The Post-Soviet Russian Economy

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 percen

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has contracted an estimated 43% since 1991, despite the country's wealth of natural resources, its welleducated population, and its diverse, although increasingly dilapidated, industrial base. By the end of 1997, inflation had been brought under control, the ruble was stabilized, and an ambitious privatization program had transferred thousands of enterprises to private ownership. Some important marketoriented laws were also passed, including a commercial code governing business relations and an arbitration court for resolving economic disputes. However, the Asian financial crisis in 1998 contributed to a sharp decline in Russia's earnings from oil exports and resulted in an exodus of foreign investors. In August 1998, the government allowed the ruble to fall precipitously and stopped payment on $40 billion in ruble bonds. Among the ongoing problems are an undeveloped legal and financial system, poor progress on restructuring the militaryindustrial complex, and persistently large budget deficits, largely reflecting the inability of successive governments to collect sufficient taxes. As one analyst wrote, Russia's problems are beyond solving by IMF loans or devaluations. You cannot run a capitalist system without banks,
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Approximate Word count = 1228
Approximate Pages = 5 (250 words per page)

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