After Chechnya, many analysts predicted that Russia's flirtation with democracy was over. However, the process leading up to the parliamentary vote of no confidence in Prime Minister Viktor Chernomyrdin's government last week suggests that the future of Russia's fragile democracy may not be so bleak. In fact, the so-called governmental crisis of the last two weeks has demonstrated that respect for the democratic process by Russian politicians is greater now than perhaps at any time in Russian history.

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On December 10, 1994, Russian president Boris Yeltsin ordered Russian armed forces into the Republic of Chechnya. For eight weeks thereafter, the Russian military waged a poorly organized but brutally destructive assault on the Chechen capital of Grozny.

Five years after the dramatic fall of communism in Eastern Europe, there is an opportunity to evaluate the efficacy of different forms of liberalization.

The most obvious and controversial difference between reform strategies is in the pace of transition. Previous theories of development have focused on the slow growth of Third World countries into modern economies. Some experts have ascribed current failures in Eastern Europe to the instantaneous liberalization of economies and the forceful application of tight monetary policies.

But this theory is contradicted by the fact that the most successful Eastern European countries, Poland and the Czech Republic, are those that initiated the most dramatic and rapid reforms. The authors of Economic Transition show how educate, relatively modern societies can make major changes in political and economic institutions almost overnight.

Economic Transition in Eastern Europe and Russia is a work of substantial academic merit that is also accessible to the interested layperson. Thirteen essays by acknowledged economic experts explore the rapid changes in the transition economies of Eastern Europe, with discussions on political and economic freedom, monetary control and privatization, labor markets and social safety nets, and taxation and crime.

The neoliberal economic and political models used by Western analysts to explain Russia's recent transformation ignore the interrelationship between the economy and politics. Russia is in the midst of a social revolution. Economic reform without political reform-as attempted by Yegor Gaidar-will fail. Prime Minister Viktor Chernomyrdin's policies have met with some success because of accompanying political changes. This interrelated pattern of reform must continue.

In January 1992 Russia's first postcommunist government launched a comprehensive economic program to transform the Soviet command system into a market economy. Privatization was and remains the heart of this plan. The original program had a clearly defined objective, namely, to create profit-seeking corporations, privately owned by outside shareholders and not dependent on government subsidies for their survival. As of two years later, however, this objective had not been achieved. By the summer of 1993 insiders had acquired majority shares in two-thirds of Russia's privatized and privatizing firms, state subsidies accounted for 22% of Russia's GNP, little if any restructuring (bankruptcies, downsizing, unbundling) had taken place within enterprises, and few market institutions had been created. During the first two years of its existence, the Russian state simply did not manage to dismantle old Soviet institutional arrangements governing property rights of large enterprises. Specifically, the state failed to implement its original vision of privatization, enforce hard budget constraints for large enterprises, or stimulate the creation of market-supporting institutions such as a legal code regarding private property and corporate governance or a social safety net. In sum, the allocation of property rights according to market principles had not yet even begun to occur.

Starting in the winter of 1991, the project on Industrial Restructuring and the Political

Economy in Russia at Stanford University's Center for International Security and Arms

Control (CISAC) has provided technical assistance to Mashinostroenie, a large aerospace enterprise engaged in research, design, experimental production, and systems integration of a broad variety of space vehicles and equipment. Officially known as NPO Mashinostroenie, the firm is one of the most prestigious enterprises in the Russian military-industrial complex, with world-class, state-of-the-art technology. The enterprise brings together many of the country's best scientists and engineers, along with management systems to execute their ideas.

Since 1992, the CISAC Defense Conversion Project has been working with the Moscowbased Impuls. Impuls is a medium-sized firm with expertise in control microdevices for the military, such as control heads for guided bombs and detection equipment for various weapon systems. Currently Impuls is working aggressively to break into several commercial high-technology markets.

Given the privileged position of the military-industrial complex in the old Soviet order, many have asserted that the military-industrial complex would be most resistant to radical economic reform. As the coddled employees of the Soviet state, we should expect directors and workers of military enterprises as well as their ministerial superiors to fear liberalized prices, commercial markets, and privatization.

Presidential Decree No. 1400 issued September 23, 1993, fundamentally altered the course of Russia's political transition. Debilitating polarization during the two years before between President Boris Yeltsin's government and parliament had resulted in the virtual collapse of the Russian state. As Yeltsin explained when he announced the decree: "All political institutions and politicians have been involved in a futile and senseless struggle aimed at destruction. A direct effect of this is the loss of authority of state power as a whole..."

The Russian privatization program has been heralded as the crown jewel of Russia's economic reform. While other aspects of Russia's economic reform have been less successful, privatization has continued unimpeded throughout the first two years of economic reform. On paper, Russian privatization appears to be more successful than any other government privatization program in history. By January 1994, 90,000 state enterprises were privatized.