In Russia, the pro-market economic determinism of the 1990s created the illusion that capitalism’s benefits would eventually produce a country of staunch democrats. Instead, Russia’s experience proved that economic growth can trigger nationalist nostalgia for a long-past superpower role. Derailed en route to democracy, Russia now sits idle in a way station where strength mingles with impotence, powerful bureaucracies constrain authoritarian leadership, and thriving private businesses uneasily coexist with state-run enterprises.

Of course, most transitional societies are hybrids of some kind. (Just look at China.) But precisely what kind of hybrid is Russia? What path does President Vladimir Putin envision for the country in his second term? Will he find the courage to undo the bonds between power and business, between those who make the decisions and those who influence them? And what fate awaits Russia if he does not?

Grigory Yavlinsky attempts to answer those questions in his book Periferiiny Kapitalizm (Peripheral Capitalism). As a professional economist and one of Russia’s most prominent opposition leaders, he has both the smarts and the street credentials to tackle these issues. Yavlinsky first emerged as a promising young deputy prime minister in Russia’s first post-Soviet government in 1990, under then President Boris Yeltsin. In a bold and rare move, he later left the government voluntarily and led his pro-democratic opposition Yabloko party into the Duma (Russian parliament), where he spent a decade storming the barricades of Russia’s soft authoritarian rule. First, he presented the “500 Days” plan to transform the Soviet economy in 1990. In 1991, he crafted the “Grand Bargain,” which aimed to...