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The Russian Financial Crisis as it Points up the Failures of Liberalization
Published online by Cambridge University Press: 28 February 2024
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The Russian financial crisis of August 1998, which occurred between the Asian recession and the devaluation of the Brazilian real in January 1999, put a question-mark over many certainties. It demonstrated that the most destructive speculative activities of financial players can only have free rein when there is a collapse of the state. The crisis proved that the markets need a state and cannot replace it. It was also the moment when people became aware of the dynamics of a globalized financial economy (Stiglitz, 1999a; 1999b), leading to a critical rereading of the policies recommended in the 1990s and a direct questioning of the IMF and its actions. In Russia it caused a paradigm shift that could turn out to be salutary. In this regard the August 1998 crisis looks like the endpoint on the route followed since 1992 by the transition in Russia (Sapir, 1999a). We can see in the crisis both elements directly linked to the financial liberalization of 1985-95 and structural elements peculiar to the consequences of the transition and the policies adopted. This is why it suggests a reinterpretation of the entire development of the transition in Russia starting from 1992.
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