False economy What’s in it for me? Understand what makes the

change their economic fate.
In the animal kingdom, natural evolution can 
lead to a dead end like the giant panda: a 
species that can barely survive or reproduce and 
has no hopes of changing. Fortunately, in world 
economics, it’s never too late to change.
Let’s take a look at why, of two countries with 
similar backgrounds, one managed to change 
and the other didn’t.
Russia is a good example of a country that tried, 
but ultimately failed, to change.
In the 1990s, after centuries of Tsarism and 
Communism, Russia attempted to transition into 
a free-market economy. But the nation quickly 
learned that it was ill prepared for this abrupt 
economic shift and ended up defaulting on its 
economic debt in 1998.
Russia then experienced a backlash against the 
free market and its unpredictability. As a result, 
Vladimir Putin restored the nation to a Tsarist-
like state: he drove out foreign companies and 
placed the nation’s energy industry back under 
governmental control.
Though much of the economy hinges on its oil 
and gas reserves, the centralization of power 
has restored a sense of stability to the Russian 
citizens. Though it has come at a price, with the 
loss of free media and fair elections.

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To see how a country can actually make 
fundamental changes, we can look at China.
China took a different approach to entering the 
free-market economy. Despite China’s history of 
being suspicious of foreign investors and 
businesses, the financial success of Hong Kong 
in the 1980s and 1990s proved that a diversified 
and open marketplace can lead to success.
So, when Hong Kong reverted back to Chinese 
control in 1997, the nation was able to follow the 
economic path of similar governments, including 
Taiwan and Singapore. Unlike Russia, China 
didn’t seal itself off from opportunities: it 
recognized the advantages a diversified 
economy has for creating potential revenue.
As with the other countries we’ve looked at, it’s 
clear that the economic outcomes of Russia and 
China were not written in stone. They are, in 
fact, the result of important choices the nations 
have made.