Russia: External Factors Essay

2101 words - 8 pages

IntroductionThe fall of Communism created a domino effect as each subsequent Russian political system fell short in its attempt to build a democratic political system and market economy to replace its former Communist regime. The transition from Communism to Democracy and from Socialism to Capitalism created great instability during the early years of the transition process. The Russian economy has stabilized due to the recent stabilization of the political climate that has been the catalyst to the impressive performance of the Russian economy in the past several years.Looking back into history, the Pre-Revolution Tsarist Russia was an agricultural society whereby the land was owned by wealthy nobles and there was no ideology of capitalism or private ownership in the Russian psyche. The Soviet Revolution brought the period of communist centralized planning that based the economic landscape on state ownership. The impending shift to economic stagnation due to an emphasis on heavy industry was followed by the Soviet invasion of Afghanistan. Many citizens were disenchanted with the current leadership and looked to Mikhail Gorbachev to save the economic system by introducing the reformation under perestroika. In 1991, Boris Yeltsin was elected as president and ended Communism and instituted attempted to alter the Russian economy by way of a crash program that was suppose to bring reform within one year. The error was committed when Yeltsin brought in young reformer economists to attempt to transform the former communist economy into a market economy.PEST AnalysisA PEST analysis provides insight into the macro environmental factors that were inherent to Russia's economic position after the reforms took place and how the changed political, economic, social and technological atmospheres have contributed to their current stability.Political:•Implementation of economic reforms/tight fiscal policy•Oil revenue went to stabilization fund in 2004 which allowed Soviet Union to repays its debts by 2005•Oil and gas accounted for 50% of Russian budget revenue and 65% of its exportsEconomic:•Bank reforms reduced the barter economy and revived the banking system. Consumer credit increased 45 times from 2000 to 2007 and the middle class grew from 8 million to 55 million and those living below the poverty line decreased from 30% in 2000 to 14% in 2007.Social:•Tremendous gap in the social strata between the rich and the poor. During 2000 to 2007 the incomes of the rich grew from 14 times to 17 times larger that the incomes of the poor.Technological:•Nuclear technology and the fate of the Nuclear City Initiative (NCI) - creation of economic opportunities in nuclear cities through foreign direct investment and conversion of existing facilities.Economic Quantitative IndicatorsGross Domestic ProductRussia's economy has rebounded since the collapse of the Soviet Union and the financial crisis of 1998. The recovery occurred quite quickly due to...

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