Russia

1
Russia

• Former Soviet Union

2
Leninism

• World War I
• Defeat in Russo-Japanese War of 1904
• Defeat in WWI of 1914-1918
• Russian Revolution
• A series of riot in March 1917
• October 1917 Bolshevik revolution ? overthrow of
  Czar
• Forming a Party State
• New Economic policy
• Nationalization of major industries, but
• Small businesses and agriculture are left private

3
Stalinism

• Stalin in power in 1928
• Starting 5 year plans
• Top priority on industrialization ?
  modernization? military power
• Collectivization of agriculture
• Purges of opponents and creation of nomenklatura
  (party elite group)

4
Post Stalin Period

• Khrushchev (1953-1964)
• More decentralized responsibilities
• Brezhnev (1964-1982)
• Brezhnev doctrine Eastern Europe under the
  Soviet
• Continuous improvement in living standards
• Two successors from 1982-1985
• Gorbachev (1985-1991)
• The 1980s are characterized as decline in Soviet
  power and economic well-being.

5
Perestroika and Glasnost

• Economic policy of Gorbachev
• Perestroika restructuring
• First perestroika, 1985-1987 and second
  perestroika, 1987-1989
• Modernizing industry by quality control,
  incentives, and decentralization
• Failed because of too many reforms uncoordinated.
• Glasnost Openness
• To create an open and transparent society
• More bad sides than good sides were revealed
• Caused independence of eastern European states.

6
Soviet Economy in the 1980s

• Slow or no economic growth
• Lack of export competitiveness
• Lagging behind in key technologies (computer,
  electronics, genetics)
• Heavy burden of defense budget (20 of GDP
  compared to 6 in the U.S.A.
• Poor infrastructures
• Environmental pollution (e.g. Chernobyl disaster)
  

7
Russia

• After Collapse of the Soviet Union

8
Transformation to Market Economy

• Shock therapy vs. gradualism
• Political change
• New constitution (drafted in 1989 under Gorbachev
  and ratified in Dec. 1993)
• From one party (Communist party) to Multi-parties
  democracy
• Legal provisions
• Contract law, property law, competition law,
  intellectual property law, bankruptcy law, etc.

9
Transformation to Market EconomyContinued

• Privatization
• Steps
• Macroeconomic adjustment, provision of legal
  framework, and valuation of assets
• Methods
• Voucher method, public auction, giving away or
  selling to workers and managers, and selling to
  foreigners
• Privatization of industry
• 1st stage small enterprises to workers and
  managers
• 2nd stage large enterprises by a voucher system
• 3rd stage case by case sales of large
  enterprises to foreigners

10
Transformation to Market EconomyContinued

• Privatization of agriculture
• State farms sold at auction
• Collective farms converted into partnerships
• Private plots no change
• Less than 3 of total land, but contributing to
  1/3 of meat and milk and 2/3 of eggs and potatoes
  production.
• Very slow privatization 90 of farms were still
  under collective farms in 1998.

11
Banking Reform

• Previously
• Gosbank (state bank) functions of both the
  central bank and commercial banks
• Special purpose bank Sberbank(savings bank)
• Presently two-tiered banking
• Central Bank of Russia
• Commercial banks (about 2,000)
• Convertibility of currency (ruble) introduced in
  1992

12
Fiscal Reform

• Federal
• Three major taxes
• VAT, profit taxes, and excise taxes
• Two major spending
• Debt service, defense
• Regional
• Three major taxes
• Profit taxes, personal income taxes, VAT
• Three major spending
• Housing and municipal service, education, and
  health

13
Evaluation of the Russian Economy

• Negative economic growth in the 1990s
• Politically and economically unstable ?reduction
  of foreign capital inflow
• Increase in poverty
• Default on foreign debts in 1998
• Increase in crime and corruption
• Increase in income and wealth inequality