and environmental factors are of crucial importance for any national
economy. With the breakup of the Soviet Union, all of the empire’s
southern and western republics were lost to Russia. In terms of
territory, the country still remains the biggest in the world, but
it has now become even more northern.
of minus forty degrees Fahrenheit unimaginable in major cities of
Western Europe and the United States are quite normal in
Ekaterinburg, Tomsk, Irkutsk, and Novosibirsk, and not uncommon in
the capital of Moscow. The severity of the Russian climate means
that the cost of housing, heating, and lighting is considerably
higher than in the West. In addition, the country’s vast territory
increases transportation costs.
All this means
that, even with the most judicious use of energy resources, Russian
industrial enterprises will always have bigger outlays than their
counterparts in Western Europe, the United States, and Japan. State
support of industry, transport, and agriculture was one of the main
characteristics of Russia’s economic development both during the
Soviet era and under the tsars. Western economic models and
prescriptions, which envisage sharp contraction of the state’s role
in these areas, condemn Russian companies to being uncompetitive in
with its enormous territory, unpredictable agriculture, northern
location, and specific economic structure, the regulatory role of
the state has always been significant and is likely to remain so.
The reforms of the 1990s have clearly demonstrated that a weak state
can hardly create conditions for an effective market to emerge.