The Study Of "the Shadow Economy" In Russia's Transitional Era(from1992to1999)

The shadow economy, which is prevalent around the world, presents a growing trend in the modern society of globalization and informatization. Especially in the transitional countries represented by Russia, the scale expansion of the shadow economy and its impact make the transition more complicated and harder. To historically record and research the shadow economy phenomenon in Russia's transitional era is not only a complement to economic historiography, but also a necessary component to interpret Russia's transition issue. The study of the topic helps us to have an objective view of and know well the historical process of Russia's transition, and draw lessons from the history to benefit our country's economic development.The shadow economy exists as the opposite side of the official economy. It shows in detail that members of society feather their own (an individual's or a group's) nest by undermining formal or informal systems and evading the supervision of the enforcement body, which led to dispersed economic activities and phenomena for a country and society. The transaction cost is the measurement criterion for the economic entity to choose "underground" or "overground" economic activities. As the game rule of the society, systems build incentive structures of human social activities to reduce the uncertainty of the activities and the transaction cost, and ascertain and limit human choice set. So the system is the decisive factor for the shadow economy to turn up. However, the cultural factors in informal systems (referring to customs, values and awareness, etc.) provide environments and routes for systems'transition, and interior continuous clues for the shadow economy's transition. The cultural factors also provide theoretical bases for the shadow economy's different forms and features, which exists in the same system pattern, but in different cultural backgrounds.The historical and cultural background of Russia makes the emerging causes, features and manifestation of the shadow economy in Russia's transitional era be different from western countries. Russia's shadow economy's existence and development have its own historical root and realistic incentives in the transitional process. The historical root is the shadow economy's having existed in Soviet times and the flaws of the planned economic system are the main causes of its emerging. However, when the Soviet Union ended, the shadow economy didn't disappear because of the collapse of the planned economic system. Rules and thought patterns produced by systems are successive, and won't dissever from an old system when a new system arises. The national monopoly, modern handlers and various kinds of subsidies to the state-owned economic sector from the state finance emerged in the planned economy pattern and remained in Russia's transitional era, which made the development of the shadow economy possible in the new period. There are five realistic incentives. Firstly, the large-scale privatization, precocious liberalization, the double-track price system and the implement of high taxation and tight money policy all created an opportunity for the shadow economy's rapid development. Secondly, the failure of law system made the shadow economy's development lack constraints. Thirdly, the weakening of the state's management function is also an important cause. Fourthly, oligopoly and corruption and the shadow economy promoted mutually. Fifth, the destruction and extreme development of the national morals and culture supplied rationality of the shadow economy with ideology. All in all, Russia bore the weight of the historical problems left over by the planned economic system in Soviet times, and the state's management function weakened day by day when the government rapidly retreated from the significant fields which it had controlled originally. With the guidance of shock therapy, the government carried out large-scale privatization, liberalization of the economy and decontrolling prices without establishing corresponding market competition mechanism and legal norms, which the economy in this era exist in the institutional vacuum. The comprehensive effect of the historical root and realistic factors makes the shadow economy increase sharply in this period. Corruption and oligopoly combines in the space-time vacuum without legal systems to wantonly occupy state property and destroy political and economical orders. This is the outstanding feature and important component of the shadow economy in Russia's transitional era. The "state factor" of Russia's shadow economy is one of its main manifestations why it's different from western countries'shadow economy. Russia's transition to the market-oriented economy at the cost of the public interest's loss made the masses lose their original social security, residents' living standard lower, the instability of the social family structure aggravate, and the social wealth polarization grow up. The existence and expansion of the social marginal population provide abundant labor force and "legal" social awareness to the overflow of the shadow economy.From Soviet times to Russia's transitional era, the speeding, scale and influence of the shadow economy all had changed a lot. In Soviet times, the shadow economy was mainly confined to the economic field, lubricating and replenishing the official economy. In the later Soviet times, the shadow economy developed at a more fast pace. In Russia's transitional era, the shadow economy had permeated Russia's many fields like politics, economy and social life, etc. In the economic field, it evaded the supervision of the state and society in various ways, destroyed the national program of macro-economy development, harassed the rational allocation of social resources and broke the national economic order. In the political field, the shadow economy and corruption promoted mutually to weaken the public management function of the state and harass the normally political order. In the field of social life, the pervasive activities of the shadow economy had been normalized to deteriorate social morality, increase law-breaking cases and break the normal order of social life. Even if the economic losses caused by the shadow economy can recover, the incidental decay of morals and values can't recover in the short run. As an abnormal economic activity and social phenomenon opposite to the official economy, the shadow economy had become a knotty social problem in Russia. Whether the shadow economy is dealt with properly directly relates to Russia's economic resurgence, the success of the transition, the social stability and the national influence in the world. So, how to crack down on, regulate, guide the shadow economy and control it within moderate bounds, and how to establish a healthy domestic market and investment environment have become the emphasis needed to refer to in Russia's government reform and an important task of the strategy of economic development.Since President Putin held power, aiming at the complex structure and the features like its strong regeneration capacity of the shadow economy, he had drafted and implemented a series of measures. Firstly, strengthen the state administration, and make cracking down on oligopoly and corruption and governing the shadow economy maintain the consistence on the action. Secondly, crack down on media oligarchs, reform the media market, grasp anew the government's control of the public opinion, and regain media's "Fourth Power" effect after the powers legislation, judiciary and administration. Thirdly, strengthen the state's economic regulation and control, reorganize the order of the market economy and improve enterprises' business environment. Fourthly, reinforce legislation and rule of law. Fifthly, increase national revenue and improve social security. Sixthly, standardize professional ethics. Seventhly, enhance international cooperation. Through unremitting efforts, Russia has been gradually stepping on the road to normal development. Some actions'implement powerfully cracked down on the most harmful part of the shadow economy, while some others nipped its expansion in the bud.Through the expounding of the development, manifestation, features and governance, we can demonstrate that Russia's shadow economy connects with its regime closely. Russia's shadow economy is different from the shadow economy in other countries implementing market economy. The intrinsic causes are absolutism, the lack of contract ideology and not clear property rights inherited from Russian history and culture.The essence of the shadow economy determines its longstanding existence. How to confine the shadow economy to a minimum scope, Russia's objective reality, lessons and measures to govern the shadow economy in the transitional era can be used for reference in the economic construction of those countries with similar national conditions.