferred by the elites and hence can be reproduced over long periods of time in vicious circles of economic and political inequality. We apply the above concepts and views to the post-Soviet period of the Russian history, where the market reforms of the early 1990s became a "critical juncture" which has shaped Russia's institutional regime for decades to come. It is argued that suppression of social participation and control at the time of market reforms in Russia has had long-term institutional legacy and resulted in the emergence and persistence of extractive institutions in post-communist Russia. The interplay between institutions and cultural change is discussed.