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Chapter 11

Chapter 11. The Erstwhile USSR and Its Crumbled Empire. Russia in Transition. -Bolshevik Revolution of 1917 - Birth of Communism in Russia -Gorbachev’s Middle Ground between Stalinism and Moderate policies - Yeltsin’s Market Reforms. Introduction .

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Chapter 11

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  1. Chapter 11 The Erstwhile USSR and Its Crumbled Empire

  2. Russia in Transition -Bolshevik Revolution of 1917 - Birth of Communism in Russia -Gorbachev’s Middle Ground between Stalinism and Moderate policies - Yeltsin’s Market Reforms

  3. Introduction • The collapse of Soviet Union strengthened the resolve of new leadership to create a market economy • Reform programs began in the second half of the 1980’s by Gorbachev • Gorbachev’s plan sought a middle ground between failed Stalinist model and market system of industrialized nations • The desire of the republics to become independent from Soviet Union • Democratic reforms in Russia was initiated by Boris Yeltsin

  4. Introduction continued • The former Soviet Union consisted of 86 million square miles, it is about 1/6 the surface of the land • Economically it provided a large internal market and below average dependency on foreign trade • It leads the world in the production of minerals such as iron, nickel, silver, copper, zinc, lead, oil, and natural gas • The exploitation of such resources from 1900 onwards produced massive industrial and manufacturing base • By the middle of WWII, Soviet economy was second largest in the world, only next to USA

  5. Triple Crisis • The collapse of Soviet Union was accelerated by 3 major factors • Economic • Political • Social factors

  6. Economic Factors

  7. Economic Factors • Fall in Soviet GNP was initiated during the Cold War and continued to decline and went below 0 in 1989 • The planned economy of the Soviet Union paid little attention to the forces of supply and demand of a free market • The centralized economy of Soviet Union was unresponsive to consumer demands • The earlier growth was due to massive inputs such as labor, cheap energy, and plentiful raw materials, ideal for building a heavy-industry economy of the 1930s, late 1940s and 1950s

  8. Economic Factors cont. • In 1960s the world market shifted to produce electronic goods, automobiles, pharmaceuticals, and communications • The Soviet economy became trapped in its own centralized system and was unable to compete with other industrialized countries • In agriculture decades of planned farming also faced similar problems as other industries in the country • The rise of political dissidents, pressure from US and its European allies for democratic reforms in Soviet Union, and East European countries experimenting with market based economy.

  9. Political Factors

  10. Criticism of the Soviet Leadership • Economic Situation • Superior System • Suffering of Public • KGB Actions and its Impact • Soviet Union’s Position in the World

  11. Things Had to Change • Gorbachev’s vision • Perestroika - restructuring • Glasnost - openness • Improvement or third-world nation

  12. The Fall of Communism • The end of communism in Germany • Beginning of the Soviet Union breakup • Soviet Republics declare independence in 1990 and 1991 • Acknowledgement of the republics independence in September 1991 • December 26, 1991: The official break up

  13. Capitalism • A new born economy • Conversion from socialistic market to free market • Free parliamentary election and independent parties • Letting go of the old system • Poor vs. wealthy divided over the free market system • Communism abandoned

  14. Social Factors

  15. Break up of the USSR in 1991 15 Independent New Nations to the Map of the World National Groups Ethnic Subgroups

  16. Independence or Interdependence? • Tensions between the 15 republics • Race • Language • Religion • Border Disputes • Migration

  17. How the Military is Affected? • Failure to match the West and Japan in advanced technologies • Demographic trends impact the military • Military willingness and effectiveness

  18. The Environment

  19. Demographics • This area is both “North” and “South” • Birth rate is declining disproportionately among the different ethnic groups • By the year 2000, it is predicted the country will be 46% Russian and that may decline steadily

  20. Future Environmental Challenges • Global Warming • Theoretical • Floods • rising sea levels • melting of permafrost • Crops • shift the zone of cultivation to the North • Less urgent problem

  21. Current Environmental Problems • Air Pollution • Degradation of Forests • Polluted Rivers and Lakes • Nuclear Plants • Dams/Diverting of Water

  22. Aral Sea • Water diverted from entering the Aral Sea • Water used for irrigation and farming • Aral Sea is drying up and causing problems for those who live near it • Salination of surrounding land • Several new problems created for the different groups

  23. Environmental Problems exacerbate the Triple Crisis Problems • Example, Aral Sea • Central Asian countries depend on the water tapped from the Aral Sea • Uzbekistan uses irrigated water to grow its main cash crop; cotton • Economy of coastal cities have been destroyed

  24. Biotech Revolution to the Rescue • Looks Attractive • Could help advance some areas of agriculture • Too expensive for most areas • Still wouldn’t solve water shortage

  25. Eastern and Central Europe

  26. The policies of glasnost and perestroika have had enormous consequences for the former Soviet satellites in Eastern and Central Europe. • Free elections • The demise of ruling communist party • The move toward free-market economic policies • The dismantling of the iron Curtain • The collapse of the Warsaw pact • The integration of the German Democratic Republic (East Germany) with West Germany

  27. The result of liberalization Leaving the responsibility of administration of the republics to their respective governments in office and its people to grapple with the new conditions.

  28. The establishment of strong and politically legitimate governments is achieved easily in some nations than in others. • Culture • Religious unity • Deep sense of self–identity.

  29. Securing political legitimacy is difficult in some new born nations if ethnic divisions reemerge.

  30. Tensions could be diminished by prosperity, but the productivity and living standard of the new born republics are still behind the West • Industrial decay due inefficient infrastructure • Lack of the technical and marketing expertise • Non transferal currencies • Massive ecological damage • Hurdles in shifting to a free-market economy.

  31. Recommendation by IMF and World Bank • Removing price subsidies • Cutting support for state-run enterprises • Reduce bureaucracies

  32. Even if some countries adjust soon enough they will endure • High unemployment • Bankruptcies • Popular agitation against price increase, and foreign interference.

  33. The recovery is made more problematic by the chaos within the former Soviet Union itself.

  34. Conclusion

  35. Key Events That Occurred Prior to Current Financial Crisis • 3/23/98 Yeltsin fired Chernomyrdin and picks a little known energy minister, Kiriyenko • 7/20/98 IMF approves $11.2 billion loan • 8/14/98 Major banks fail to meet obligations • 8/23/98 Parliament meets in emergency session and Yeltsin sacks Kiriyenko • 8/25/98 Ruble hit hard, falls to a 4 year low • 8/26/98 Central bank halts ruble trading • 8/31/98 Duma rejects Chernomyrdin • 09/03/98 Domestic problems for Yeltsin escalates

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