Why has moving from socialism to capitalism proven so disappointing for Russians, and so rewarding for those in the former Soviet-controlled Baltic states?

The answer lies in the two fundamental requirements for the transformation from socialist repression to a free-market capitalist economy. First, a thoughtful, transparent and unbiased privatization process is required to make the move from state-controlled socialism. Second, the rule of law must be enforced against corruption.
Russia’s transition from socialism to capitalism failed on both counts. In an ill-considered privatization process, vouchers exchangeable for shares in huge oil, mining, and other industrial companies were distributed to citizens who had no concept of private ownership. Chaos reigned as some people even traded vouchers for shots of vodka in bars; many vouchers were bought for a pittance by men who instantly became fabulously wealthy. Several Russians told us that these so-called oligarchs gained their private jets, yachts and international palaces “over the backs of the Russian people,” thus becoming symbols of capitalism’s failure.

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