I fully agree that by and large law follows the economy. But there are some points in history where we can make choices. You can make a choice whether you launch radical economic reforms in the fall of 1991 based on the authority granted by the Supreme Soviet of the Russian Federation for twelve months, or whether you engage in trying to build some constituencies to engage in constitutional reforms and redefine the powers of the Executive, including the Russian President and the Supreme Soviet. Many people, including western advisors (this is not only a Russian phenomenon) — I had many fights over that with my good friend and colleague now, Jeff Sachs, but at the time I was fighting him tooth and nail over those issues, that economic reforms trumped everything else. It was regarded as a total waste of time to engage in either constitution-building, or even to engage in political party-building. Yeltsin wanted to stay above the fray; he never joined a party. Yegor Gaidar, or any of the other young reformers, never thought it was worth their while to try to build political constituencies.
Looking at this early period and how, I think, they stacked the cards at the time, I don't find the outcome so terribly surprising. The Constitutional Court of Russia dates back actually to the Gorbachev era, so this was already developed in the late 1980s as part of glasnost. But with Yeltsin trying to push through economic reforms no matter what — you remember, of course, the big clash between the Constitutional Court and Yeltsin, the shouting match between Valery Zorkin and Yeltsin, and he dismissed the Constitutional Court and then reconstituted it. There's no better sign of how Yeltsin perceived constraints the law might have placed on him. He had the political card of saying: “They are just Communists, the Supreme Soviet. They are trying to constrain us. They are just trying to uphold the system. The constitution of 1976 should not be binding on us because it is a Soviet constitution and does not have political legitimacy.” But here we are running in circles. If you don't create a new constitution that sets the stage for how you will resolve political issues in the future, of course all you have is 1976, plus extraordinary decree powers that were granted in an ad hoc fashion by the Supreme Soviet.
I think the reformers were trying to make a bet. They were hoping and gambling on being able to push through economic reforms fast enough so that the benefits would pay off, and so that the Supreme Soviet would not have a choice but to renew the extraordinary powers; or that in any other way they could build enough support to be able to continue. But that bet simply did not pay off. I think that is what led to the major constitutional crisis which led to the really unfortunate events in October of 1993 and onward. I think that at the political level, many mistakes were made.
Now just to be clear, one of the major debates I have always had with Jeff Sachs over these issues is whether they had another opportunity in the fall of 1991. I am very aware of the fact that of course the Soviet Union was dissolved only in December. So this was a very uncertain moment, and maybe not the best moment to call a constitutional assembly. But neither was it a great moment to launch radical economic reforms on the basis of a decree that lasts exactly twelve months. That is my opinion on that.
So, I think major mistakes were made. Were they not made, would things have panned out completely differently? I would not make any bets on that. But if you start from a situation where you do not want to be — and that goes back to one of the famous jokes that circulated in post-Soviet systems in Eastern Europe. Two peasants meet in Donegal, Ireland and one asks, “What is the best way to Dublin?“ The other says, “You don't want to start from here.” If you want to build a rule of law you don't want to start from where Russia was. If you want to build a decent market-based economy, you don't want to start from a centralized planned economy. But if you have to, you really want to think about the process of how to do that. I still think that major mistakes have been made.
Clearly Russian legal history is different. Russian thinking about the law is very different — I fully agree with that — but so are, of course, other legal systems. Just a footnote on the civil law comparisons, since my background is in German law: I've had many conversations with American lawyers who practice in Russia. If all they know about civil law systems comes through the lens of Russia, it is a little bit distorting as well, because Russia is also an outlier in many ways as well. I would be happy to respond to questions, if there are any, with regard to that.
I want to mention a couple things about the courts, as well, because they featured so prominently in Jane's discussion. I have not looked at the courts of general jurisdiction — civil courts in Russia — but I have looked at data on the arbitrazh courts, which are in Russia the state courts, not arbitration courts, but arbitrazh courts, which come out of the state arbitrazh system of the Soviet Union. Basically, they handle economic disputes, that is, disputes between two private parties that are defined as merchants according to the relevant statutes, or disputes between such entities or individuals and the state. So they handle tax matters, but they also handle bankruptcy law, and they handle any kind of contract enforcement in corporate law, etc., among economic entities.
What I found stunning is comparing Russia and litigation rates in the early 1990s to Poland, the Czech Republic, or Hungary. Whereas in Poland you have an explosion of lawsuits in economic matters right when the radical reforms were introduced, in Russia during the first couple of years (1992 through 1995) they decreased by 30 percent per year. If you take as a benchmark 1991 — these were all disputes among state enterprises and the state planning system, so you have to discount for that a little bit — there were over 300,000 cases at the time. They decreased radically in the first couple of years. I interpret this to suggest that the new entities that were trying to figure out how this new system worked did not trust these courts. They would not take their disputes to these courts. The rate of litigation has increased since and has recovered, but not by much beyond the level it had in 1991. Where you have actually seen a tremendous increase is in the litigation between private entities and the state. So there is a lot of litigation against the state, a lot on tax issues. We can interpret whether this is trust in the court system or whether it is just desperation, because you have to somehow try to fight the taxman somewhere.
One final note that I would like to make: I violated another rule that Jane suggested — one should not talk only about the outliers; one should look at ordinary business. I think there is a lot of truth to that. But I think that sometimes crises or outlier events can illuminate some basic features about the system.