Russia

Joseph Stiglitz: October, 2002, interview

Q: Let me ask you about Russia. President Putin has been a prominent advocate of the need to shift the fiscal base away from people's wages and savings and on to the rents of natural resources. But this strategy flew in the face of conventional tax wisdom, which favored a "broad tax base" that included the use of "stealth" taxes. The IMF, by its actions (if not its public declarations), strenuously opposed the Putin strategy. What might President Putin do to remain engaged in the process of pro-market reforms while retaining the support of foreign investors and at the same time shifting the tax base on to the rents to be derived from Russia's natural resources?

JES: Russia provides another good example of what I've been talking about. The fact is that their economy has been imploding. And it's become nothing more than a natural resource economy as a percentage of the GDP — about 60 to 70%. At that point, natural resources become the only major source of revenue. So they've been forced to move in that direction by necessity. And, obviously there's a political economy tension: the rich guys don't want to give it up. But that's the distinction they're going to move in because there's no alternative. ... read the entire interview