1 / 160

RUSSIAN ECONOMY

RUSSIAN ECONOMY. Communist Economic Systems. Russia’s transition to planned economics. state. In a planned economy, the __________ regulates or “plans” p_____________ and p________ Planned economies are also called _____________economies

elam
Download Presentation

RUSSIAN ECONOMY

An Image/Link below is provided (as is) to download presentation Download Policy: Content on the Website is provided to you AS IS for your information and personal use and may not be sold / licensed / shared on other websites without getting consent from its author. Content is provided to you AS IS for your information and personal use only. Download presentation by click this link. While downloading, if for some reason you are not able to download a presentation, the publisher may have deleted the file from their server. During download, if you can't get a presentation, the file might be deleted by the publisher.

E N D

Presentation Transcript

  1. RUSSIAN ECONOMY Communist Economic Systems

  2. Russia’s transition to planned economics state In a planned economy, the __________ regulates or “plans” p_____________ and p________ Planned economies are also called _____________economies From the late 19___s to 19___, the Soviet Union operated under a planned economy The ideology of __________________ inspired the use of this system encourages____________ownership of means of production roduction rice command 20 91 Marxism- Leninism public

  3. Russian Civil War 1920 Bolsheviks  Conversion to a planned economy began after the end of the ___________________in ______________  The ________________ seized control of Russia after this war __________________ (1870-1924) led the Bolsheviks during the war  The Soviet government ___________________ agriculture in the late 19____s and 19____s  Collectivization formed communities in which property is shared  Property was owned by the ______________, not individuals  ______________(1878-1953) spearheaded collectivization succeeded Lenin as leader of the Bolshevik Party  The Bolshevik Party became the _________________ Party of the Soviet Union Vladimir Lenin collectivized 20 30 community Joseph Stalin Communist

  4. STALIN’S REFORMS Socialist  Stalin aimed to transform Russia into a __________ economy In this economy, ____________ and society belonged collectively to all workers  Stalin eliminated the class of people who owned property without contributing ____________ This class is referred to as the “____________”  To achieve this goal, the government attempted to __________________all private property  This included all factories and equipment, which were known as “_________” property labor capitalists nationalize capital

  5. Russia’s transition to market-based economics •  Russia now operates under a market-based economy •  Transitioning from a planned to market-based economy took _______ years (19___-20___) •  Most of the transformation occurred in the 1990s • Russia no longer operates under communism •  ECONOMIC GROWTH: • Russia experienced rapid growth from 19___ to 20__ • Growth ended abruptly with the ________________________in 2008 •  Russia faces significant challenges • Several problems stall Russia’s development in the global economy twenty 91 11 99 08 global economic crisis

  6. Forms of Property • Three forms of property comprise the “classical” socialist system • state-owned firms, • budgetary institutions, and • cooperatives

  7. Three Organization Types

  8. State-owned firms •  There were both • NATIONAL FIRMS • REGIONAL FIRMS

  9. State-owned Firms • National firms • under the jurisdiction of national-level ministries • Regional firms • under the jurisdiction of provincial and local governments • THE “BIG BUT”: • Economist Janos Kornai: categorizing firms as state-owned = meaningless because… • subnational governments were controlled by the national government • All income from production contributed to • STATE COFFERS • Firms could not be • bought or sold

  10. These firms provided employment and housing on a massive scale • The place of employment included all essential -- social services • Workers had access to • apartments, daycare, schools, and other social services • This system gave rise to the communist ___________to________ system of social services cradle grave

  11. These firms provided employment and housing on a massive scale • State-owned firms encompassed most _____________industry • auto plants and • defense factories • The Soviet model emphasized economies of scale in every industry • Economies of scale describes the gains a firm achieves from • Expanding production • Individual plants commonly employed over • 100,000 workers heavy

  12. mobility • Due to this living and working situation, laborers lacked ____________. In order to move, workers had to acquire a • new job, residence, and housing permit • A housing permit was called a _____________ • The process of moving took years • Low worker mobility _____________the process of devising production plans • Government planners needed to keep track of labor at every individual firm • _____________________ of state-owned firms started in 1992 PROPISKA simplified PRIVATIZATION

  13. Budgetary institutions • Budgetary institutions included • universities, • research and educational institutions, • Training centers, • trade schools, • hospitals, and • museums • ____________or_______________________budgetsfunded budgetary institutions • Budgetary institutions had no obligation to make ____________cover___________________ National regional government income expenditures

  14. Comrade, come join the KOLKHOZ! Cooperatives • Cooperatives operate similarly to state- owned firms but were mostly located in _________________ • The cooperative, or collective farm, was called a _______________ • Like state-owned firms, cooperative farms operated on a ___________ scale • Farms included social services such as ___________ • In the 1930s, Stalin collectivized agriculture by stripping all citizens of _______________ •  The state assumed ownership of all _________ agriculture KOLKHOZ massive housing property output

  15. COLLECTIVIZATION • ECONOMIC MOTIVES: • steady supply of grain for________ • The state believed larger farms would produce more ________________ than smaller farms • POLITICAL MOTIVES: bureaucratic control of farmers prevented them from fighting back • Farmers could not become a social, political, or economic force • They fit seamlessly into the body of the Soviet system • They could not • leave the farm or • outsource labor • Essentially, farmers always remained members of • the “collective” cities efficiently

  16. Summary of socialism PRIVATE • Socialism replaces __________ownership with __________ ownership • The state owns all property • Capitalists could no longer __________workers • All members of society collectively worked and owned property • Public ownership of production transferred the responsibility of allocating resources from __________mechanisms to ________________ economic planning PUBLIC EXPLOIT MARKET BUREAUCRATIC

  17. CENTRAL PLANNING SYSTEM

  18. The Planning System: The role of bureaucracy • The bureaucracy planned all economic activity • top-down fashion • Fulfilling plans was compulsory • planned economy sought to eliminate the anarchy of the market • state would organize the economy on a national scale • bureaucracy, not the market forces, controlled the vitality of a firm • Bureaucratic planning sought • to distribute goods more equitably • goal followed the ideals of Marxism

  19. Five-year plans dictated the Soviet economy • Each five year plan was split into annual plans • Five-year plans functioned as statements of policy intent rather than specific plans • The first plan: 1928 • The last plan: deteriorated in the late 1980s

  20. CENTRAL PLANNING • Planning involved • determining inputs and • estimating outputs for each individual factory • This task was enormous, especially since the Soviet Union spanned 13 time zones • Flawed estimations often resulted in shortages • A lack of inputs caused a lack of outputs

  21. CENTRAL PLANNING • Plans determined each firm’s level of • technical development, • capital investment, and • trade

  22. CENTRAL PLANNING • A system of bureaucracy-controlled price lists designated prices of all goods • Gosplanmanually calculated every aspect of the entire Soviet economy • For most of this period, planners lacked access to computers

  23. BUREAUCRATIC RESPPONSIBILITIES

  24. The role of managers and labor • Plans required coordination of • the Communist Party, • State ministries, and • individual firms

  25. The role of managers and labor • Gosplan strategies to break these systems down into manageable parts • Planners disaggregated the plan in a downward flow of information • Higher levels sent directions to lower levels • State plans did not recommend or suggest actions • The term “command” economy derives from this process • Planners received an upward flow of information • While drafting a plan, planners received information from lower levels • Lower levels contributed nonbinding recommendations about target output levels

  26. The role of managers and labor • The bureaucracy chose managers at every level of the economy • Each manager held a specific and mandatory role in each plan • Plans specified the amount of labor allocated to each sector and factory

  27. Incentives and attitudes • Plans required firms to produce exactly the amount stated in the plan • managers lacked motivation to innovate • No reward for producing a surplus • But the state punished managers for failing to meet plan targets • Managers could be • removed from office, • sent to a labor camp, or • accused of sabotage • An accusation of sabotage could lead to a death sentence

  28. Central Planning and Central Management • Motivation: intrinsic • ideological sense of duty to the Communist Party • Motivation: extrinsic - bonuses for good work • awards and • privileges • In addition, • political power and prestige provided sources of motivation • For some, material benefit and fear were motivators

  29. Central Planning and Central Management Among managers, “SERVILITY and a HEADS DOWN MENTALITY prevailed. • BIG “BUT”: the penalties of taking risks outweighed the potential rewards • Without ownership, managers lacked incentive to exceed the bare minimum • Janos Kornaistates…

  30. Economic distortions • A chronic “shortage” economy emerged in almost every sector • The planning system misestimated the supply and demand for goods • In a free market economy, changes in price eliminate excess demand and supply • This shortage condition affected consumer goods

  31. Managers had built-in incentives to underreport production: • Ensured that plan targets for the next year would not exceed the firm’s capabilities • A firm that could produce 150% of the target plan might produce only 101% • This signaled improvement but not enough to cause expectations of it to increase • Managers • hid extra output and • sold it on the black market

  32. Outputs differed in proportion to inputs • Target plans • only specified that firms meet a goal, • not fully utilize the allocated inputs • As a result, • excess inputs existed in some sectors • while shortage existed in others • This caused • poor allocation of resources and • waste

  33. STATE PRIORITIES: • Socialism overemphasized rapid growth • Quantity of production took precedence over quality • Inferior quality of goods still impedes Russia’s ability to compete in world markets • The state prioritized industrial production over consumer production

  34. SUMMARY of PROBLEMS:

  35. SHADOW ECONOMY / BLACK MARKET • RESPONSE to the chronic “shortage” state • A black market is called a shadow economy • economic activity that lacks official state approval • In the socialist system, private property and private means of production do not exist • Black market participants circumvented price lists and other restrictions of the system • Some analysts believed the black market kept the system alive • The black market remedied some of the failures of the planning system • It also fueled corruption at every level of the economy • Russia still feels the effects of the black market today

  36. MIKHAIL GORBACHEV: VITAL STATS • Born: • 1931 • Became General Secretary of the Communist Party: • March 1985 • Ousted from office: • 1991

  37. Problems facing Gorbachev upon entering office • Soviet Russia’s stagnating economy was the greatest challenge • planning system lacked flexibility • complexity of calculating economic needs exceeded the capabilities • Tim COLTON believed planners could not anticipate the need for computerization • As the economy’s size and complexity increased, so did planning failures • Values and motivation suffered under the overbearing state TIM COLTON Morris and Anna Feldberg Professor of Government and Russian Studies and the Chair of the Department of Government at Harvard University

  38. Reform and reconstruction • Gorbachev immediately recognized a need for an overhaul of the economy • This goal = perestroika, literally translating to “reconstruction” • did not intend to establish a market-based liberal system • sought to reform the existing communist system

  39. Criticism • Many critics argued that Gorbachev ignored the Soviet economy • They compared his actions to Chinese leader Deng Xiaoping’s actions in the 1980s • They accused him of “sequencing” reform • This practice involves favoring “easier” political reforms • In contrast, Gorbachev began his reforms with the economic challenge • Gorbachev’s economic policies • between 1985 and 1991 • Followed 4 phases

  40. Phase 1: 1985-86 • Recovering Worker Productivity and Infrastructure

  41. Anti-alcohol campaign • First, Gorbachev tackled worker absenteeism and low labor productivity • He initiated an anti-alcohol campaign to reduce chronic alcoholism among workers • The campaign closed down some alcohol factories • Some Russians resorted to producing bootleg liquor • This created the unintended sugar shortage • The consumption of bootleg liquor also meant that productivity remained low

  42. Uskorenie • Gorbachev attempted to invest in old infrastructure • launched an uskorenie, • literally meaning “acceleration” • acceleration of investment in old plants and factories • The Soviet Union lagged behind the West’s technological progress • Poor infrastructure impeded labor productivity

  43. The two programs were fundamentally incompatible, because • one reduced government revenue and • the other demanded more government spending.

  44. Failure of both reforms • Both initiatives failed • socially • economically • The anti-alcohol campaign worked against the investment project • Closed alcohol factories reduced state revenue • Decreased revenue hindered increases in investment • Neither initiative improved • worker discipline, • economic productivity, or • infrastructure • Workers still consumed bootleg liquor • The budget deficit increased

  45. Phase II: 1987-88: Glasnost and Demokratizatsiia

  46. Glasnost • A policy that allowed greater public discussion • Gorbachev initiated it at the • in 1987 • Central Committee of the Communist Party PLENUM • A plenum is a planning meeting • allowed citizens to openly discuss the merits of the communist and market systems • The Soviet Union had never allowed this level of free speech • Glasnost enabled • the Soviet media and • politicians to discuss issues freely • Politicians of this time comprised a new super parliament in 1989 • jumpstarted discussion on private property • The subject had always remained taboo

  47. Demokratizatsiia • introduced limited accountability into Soviet politics • The term demokratizatsiia translates to “democratization” • It enabled greater participation of interest groups in the political process

  48. Introduction of private property rights • “Cooperative” enterprises introduced quasi-property rights • These firms operated in the • commercial and service sectors • “Cooperative” enterprises • lacked clear governance or ownership structure • They offered business initiative among a small group of entrepreneurs • Gorbachev granted managers more autonomy on what to produce • Managers still had limited opportunities to explore new markets • Gorbachev maintained the collective farming system • He refused to reinstate private farming • Intermittent food shortages persisted

  49. MANAGERS JUST WANT TO HAVE FUN • Gorbachev gave managers more freedom from bureaucratic control. As a result, managers… • privatized firms behind planners’ backs • increased activity on the black market • acquired money that they later used to participate in privatization • HALF-MEASURES • These partial reforms worsened the economic situation. • Gorbachev passed up his chance to implement sweeping reforms before the onset of stagflation in 1989.

  50. No sweeping economic reform • Gorbachev tended to compromise with conservative members of his Politburo • The Politburo consisted of a cabinet of elite communist party officials • Compromising stalled implementing far-reaching economic reforms • He missed the chance to initiate reforms before the onset of stagflation • Stagflation describes inflation with zero or negative economic growth • This presents the worst possible situation for an economy • Normally high growth accompanies inflation • This concern still plagues China’s economy • Gorbachev may have lacked the means to initiate widespread economic reform • may have lacked enough control within the Communist Party • may have lacked desire for change • He believed in the communist system, not liberal capitalism

More Related