The Russian Economy in the Post-Soviet Era
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Case Code: ECON027 Case Length: 19 Pages Period: 1995-2007 Pub Date: 2008 Teaching Note: Not Available |
Price: Rs.400 Organization : - Industry : - Countries : Russian Federation Themes: Economics |
Abstract Case Intro 1 Case Intro 2 Excerpts
"Everyone's focusing on the fact that there are more billionaires in Moscow than there are in London, but what we're actually also seeing is that the disposable income of skilled people in Russia is going up. You see a lot of infrastructure, a lot of housing, shopping malls. The commodity boom is now percolating beyond Moscow"
- Mark Spelman, Accenture Energy Analyst, in July, 2007.
"The catastrophe has run its course. The economic policy of Yeltsin's and Chernomyrdin's aides has made a small section of the former communist nomenklatura and of the "new Russians" unbelievably rich, plunged most of the nation's industry into paralysis, and reduced the majority of the population to poverty. As far as property ownership is concerned, the gap between the rich and poor is much deeper now than that which led to the [1917] October [Bolshevik] Revolution."
- A statement issued by a group of prominent Russian intellectuals in the late 1990s.
Introduction
In early 2007, the Gross Domestic Product (GDP) (in terms of market exchange rate) of the Russian Federation (Russia) crossed the $ 1 trillion mark on the back of economic growth and a strong ruble. In the early to mid 2000s, Russia's economic growth had been rapid, contributed in a significant measure by the growth in the domestic energy industry. Prior to 1991, Russia was the largest republic (Russian Soviet Federative Socialist Republic or RSFSR) in the Soviet Union or Union of Soviet Socialist Republics (USSR). In 1990-91, the Soviet economy was reeling under supply shortages and high inflation. Between 1990 and 1991, the GDP declined by 17 percent and retail prices increased by 140 percent.
The troubled economic conditions together with political turmoil led to the dissolution of Soviet Union in 1991. After the breakup of the Soviet Union in December 1991, Boris Yeltsin (Yeltsin) became the President of Russia. During his first term as President, Yeltsin introduced a program of macroeconomic stabilization and economic restructuring. The macroeconomic stabilization measures included reducing the government budget deficit, increasing government revenues, and controlling the expansion of money supply including the subsidized credit given to entrepreneurs.
The government also lifted price controls, changed the tax system, and privatized several sectors of the economy. However, in the early years of the program, the government was not successful in reducing government spending, or in controlling credit expansion and money supply growth. But later, with strict fiscal and monetary policies, the government achieved some of its objectives. In 1996, Yeltsin was reelected as President of Russia. In the next two years, Russia experienced declining foreign exchange reserves and a fiscal situation that started to worsen again. In August, 1998, Russia faced a financial crisis when the value of the ruble declined by 75 percent and the country defaulted on its debt. The financial crisis resulted in growing opposition to Yeltsin in the parliament; and in 2000 Vladimir Putin (Putin) was elected President of Russia...
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