The Foreign Service Journal, April 2007

nesses that produce, buy and sell in Siberia all have to overcome the obstacle of distance. Spatial misallocation is an often-underappreciated feature of the Soviet system. One way to recognize this is to imagine a counterfactual: suppose that the Bolshevik Revolution had taken place not in Russia but in Japan. Central planning under a “Japanese Stalin” would have done great damage to the economy. But it would not have caused as much spatial misallocation, simply because it would have had much less “room for error.” Spatial misallocation may well be the most diffi- cult part of the Soviet legacy to overcome, as decades of mistakes have to be corrected. Has there been any corrective shift in the post-Soviet period? After the collapse of the command-administra- tive system of economic management in the early 1990s, free-market forces in Russia began rectifying the mistakes of the Soviet era. People migrated out of the coldest and most remote regions. However, that self- adjustment came to a halt in 1999, a development illus- trated in Figure 3 above. The index plotted on the chart is the average January “temperature per square meter” of new housing. It takes into account both the volume of new housing built F O C U S A P R I L 2 0 0 7 / F O R E I G N S E R V I C E J O U R N A L 35 Figure 3