There are few studies in Russian economic writings which not only criticize the reality but also give scientifically substantiated answers to the principal questions that face the country in the transition to the modern market. The book under review is one of them.
On the whole, the book's conception seems to be quite convincing. Thus, when tracing the dynamics of GDP according to the principal type of use, the author shows that the production drop in 1992-1995 can essentially be explained by a drastic reduction in state expenditures and capital investment, that is, the shortage of aggregate demand. This analysis is in tune with the conclusions of Janos Kornai, a known Hungarian scientist, who put forth the transition from the excess... of aggregate demand to its shortage as a characteristic feature of the so-called "transformation crises".
Now it is a habit in Russia to flaunt one's knowledge of the monetarist theory according to which inflation is allegedly caused by the excess of money in circulation and the very excess by the excessive state expenditures over revenues, that is, the budget deficit. In his book Menshikov criticizes such a position. Of course, the excess of paper money which is consciously or unconsciously emitted by the state without any connection with the commodity turnover causes inflation and even hyperinflation. But along with the "inflation of demand" there is an "inflation of costs" which emerges in case of the accelerating growth of the prices of raw materials, fuel and electricity. It is also possible when there is no budget deficit. The author shows that the recent Russian inflation is mostly of such a character. Possibly, it is no accident that Russia makes at present an essential emphasis on the regulation of prices of natural monopolies whose behavior motivates the "inflation of costs".
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