Russia Political Economy & Development

What are the weaknesses of Russian state institutions?  Tax collection  Legal enforcement of contracts  Protection of ownership rights  Control of crime and corruption  Creation of a reliable banking system  Adaptation to market economy  Tax collection  Legal enforcement of contracts  Protection of ownership rights  Control of crime and corruption  Creation of a reliable banking system  Adaptation to market economy

Soviet Economic System  Command Economy  Timeframe Plans  Environmental Impact  Limited Technological Safeguards (Chernobyl)  Search for Resources  Impact of Insulation of Economy  Command Economy  Timeframe Plans  Environmental Impact  Limited Technological Safeguards (Chernobyl)  Search for Resources  Impact of Insulation of Economy

Soviet Economic System (strengths)  Rapid Industrialization  Social Welfare  Mass Education  Low Levels of Inequality  Military Advances  Space Advances  Rapid Industrialization  Social Welfare  Mass Education  Low Levels of Inequality  Military Advances  Space Advances

Russian Federation  Market Reform (Shock Therapy)  Private Ownership - respond to consumer demands, increase efficiency, create competitive environment  Attraction of Foreign Capital  Market Reform (Shock Therapy)  Private Ownership - respond to consumer demands, increase efficiency, create competitive environment  Attraction of Foreign Capital

Shock Therapy  Free Prices from State Control  Take Ownership of Economic Assets away from State  Open Economy to international Influences  Transition of Decision-Making to New Private Owners  Goals - Avoid Downward Spiral & Hyperinflation, Create a Western- Style Market Eco., Join Global Eco. System while producing Domestic Prosperity  Free Prices from State Control  Take Ownership of Economic Assets away from State  Open Economy to international Influences  Transition of Decision-Making to New Private Owners  Goals - Avoid Downward Spiral & Hyperinflation, Create a Western- Style Market Eco., Join Global Eco. System while producing Domestic Prosperity

Yeltsin’s Steps  Three Pillars of Reform 1.Lifting of Price Controls 2.Encouragement of Small Businesses 3.Privatization of most State- owned Enterprises Results - Inflation, Real Wages declined, IMF Restrictions Hurt Eco  Three Pillars of Reform 1.Lifting of Price Controls 2.Encouragement of Small Businesses 3.Privatization of most State- owned Enterprises Results - Inflation, Real Wages declined, IMF Restrictions Hurt Eco

Privatization of State Sector  Spontaneous Privatization - Resulted in…  Joint-Stock Companies - ?  Privatization Vouchers - ?  Distribution of Shares ? Problems? - Insider Privatization  Spontaneous Privatization - Resulted in…  Joint-Stock Companies - ?  Privatization Vouchers - ?  Distribution of Shares ? Problems? - Insider Privatization

Impact of Privatization  Some Managers extracted personal profits rather than improve production/lacked skill set, workers marginalized  Certain industries remained stagnant, others were gobbled up by financial-industrial conglomerates  “Favored businessmen” gained control over lucrative enterprises, gave gov loans which they could not Repay – Oligarchs  Productivity & Efficiency didn’t ↑ signif; unprofitable forms continued operating; investment was weak; ownership unfair  Agricultural transition was also ineffective as efficiency waned and foreign imports undercut dom. producers (Reforms later restricted for inv.)  Economic Depression! (Probs on pg )  Other Centers of power, Oligarchs, corruption, mafia…  Some Managers extracted personal profits rather than improve production/lacked skill set, workers marginalized  Certain industries remained stagnant, others were gobbled up by financial-industrial conglomerates  “Favored businessmen” gained control over lucrative enterprises, gave gov loans which they could not Repay – Oligarchs  Productivity & Efficiency didn’t ↑ signif; unprofitable forms continued operating; investment was weak; ownership unfair  Agricultural transition was also ineffective as efficiency waned and foreign imports undercut dom. producers (Reforms later restricted for inv.)  Economic Depression! (Probs on pg )  Other Centers of power, Oligarchs, corruption, mafia…

Effects of the 1998 Financial Crisis  New loans were taken out at higher rates to pay off existing debt (Pyramid Debt)  8/98 – Russian Stock Market lost over 90% of its value  Value of Ruble plummeted as gov printed more  Devaluation of Ruble (lost 2/3 of its value against the U.S. Dollar  Crisis eventually led to positive changes 1. Reduction of imports – Local comp. 2. Indigenous solutions 3. International oil & Gas prices ↑ sharply  New loans were taken out at higher rates to pay off existing debt (Pyramid Debt)  8/98 – Russian Stock Market lost over 90% of its value  Value of Ruble plummeted as gov printed more  Devaluation of Ruble (lost 2/3 of its value against the U.S. Dollar  Crisis eventually led to positive changes 1. Reduction of imports – Local comp. 2. Indigenous solutions 3. International oil & Gas prices ↑ sharply

Putin’s Economic Policy  Simplification of tax system (13% flat tax)  Amendments to corp. governance law to protect shareholders, Legislation to control money laundering, Provision of the sale of land for domestic and foreign buyers, etc. (374)  Budget surplus & for. Debt declined  WTO acceptance  Oligarchs targeted (Media Moguls Vladimir Gusinsky and Boris Berezovsky both fled)  Selective enforcement or law concerns  Debates of status of press freedom, democracy & privatization continue – Are Order & stability worth the limits on democracy?  Simplification of tax system (13% flat tax)  Amendments to corp. governance law to protect shareholders, Legislation to control money laundering, Provision of the sale of land for domestic and foreign buyers, etc. (374)  Budget surplus & for. Debt declined  WTO acceptance  Oligarchs targeted (Media Moguls Vladimir Gusinsky and Boris Berezovsky both fled)  Selective enforcement or law concerns  Debates of status of press freedom, democracy & privatization continue – Are Order & stability worth the limits on democracy?

Soviet Social Policy

Economic Reform & Russian Society

Russian Political Culture & Eco Change

Russia & the International Pol. Eco.