KREMLIN’S DRAFT LABOR, LAND CODES ARE ALREADY DRAWING FIRE.

The Russian government is also moving forward with measures to liberalize markets for labor and land. Here, the government’s desire to improve the investment environment by making it easier for businesses to buy land and fire workers runs up against both Soviet-era legislation and strong popular opposition to the further extension of market mechanisms in these areas.

The Duma on June 15 passed the government’s draft land code on its first reading by what would seem to be a whopping 251-22 margin. The relative ease of the draft’s passage was misleading in a number of respects. For one, its most controversial provisions–dealing with the sale of agricultural land–were removed from the draft land code last year, in the face of strong parliamentary opposition. Despite this, the Duma debate on the land code precipitated furious denunciations from opposition MPs that prevented Economics Minister German Gref from addressing the assembly. The Communist and Agrarian Party delegations walked out of the Duma, but not before fisticuffs broke out between two MPs. Gref’s arguments that restrictions on companies’ abilities to purchase the land on which their business are located discourage much-needed investment apparently cut little ice with the opposition, who equate land sales with the privatization scandals that dogged the sale of state enterprises and natural resources in the 1990s (Reuters, June 15).

The government’s draft labor code seeks to modernize labor regulations by legalizing employment practices that union activists find distasteful but are commonplace in Russia and in more developed market economies. These include giving employers the right to fire workers without union’s approval, as well as hiring workers on a “contract” basis without providing social benefits. In contrast to the initial version of the draft code, which was submitted to the Duma last year and then withdrawn in the face of labor opposition, the most recent version enjoys the support of Russia’s “official” Federation of Independent Trade Unions, which claims some 40 million workers as members. Despite this, the government’s submission of the draft to parliament on June 19 evoked protests from other labor unions, whose representatives picketed the Duma in defense of competing legislation sponsored by the parliamentary opposition (Moscow Times, July 20)

The ambition of the government’s reforms, and the opposition they have already encountered, suggest that few are likely to be implemented rapidly. Russia’s experience with market reform also indicates that their promulgation could have consequences that differ dramatically from those anticipated by their authors. Still, the breadth and depth of these measures taken together rivals that of the “shock therapy” reforms introduced during 1992-1994, when prices were liberalized and most Soviet-era economic institutions abolished or transformed. Should even a portion of the government’s 2001-era economic reforms be introduced, their effects could be very profound.

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