Economy of Mother Russia

Alistair Wilkie, Liszter Li, Marco Cunqueiro, Suriya Baskar, Fazla Rabby

Communism

● Communism is a socioeconomic system structured upon common ownership of the means of production and characterised by the absence of classes, money, markets and the state

● The means of production would be owned by the proletariat(the wage earning working class)

● One class with an equal distribution of wealth would arise

Communism in the Soviet Union● Communism prevailed as a socioeconomic system in the Soviet Union from 1922 to

1991● In the Russia the means of production was not held by the working class but

instead the central government● This is known as a command economy(an economy in which production,

investment, prices, and incomes are determined centrally by a government● Beginning in 1928, the entire course of the economy was guided by a series of

Five-Year Plans(nationwide economic plans). By the 1950s, the Soviet Union had, during the preceding few decades, evolved from a mainly agrarian society into a major industrial power

Transition to Market Economy● After Mikhail Gorbachev came to power, continuing economic liberalisation moved the

economy towards a market-oriented socialist economy● The transition from a command economy to a market economy was a huge step for

Russia that created many problems such as: economic collapse, hyperinflation, privatization, corruption, price drop for oil

● Boris Yeltsin implemented “shock therapy”-sudden release of price and currency controls and immediate trade liberalization within a country.

● Massive poverty was also an outcome

Consequences of the Economic Transition

● Privatization lead to many bankruptcies● Decentralization of power lead to local

governments disregarding the policies of central governments

● Corruption● Inflation which caused a decrease in the

output of the country

Consequences Cont.

● Greater inequality causing a higher crime rate(which is not overseen)

● Decrease in availability of public services (medical and educational)

● Weak enforcement of law

Putin’s Economic Policies● Progressive reforms from 2000 to 2002● Progressive income tax with a peak of 31% replaced

with a flat income tax of 13%● Corporate tax reduced from 35 to 24%● Social security contributions cut from a flat rate of

39.5% of payroll to an average of 26%● Small scale tax violations decriminalized● simplified registration, licensing and standardization of

enterprises - number of enterprises increased by 7% annually since 2002

Putin’s Economic Policies

● Drastic change in 2003● Confiscation of biggest oil company Yukos● Started re-nationalization throughout country● Condoned corruption● Bribes to go to uni, stay out of the military, stay out of

prison, etc

Medvedev’s Policies

● Less oil dependence and increasing technology sector● Privatization of assets to bring in Western capital due

to financial crisis● Reform rather than nationalization

Dangers of Russian Economy

● Little implementation of laws● Too much dependence on oil● Russia needs other factors to grow an economy able to

sustain the life style that has arisen since the end of the Soviet Union

● Stagnation of oil prices, hindering growth● Corruption is allowing for companies to do what they

want

GDP Growth since 1999

● GDP per capita in 1999 - $1338.99● GDP per capita in 2004 - $4108.57● GDP per capita in 2008 - $11700.22● GDP per capita in 2012 - $14037.02● Steady increase with the exception of 2009 for obvious

reasons

Russia’s Environmental Policies

● There are numerous environmental issues from policies during the Soviet Union

● Russia has made an effort to steadily migrate to environmentally friendly standards.

● Pushed by both western markets and by the state.● Deforestation● Air pollution● Water pollution● Lack of funds

Current Russian Economy-Currently, as of the last two months, Russian economy is showing signs of collapse.Major Contributions to Declining Economy-Invasion of Crimea led to sanctions from Western Powers, where Russia exports goods such as wheat.-Consumer demand failed to make up for Declining investments

Current Russian Economy

Effects of Declining Russian Economy-The Russian Ruble has weakened about 9.6% against the dollar this year, more than 175 other currencies. -Experts predict the involvement in Crimea will drop Russian Economy into another economic recession towards the end of this year.- Direct cost of annexing Crimea will cost the Russian Government 3 billion dollars, along with 2 billion dollar to replace funds from Ukraine’s budget and 1 billion dollars to help raise pensions upto Russian standards.

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