40 Web- 1 Copyright McGraw-Hill/Irwin, 2005 Ideology and Institutions Planning Goals and Techniques Collapse of the Soviet Economy Russian Transition to a Market Economy Centrally Planned Price Effects Market Reforms in China Outcomes and Prospects Key Terms Previous Slide Next Slide End Show WEB RUSSIA & CHINA Transition Economies: 40 C H A P T E R WEB

40 Web- 2 Copyright McGraw-Hill/Irwin, 2005 Ideology and Institutions Planning Goals and Techniques Collapse of the Soviet Economy Russian Transition to a Market Economy Centrally Planned Price Effects Market Reforms in China Outcomes and Prospects Key Terms Previous Slide Next Slide End Show WEB Marxian Ideology Labor theory of value Surplus Value State Ownership Central Economic Planning IDEOLOGY & INSTITUTIONS

40 Web- 3 Copyright McGraw-Hill/Irwin, 2005 Ideology and Institutions Planning Goals and Techniques Collapse of the Soviet Economy Russian Transition to a Market Economy Centrally Planned Price Effects Market Reforms in China Outcomes and Prospects Key Terms Previous Slide Next Slide End Show WEB 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

40 Web- 4 Copyright McGraw-Hill/Irwin, 2005 Ideology and Institutions Planning Goals and Techniques Collapse of the Soviet Economy Russian Transition to a Market Economy Centrally Planned Price Effects Market Reforms in China Outcomes and Prospects Key Terms Previous Slide Next Slide End Show WEB Problems with Central Planning The Coordination Problem The Incentive Problem PLANNING GOALS & TECHNIQUES

40 Web- 5 Copyright McGraw-Hill/Irwin, 2005 Ideology and Institutions Planning Goals and Techniques Collapse of the Soviet Economy Russian Transition to a Market Economy Centrally Planned Price Effects Market Reforms in China Outcomes and Prospects Key Terms Previous Slide Next Slide End Show WEB COLLAPSE OF THE SOVIET ECONOMY Declining Growth Poor Product Quality Few Consumer Goods Large Military Burden Agricultural Drag

40 Web- 6 Copyright McGraw-Hill/Irwin, 2005 Ideology and Institutions Planning Goals and Techniques Collapse of the Soviet Economy Russian Transition to a Market Economy Centrally Planned Price Effects Market Reforms in China Outcomes and Prospects Key Terms Previous Slide Next Slide End Show WEB RUSSIAN TRANSITION TO A MARKET SYSTEM Privatization Price Reform Promotion of Competition Making Ruble Fully Convertible Price-Level Stabilization Other Major Problems Recent Revival

40 Web- 7 Copyright McGraw-Hill/Irwin, 2005 Ideology and Institutions Planning Goals and Techniques Collapse of the Soviet Economy Russian Transition to a Market Economy Centrally Planned Price Effects Market Reforms in China Outcomes and Prospects Key Terms Previous Slide Next Slide End Show WEB CENTRALLY PLANNED PRICE EFFECTS D S’ S Price per unit Quantity demanded and supplied 0 PfPf FIXED LOW PRICE CEILING BY GOVERNMENT LEADS TO… SHORTAGE

40 Web- 8 Copyright McGraw-Hill/Irwin, 2005 Ideology and Institutions Planning Goals and Techniques Collapse of the Soviet Economy Russian Transition to a Market Economy Centrally Planned Price Effects Market Reforms in China Outcomes and Prospects Key Terms Previous Slide Next Slide End Show WEB D S’ S Price per unit Quantity demanded and supplied 0 PaPa PfPf SHORTAGE Without privatization prices rise to P a CENTRALLY PLANNED PRICE EFFECTS

40 Web- 9 Copyright McGraw-Hill/Irwin, 2005 Ideology and Institutions Planning Goals and Techniques Collapse of the Soviet Economy Russian Transition to a Market Economy Centrally Planned Price Effects Market Reforms in China Outcomes and Prospects Key Terms Previous Slide Next Slide End Show WEB D S’ S Price per unit Quantity demanded and supplied 0 PaPa PePe PfPf SHORTAGE With privatization prices rise to P e CENTRALLY PLANNED PRICE EFFECTS

40 Web- 10 Copyright McGraw-Hill/Irwin, 2005 Ideology and Institutions Planning Goals and Techniques Collapse of the Soviet Economy Russian Transition to a Market Economy Centrally Planned Price Effects Market Reforms in China Outcomes and Prospects Key Terms Previous Slide Next Slide End Show WEB 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

40 Web- 11 Copyright McGraw-Hill/Irwin, 2005 Ideology and Institutions Planning Goals and Techniques Collapse of the Soviet Economy Russian Transition to a Market Economy Centrally Planned Price Effects Market Reforms in China Outcomes and Prospects Key Terms Previous Slide Next Slide End Show WEB OUTCOMES & PROSPECTS Positive Outcomes of Reform Problems Incomplete Property Rights Macroeconomic Difficulties Integration into the Global Economy Geographically Uneven Development

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) ENDBACK Copyright McGraw-Hill/Irwin, 2005