40 C H A P T E R WEB Transition Economies: RUSSIA & CHINA.

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Presentation transcript:

40 C H A P T E R WEB Transition Economies: RUSSIA & CHINA

Labor theory of value Surplus Value Marxian Ideology State Ownership IDEOLOGY & INSTITUTIONS Marxian Ideology Labor theory of value Surplus Value State Ownership Central Economic Planning

PLANNING GOALS & TECHNIQUES Industrialization (Rural Development in China) Overcommitment of Resources Mobilization of Resources Allocation by Directives Government Price Setting Self-Sufficiency Passive Macroeconomic Policies

PLANNING GOALS & TECHNIQUES Problems with Central Planning The Coordination Problem The Incentive Problem

Declining Growth Poor Product Quality Few Consumer Goods COLLAPSE OF THE SOVIET ECONOMY Declining Growth Poor Product Quality Few Consumer Goods Large Military Burden Agricultural Drag

RUSSIAN TRANSITION TO A MARKET SYSTEM Privatization Price Reform Promotion of Competition Making Ruble Fully Convertible Price-Level Stabilization Other Major Problems Recent Revival

CENTRALLY PLANNED PRICE EFFECTS FIXED LOW PRICE CEILING BY GOVERNMENT LEADS TO… Price per unit Pf D SHORTAGE Quantity demanded and supplied

CENTRALLY PLANNED PRICE EFFECTS Without privatization prices rise to Pa Pa Price per unit Pf D SHORTAGE Quantity demanded and supplied

CENTRALLY PLANNED PRICE EFFECTS With privatization prices rise to Pe Pa Price per unit Pe Pf D SHORTAGE Quantity demanded and supplied

MARKET REFORMS IN CHINA Agricultural & Rural Reform Township & Village Enterprises Reform of Urban Industries State Owned Enterprises (SOE) Urban Collectives Special Economic Zones (SEZs) Development of Supporting Institutions Transformation of the SOEs

OUTCOMES & PROSPECTS Positive Outcomes of Reform Problems Incomplete Property Rights Macroeconomic Difficulties Integration into the Global Economy Geographically Uneven Development

KEY TERMS labor theory of value surplus value state ownership central economic planning coordination problem incentive problem township & village enterprises state-owned enterprises (SOEs) urban collectives special economic zones (SEZs) Copyright McGraw-Hill/Irwin, 2005 BACK END

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