Government Interference: An Institutional Trap

Abstract

In the spring of 2007, few supposed that the US mortgage crisis would lead to a global crisis of sovereign debt that could last a decade. Five years earlier, Russia Prime Minister Mikhail Kasyanov sought to prepare the country for ‘the debt problem of 2003’, not knowing that there would be no such problem, because 8–10 years later oil prices would settle at around 100 dollars per barrel. From August to October 1998, nobody could have expected that a country that had defaulted on its debts and devalued its currency, whose economy was based on barter and missed payments, would see a decade of stable GDP growth. And, in late 2010, experts were not predicting an explosion of political activity and did not foresee that, a year and a half to two years later, a fairly large percentage of the urban population would begin to perceive the Russian political system as hopelessly archaic. The number of such examples is limitless, and any attempt to predict economic developments nearly 20 years ahead of time is truly a thankless task.