Russia begins its economic transformation as a rent-seeking society

Abstract

The aim of this article is to present and assess the institutional environment that enabled and facilitated the extraction of unearned rents during Russia’s economic transformation in the early 1990s. This phenomenon, resulting from rapid systemic changes and institutional mismatch, reached an unprecedented scale in the history of global economic development. Consequently, it is justified to refer to Russian society of that period as a rentseeking society—a society in which the dominant strategy of interest groups was to exploit political connections to achieve private gains at the expense of the broader population.

The article presents the main sources and mechanisms of rent extraction by interest groups, such as manipulation of the privatization process, trade in natural resources, and the exploitation of ambiguities in tax regulations. It also attempts to estimate the magnitude of this phenomenon in relation to Russia’s GDP, revealing its destructive impact on the country’s economic development, the deepening of social inequalities, and the erosion of trust in public institutions.

The analysis is based on a qualitative method that employs an institutional-historical approach, alongside estimated data concerning the scale of rent-seeking. The article presents the key sources and mechanisms through which interest groups extracted unearned rents, such as manipulation of the privatisation process, trade in natural resources, and the exploitation of ambiguities in tax regulations.

Historical examples of using state structures for rent-seeking activities show that this phenomenon is not unique to economies in transition. Rather, it is universal in nature and dependent on the broader socio-economic context. Therefore, the following conclusion can be drawn: rent-seeking will emerge wherever favorable conditions arise.