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Russia

Russia. Former Soviet Union. 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

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Russia

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  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

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