Question

Russian transition from socialism to a free-market economy and its effects.

Answer 1

In 1991 after the collapse of the Russias controlled economy, a new Russian Federation was created in 1991 under Boris Yelstin. The Russian Federation undertok numerous economic reforms, including trade and market liberalization and privatization due to communism collapse. In the early 1990's since the Communism collapse, Russia has experienced several hurdles in making the economy transition from a centrally planned to a market based. Russia undertakes the transition with benfits and hurdles. The socialism system allowed leaders in Soviet Union to marshal resources quickly in crisis time, such as the Nazi invasion, and the country's reindustrializstion during the postwar period.

The central planning entailed implementing monetary and fiscal policies that promote growth of economy in an environment of stable prices and exchange rates. The market-based economy needs an establishment of the commercial, and institutional entities - banks, private property, and commercial legal codes which allows the economy to operate effectively. However the privatization transferred a large portion of wealth into the pockets of a few, making them immensely rich. The assets of nation became concentrated in the hands of a few rich people while several ordinary people faced a decline in the real value of their wages and pensions. There was an increase in corruption and crime. Moreover GDP between 1989 and 1998 decreased by 50% . The collapse of the value of the rouble resulted to a decline in confidence and deterred foreign investment. Although in in the short term the nation struggle to compete hiwevr later exploited the benefits of comparative advantage.