Tax the Oligarchs

Around the world, there is concern about the arrest of Russian oil billionaire Mikhail Khodorkovsky. The worry is that Russia may be backtracking from democracy and the rule of law.

Russia faces numerous problems posed by the legacy of Communism and the way the transition from Communism to a market economy was handled. One set of problems concerns politics and the difficulties of creating democracy and the rule of law after decades of totalitarianism. Another relates to economics.

Two grievous economic policy errors were committed during Yeltsin's presidency. The first, as I argue in my book Globalization and its Discontents , was to create incentives that led to asset stripping rather than wealth creation. The other was to squander the few positive legacies left from the Communist era.

One such legacy was a high level of human capital, especially in technical and scientific areas, much of which was lost, as many of the country's most talented people emigrated. Another squandered legacy -- with serious political consequences -- was the relative equality bequeathed by Communism.