Since the time of the failed coup attempt in 1991, the Russian economy has been in a transition to a Western-style capitalist country. This only partially identifies the goal, since there are several different types of Western capitalist country. Each of the Western models is sufficiently similar, though, that the path taken by the Russian socialist system will be clearly in a new direction (Leitzel, 1995, 1).
Russia developed a market economy and has included capitalist-style behavior for as much as 25 percent of all economic activity in the pre-reform USSR, some of which was even legal. The legal portion was dominated by collective farm markets. Prices at these markets were more or less unregulated. In addition, some 100,000 Soviet citizens engaged legally in small-scale crafts and trades. The rest of the Soviet market economy was technically illegal and so hidden and described as the "underground economy" (Leitzel, 1995, 27). The transition has built on both the legal and the illegal market economy.
Considerable progress was made in the Russian economy immediately after the dissolution of the Soviet Union: "In less than five years, most wholesale and retail prices have been freed and store shelves are full" (Bush, 1996, 30). The private sector then accounted for more than 60 percent of GDP. The federal budget deficit was over 30 percent of GDP in 1991 and dropped to 3.5 percent in 1995, according to the Russian government. Yearly inflation was 2,650 percent in 1992 and was reduced to 131 percent by 1995. In 1996, monthly inflation was kept below 3 percent. Foreign trade suffered greatly with the severance of Russia from the other former Soviet republics but then largely recovered. The size of defense spending fell from over 20 percent of GDP in the 1980s to around 5 percent today. The changes have been considerable, but the country has much more to do if it is to become a capitalist economy (Bush, 1996, 30)....