From Communism to Capitalism: Private versus Public Property and Inequality in China and Russia

Since 1980, many economies around the world have experienced two trends: rising aggregate private wealth-income ratio and increasing income inequality (Piketty and Zucman 2014; Piketty 2014). These trends have been particularly spectacular in China and Russia since their transitions from communism to more capitalist orientated economic systems (Piketty, Yang, and Zucman 2017; Novokmet, Piketty, and Zucman 2017). The transition to a mixed economy has taken different economic and political forms in China and Russia—with different privatization strategies for public assets, in particular. These different strategies have had a large impact on inequality and wealth ownership. In China, the transition has involved gradual but nevertheless wideranging reforms. The reforms were implemented progressively, from special economic zones in coastal cities towards inland provincial regions, and in sectoral waves. By contrast, Russia opted for a "bigbang" transition after the fall of the Soviet Union in 1990-1991, with a rapid transfer of public assets to the private sector and the hasty introduction of free market economic principles. In this paper, we compare our recent findings on private and public wealth accumulation in China and Russia, and discuss the impact of the different privatization strategies followed in the two countries on income inequality.