The Economic History of Russia
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The Russian economy is ranked as the sixth largest by purchasing power parity and the eleventh largest economy in the world by the nominal value. Russia has rich reserves of natural oil, coal, gas, as well as other valuable metals. Soon after the Second World War as well as the collapse of the Soviet Union Russia has undergone considerable changes, shifting from a centrally designed financial system to an internationally incorporated and a more market-based financial system. Various economic reforms that happened after the Second World War aimed at privatizing industries, with distinguished exceptions in the defense and energy-related sectors. Nevertheless, the speedy privatization procedure, together with a much disapproved "loans-for-shares" plan that converted major publicly owned firms to politically related "oligarchs," has led to a high concentration of equity ownership. As of 2010, Moscow, Russia’s capital has the highest population of billionaires in the whole world (Central Intelligence Agency 2).
From the year 1991 when the Soviet Union was dissolved, there has been a huge economic turmoil, particularly in Russia, in the changeover to capitalism. This has been characterized by decreased standard of living and an economy that has failed to create a greater material lifestyle for several people. However, in the haze of this economic turmoil there has been a flare of light. This dazzling spot in the Russian economy is attributed to the presence of oil and gas. Since the end of Second World War and the fall of communism, Russia has invented innovative ways of trade as well as laying pipelines that link to countries, a situation that has greatly increased revenue. Nevertheless, the Russian economy has been under pressure as it treads on the intricate path of recovery following the crumple of the previous Soviet Union in late 1991. Even though Russia is recognized of having huge reserves of natural resources as well as a pool of well-educated workforce, it has had restricted achievements as it tries to get rid of an economy that is centrally controlled and a shift towards a market-oriented economy (Central Intelligence Agency 3.
The unprepared Russian economy was badly affected by the 1998 global economic crisis. Throughout this period, the rate of inflation in Russia increased, additional cases of unemployment were reported, and there was a drop in the standards of living followed by a crashed GDP thereby creating a major disaster in the country. Nevertheless, the somber financial condition reverberated in the year that followed, and since then the Russian economy has made significant progress. This development has been mirrored in a stable decline in inflation, a rise in the GDP, a decrease in unemployment figures in addition to increase in both domestic and foreign investment. The major factors facilitated the economic recovery following 1998 crisis have been the aggressive enhancement from the weak ruble along with the trade surplus following an increase in world oil prices (Solanko 12).
Though Russian economy has improved through the years, decades of socialist rule have inundated the country with different economic problems that have to be effectively dealt in order to preserve the positive trend towards economic growth. Nevertheless, there are various industries in Russia, these industries are in deprived states require modernization or replacement. Furthermore, issues over rights in land ownership have continued to discourage restructuring and investment. The Russian economy even faces a more serious problem of tax evasion and there is the giant subject of planned crime that has permeated the very fabric of the Russian society. Therefore, the Russian government will have to embark on a lasting plan, be more reliable with its strategies as well as produce an environment that is favorable to for investors. This will infuse a positive picture in the minds of the prospective investors and get their confidence (Solanko 15).
The Russian financial system made a moderately excellent improvement in 2001 and 2002. In the year 2001 Russia’s GDP improved by 5 percent and in 2002, it improved by 4.1 percent. Although the proportional rise in the GDP in 2002 was small compared to that of 2001, the development was rather acceptable. Relatively, the standard proportionate boost in GDP in industrialized nations was 1.5 percent while in the United States, it was 2.3 percent. The year 2002 was the fourth consecutive year that Russia experienced a stable enhancement in its financial system after its miserable condition in the 1998 hence introducing a form of steadiness and creating financiers’ assurance (Solanko 21).
Russia is among the most developed of the previous Soviet states. Nevertheless, years of poor savings have left a great deal of Russian business outdated and extremely incompetent. Apart from its resource-based production centers, it has generated huge manufacturing abilities, particularly in metals, provisions or foodstuffs, and transportation tools. Globally, Russia is currently the third-biggest exporter of main aluminum and steel. Russia took over most of the security manufacturing foundation of the Soviet Union, thus weapons are still an essential export kind for Russia. Based on the U.S. statistics of the Trade Representative's National Trade Estimate of 2010, Russia keeps on upholding numerous obstructions with regard to imports. Negotiations are in progress in the framework of Russia's WTO succession to eradicate these actions or amend them to be reliable with globally established trade strategy observations. Non-duty hurdles are recurrently employed to hamper alien admittance to the marketplace and are as well a considerable subject in Russia's WTO consultations (Wolf and Lang 53).
Russia has gone through momentous transformations ever since the crumple of the Soviet Union, moving from an internationally-segregated, centrally-scheduled financial structure to a more market-foundation and worldwide-assimilated financial system. Most of the manufacturing industries in Russia were privatized by the monetary changes in the 1990s, with prominent exclusions in the electricity and security-linked segments. The security of possessions civil rights is still feeble, and the private zone is at the same time answerable profound state intrusion. Russian business is principally divided between internationally-viable product manufacturers; in the year 2009 Russia was the globe's biggest distributor of natural gas, the second biggest distributor of oil, and the third main exporter of steel and original aluminum; and other fewer viable important businesses that remain reliant on the Russian home market (Wolf and Lang 55).
This dependence on product exports makes Russia defenseless against detonation and ruined sequences that pursue the extremely unpredictable sways in the international product cost. The administration from the year 2007 has initiated a determined curriculum to decrease this dependence and increase the nation’s enhanced proficiency areas, but with little consequences up to now. The financial system had standardized a 7 percent increase from the year 1998 when Russian experienced an economic catastrophe, leading to a multiplying of actual throwaway earnings and the materialization of a middle social rank. The Russian financial system, nevertheless, was one of the toughest strikes between the years 2008-09 international monetary predicament as oil charges went down and the overseas money that Russian financial institutions and companies depended on crumpled. The Central Bank of Russia used one-third of its $600 billion universal funds, the third largest, globally, in late 2008 to drag the ruble. The administration also dedicated $200 billion in a salvage arrangement to boost bank’s sector liquidity and support Russian companies that were not capable of settling huge overseas outstanding amounts of debts (Wolf and Lang 61).
Solanko further explains that in mid-2009, the fiscal deterioration died out and in early 2010, the financial system started to develop. However, ruthless fires and famine in middle Russia condensed farming productivity, leading to a prohibition on the export of grains for a fraction of the year, and it reduced development in other divisions like industrialized and selling business. Increased oil costs held up Russian development in early 2011 and might assist Russia decrease the financial plan shortage passed down from the bad years of 2008-09, although inflation and augmented government expenses may hinder the constructive effect of these returns. Russia's continuing setbacks consist of a lessening labor force, an advanced level of fraud, complexity in getting investment resources for minor, weak firms, and poor communications helpless without huge investments (27).
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