Russian Reform and Economics: The Last Quarter of the 20th Century


Outline

Thesis: As the reformation of the USSR was becoming a reality, Russia's economy was
crumbling beneath it. Russia began its economic challenge of perestroika in the 1980's.
The Russian people wanted economic security and freedom, while the government was
trying to obtain democracy. The previous management styles needed to be changed along
with the way that most businesses in Russia operated.

I. Reformation of USSR
A. The change from communism to democracy.
B. The change in government has had a great effect on the Russian people and
workers.
C. The reformation left the Russian economy upside down.
II. Post-Reform economy versus Pre-Reform economy.
A. There were many steps in the reformation of the economy.
B. What are some of the effects of a reforming economy?
C. There are many changes that are still needed in order for the Russian economy
to grow.
III. What will be the future of Russia's Economy?


Main Body

As the reformation of the USSR was becoming a reality, Russia's economy was
crumbling beneath it. Russia began its economic challenge of perestroika in the 1980's.
The Russian people wanted economic security and freedom, while the government was
trying to obtain democracy. The previous management styles needed to be changed along
with the way that most businesses in Russia operated.
The Russian Federation consists of 17,075,400 square km, which is roughly 76.2
percent of the former USSR, and covers about 12 percent of the earth's land surface. The
Russian Federation's population in 1991 was 147.3 million (Smith, A., 7).
During the 1980's the Russian government started a reformation process called
"perestroika," meaning restructuring (Aganbegyan, 1). Perestroika signifies qualitative
changes and transformation in the government and in the economy. The four stages of
perestroika are the "Preliminary stage (March 1985-February 1986)," the "Stabilizing stage
(March 1986 - January 1987)," the "Expansive stage (January - November 1987)," and the
"Regrouping stage (November 1987 onwards)" (Hill & Dellenbrant, 140). The government
also identified two other processes. "Glasnost," which means openness, supported the
strong economic reform (Aganbegyan, 1; Hill & Dellenbrant, 54). The acceleration of
economic reform was called "uskorenie" (Aganbegyan, 1).
Many changes took place during the years contained in each of the stages of
perestroika. This changes ranged from government policies and structure to industrial
production procedures to economic policies. The major change came in 1991 with the
breakup of USSR. This freed the individual states and allowed them to become
independent countries. All of these new countries went through radical government
changes. Many of them, including Russia, chose to implement democracy. This change
from a central military based structure into democracy effected all of the former soviet
states' centralized economic departments.
The assets were owned by the people and were distributed by the state during the
communist reign in Russia. All of the resources were also distributed by the state for the
betterment of the people. The government ran all state budgeted enterprises. All of the
private enterprises, that marketed consumer goods, were taxed by the government and
were also closely regulated.
Before the democratic government, Russian workers received the same pay whether
they worked hard or not, causing wages to be low and work conditions to be very poor.
Russian workers would steal from the government in order to supplement their low wages.
The Russian theory was that people were motivated by their collective interests. This
proved to be very wrong. The actual growth for national income in 1987 was 1.6 percent
less than what the government had predicted (Hill & Dellenbrant, 106).
With all of the changes going on in each of the stages of perestroika there was a lot
of political, bureaucratic, managerial, and intellectual opposition to what the leaders were
establishing. This goes to show that people will always resist change.
Perestroika identified many problems with the existing government, economics, and
living conditions of the people. The lack of overall government regulations like
unemployment insurance, a decent taxation system, and a centralized market caused many
of the conditions. Another problem was the lack of legal infrastructure and protected
property rights.
The old factories in Russia couldn't keep up with the new technology of the
Information Age. In 1987 Russia had less than 200,000 computers compared to the United
States' 25,000,000 (Smith, H., 239). Innovation in Russia was looked at as a disruption of
the flow of production even though technological modernization was needed badly. The
idea of quantity overruled quality in most of the factories. Many pieces of machinery were
built but