As any sane economist will tell you, small businesses are much more important to a nation's economy than big businesses. In the United States, small businesses account for over two thirds of our economic activity. In still-repressive Romanina, 100,000 small businesses have started since privatization and market reform began in early 1990.
Russia and Chile are thus depriving their lower classes a freedom essential to their own well-being and the well-being of their nations' economies as a whole. While Chile's corporatist capitalism allowed a flood of consumers goods to enter the country, putting all its eggs in the big business basket made Chile extremely vulnerable to the recession of the early 1980s.
Russia seems to be taking a similar corporatist tack in its free market reforms. As it ignores the needs of small businesses and entrepeneurs, the government is concentrating on converting large military industries to consumer production. Like Chile, Russia will ultimately find this corporatist strategy increases the wealth of its citizens only marginally. The most wealthy members of society will benefit, and some industrial workers will retain their jobs. But the economy as a whole will gain little if the entrepeneurial base remains marginalized.
TO CALL CHILE and Russia "capitalist" or "free market" in their reforms ignores the market that really matters. If Russia wants to emulate the economic successes of the United States (or even of Rumania) it should move away from the Chilean corporatist model. The free market, to function well, must be free for all, not just for a select few big businesses chosen at random by bribed bureaucrats.
If Boris Yeltsin recognizes this essential fact of capitalism, his country will begin the real move to a market so desperately needed by the Russian people. Maltsev recommends that Russia simply legalize the black market, making it the white market. If Yeltsin fails to smash such bureaucracies as the OBKhSS and legalize the black market, he will condemn his people to decades more of poverty and discontent.
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