Russian Economy in the Aftermath of the Collapse of the Soviet Union

Last Updated: 02 Apr 2020
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After the Soviet Union came to an end, politics and economics became closely intertwined within Russia. President Boris Yeltsin, his democratic supported, and his economic ministers wanted to prevent communism from returning and worked fix the unstable economy. In January 1992, Russia wished for liberalization. In order to achieve liberalization, the Russians completely abolished controls over price in most consumer goods and privatized thousands of mines and factories.

Yeltsin believed that "shock therapy" would bring back widespread production prosperity, but his plan failed as prices increased by 250% on the first day, and production fell by 20%. Most estimates state that Russia produced ? to ½ less output in 1996 than in 1991, and in 1998 the Russian economy crashed again due to the emergence of Asia's financial crisis.

There were many reasons why rapid economic growth failed in Russia.

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  1. Soviet industry was highly tilted towards military goods,
  2. many large factories were privatized,
  3. High inflation and poorly executed privatization gave the elite

Oligarchs more wealth and power, while large numbers of people fell into poverty. Over the next years, Yeltsin increasingly became more unpopular as the majority of people sold their belongings just survive and found their savings to be worthless. Only with support form, the Oligarchs helped to keep Yeltsin in power.

In the following years, Vladimir Putin became popular and was elected as president in 2000, and re-elected in March 2004. Putin maintained relatively liberal economic policies but re-established semi-authoritarian rule in Russia. His system was named an imitation democracy by critics because his government appeared to be democratic and masked the underlying authoritarian rule. Putin argued that his plans were meant to prevent chaos and corruption.

Vladimir then combined strict politics with economic reform by restricting excesses of the Oligarchs, reducing corporate/business taxes, and improving the exports of oil and natural gas, all of which encouraged the growth of the middle class. However, in 2008 the decreased price of oil caused the Russian stock market collapse until it stabilized in 2010. Although Putin's reformed improved the living condition standards, Putin downplayed Stalin's actions and praised the Soviet's accomplishments, ultimately creating Russian patriotism.

Putin aggressively opposed the expansion NATO and the Commonwealth of the Independent States, but the government's crackdown on independent media of using pro-government businessmen, caused the west to worry that Russia was returning to Soviet standards. Putin stepped down when his term expired in 2008, and he handed over his position as president to Dmitry Medvedev who picked Putin to be the prime minister. Putin later won the presidential election in March 2012 with over 60% of the vote and reinforced the Russian system of authoritarian central control.

Developments and change in the East bloc countries were similar in Russia as they worked to replace socialism with market mechanisms and private property. Central planners created distribution goals and also set price controls, for the East bloc countries were adopting market-based economic systems, and looked for ways to privatize industries, farms, and businesses. Poland's leaders returned "shock therapy" which dramatically transformed their economies.

Although Poland's return to shock therapy created high inflation and lowered living standards that brought out strikes and protests among the general public, Poland had the West's financial support, and by the end of the decade, had one of the strongest economies in the East Bloc. inequalities between different groups in the East bloc, the young and old, and of the rich and poor increased all over, as well as crime, corruption, and gangs on the streets. Many people also wanted to return to the stability communism as it provided guaranteed jobs and social benefits to the people in the soviet union.

On the other hand, tragedy swept across Yugoslavia after getting rid of communism. Many revolutions and protests began to break up Yugoslavia. Serbian president, Slobodan Milosevic, a former Communist official who centralized Serbian control, declared their independence and ordered the Yugoslavian army to invade both Slovenia and Croatia to prove Serbian control. They were ultimately forced to back out of Slovenia but managed to take 30% of Croatia.

The civil war then spread to Bosnia-Herzegovina in 1992. Because many people did not want to live with or near Bosnian Muslims, the goal of "ethnic cleansing" was set. The Yugoslavian army also attempted to "cleanse" the areas of all non-Serbs, and even before the fighting in Bosnia ended, 300,000 people were dead and millions were forced out of their homes. In 1995, US president Bill Clinton helped create an accord that gave Bosnian Serbs 49% of Bosnia and gave Bosniaks the rest. Because Milosevic refused to remove militia from Kosovo, NATO began bombing Serbia in 1999.

Serbia, therefore, deported 865,000 Kosovarans, but NATO eventually forced him to withdraw and allow the Kosovars to regain their homeland. NATO and the UN ended the 10-year Yugoslavian civil war, and Milosevic was later voted out of office, was put on trial in the Netherlands, and then died in 2006. In 2008, Kosovo declared its independence from Serbia, which only the US and the European Union recognized, while Serbia and Russia did not.

Along with the collapse of Soviet Union, fourteen new independent republics were established and adopted part of liberal market capitalism. Color revolutions, such as the Rose revolution in Georgia that brought a pro-NATO, pro-Western leader to power, and the Orange revolution in Ukraine that expressed nationalist desires to be further distanced from Russia, also challenged Russian interests. Putin was aggressive when dealing with anti-Russian revolts, and in 2008, he ordered Russian troops to continually invade Chechnya, a small Muslim republic on the southern border of Russia.

When revolutions broke out in Ukraine in 2014, Putin intervened the protests that were occurring in a valuable pro-Russian peninsula as armed rebels took over the capital and other cities within Ukraine and claimed "People's Republics." The U.S. and the European Union punished Russia and the conflict lessened in 2015, but the outcome still remains uncertain.

The world also developed a new global system that eased barriers on international trade and allowed for more multinational corporations that escaped the control of politicians. A worldwide business model was exemplified by Conglomerates, and the growth of independent technology was accompanied by the growth of international trade. This allowed the economy to flow through international borders, but these close connections also made the world's economy vulnerable to economic downturn. In 1997, a banking crisis starting in Thailand spread from one country to the next, and soon enough the whole world was in possibly the worst economic crisis since the great depression of the 1930s.

Global economic pressures called for the expansion of European Union, which set financial criteria for all members of the EU and Monetary Union in the Maastricht Treaty, which created legal standards and anticipated the development of foreign affairs. Many people did not like the treaty, believing that it was undermining national customs and traditions and giving more power to the "Eurocrats." Citizens also feared that joining the monetary union would call for budget cuts, but when voted on, the Treaty barely passed with 50.1% of the vote.

Later in 2002, the euro became the new form of currency throughout Europe, and in 2004, the former East bloc members were included in the monetary union. The constitution that was rejected and replaced with the Treaty of Lisbon, which was similar to the old model but further encouraged the EU and its political structure, and marked the end of a 50-year effort to unify war-torn Europe that was finally united.

The United Nation is consists of five permanent countries - the United States, Great Britain, China, Russia, and France - that can all veto resolutions. The World Bank and the International Monetary fund were made to rebuild Europe, but now instead they now offer loans to developing countries. The trio of nonprofit international financial institutions, the UN, the World Bank, and the Monetary Fund also began to gain power.

World Trade Organization is one of the most powerful institutions, as it sets agreements on trade and the import/export of taxes over 150 countries, that helped manage a large percent of the worlds import-export policies. These institutions allowed for the emergence of nongovernmental organizations, and through the organizations are smaller and are financed through the government and private citizens, they still can leave a profound impact on the world and other organizations.

The types of available jobs began to shift in western Europe and North America as many manufacturing jobs were beginning to disappear due to the many jobs that were leaning to a more modern service-oriented work rather than the previous industrial work. Deindustrialization in Europe also created an array of winners and losers within society, the winners being experts and professionals, and the losers being unskilled and unemployed. This inequality in jobs was often linked to race, ethnicity, and education opportunities, as new immigrants, young black men, and youths found it difficult to find a job.

Geography also exemplified the unequal parts of globalization, as regions that successfully shifted to a post-industrial society (Northern Italy, Southern Germany, Austria) enjoyed prosperity, while regions that relied on heavy industry were lagging behind (East Bloc, Southern Italy, Spain, Greece). The protesters who marched during the meeting of the WTO in Washington, inspired the Occupy movement in the US in 2011, in which the protestors called themselves the "99%" who fought for social equality.

Technology has also rapidly developed, having a major effect on communication,commerce, and politics. Leisure-time and entertainment grew tremendously, as the TV, DVDs, and video streaming became available. Popular broadcasting systems, such as BBC were forced to compete with rising private companies like Netflix. Music downloads and streaming audio replaced compact discs, and IPads and Kindles created a handheld portable library where ever you went. The Internet transformed communication, as technology like the smartphone, provides the functions of e-mail, texting, Facebook, and Twitter, to keep you connected with family, friends, and business.

The Smartphone also surpassed the old-fashioned landline phone of the previous decades. Industries changes as people become more reliant on the internet to purchase goods. The rapid growth of the internet also allowed the government and businesses to use tracking systems to gain huge amounts of information and monitor individuals to target them with advertising. Since nearly everything is online, it would not be difficult for governmental or business secret to leak out onto the internet, which is why internet surveillance remains widely debated as it is strictly monitored and online access is limited in many authoritarian states such as North Korea, Iran, and Cuba.

Throughout the world, populations continued to grow in many developing nations but began to decline in the industrialized nations. None of the 20 countries in the EU had birthrates above 2.0, averaging 1.55 children per woman. many women would wait to have children until their 30s to establish a job and finish education, but balancing work with raising children was harder than expected for them. The major decline in population forced the media to advertise for large families.

The flow of immigrants also began to change. While some immigrants came to the UN legally with proper documentation, many others were smuggled over the borders, erupting as a critical and controversial issue all over the world. The economic problems in western Europe provided many immigrants with economic opportunity, which was a major factor in the increase of immigrants. Many immigrants fled to Europe to escape the civil wars in Iraq and Syria, but many of the undocumented immigrants who attempted to cross into Europe were turned back at the borders.

Many illegal female immigrants who were lured over the borders by criminals who provided jobs were often trafficked and forced into prostitution. In 2015, tens of thousands of migrants entered Hungary, causing the migration issue to reach a crisis, and Europe's ethnic makeup to diversify from the diasporas (permanently displaced ethnic groups). Immigrants were also divided into two groups, a small group with a good education who were well trained and could find a job, and the rest who didn't have a good education and were crowded into poor housing.

Multiculturalism called for new styles of film and fine arts, but music grew the most due to the many different cultures that blended together and entertained a huge audience. Immigration also created controversy and conflict regarding nationalism, jobs, and misuse of money during times of economic downfall in Western Europe.

Concerns on immigration were now mixed with the fear of Muslim migrants and residents in Europe, who now outnumber the EU's Protestant north and the Protestants in Europe's Catholic south. Because of the 9/11 terrorist attack, fears of Muslim immigrants increases as Islamic State attacks continued to occur in Europe. Most of Europe's Muslim population supported democracy and rejected violent extremists, but the increasing Muslim population posed as a threat to the West's liberal traditions of freedom of thought, toleration, separation of church and state, and equal rights for women and gay.

Many Europeans had difficulty in understanding the values of Muslim spirituality, including the hijab and the growing number of mosques, which many leaders saw as a sign that they would not transition to Western culture. As the years went on, the Muslim population continued to grow, causing citizens to believe there were "too many Arabs" in their countries, and making the public overestimate the number of Arabs in Europe.

Thousands of Germans joined the anti-immigrant movement called Pegida. Muslims no longer felt welcome and were now considered outcasts in their adoptive countries, leading to high unemployment rates, discrimination, and exclusion in France. The minority argued against the anti-immigrant and anti-Muslim groups that they were racist, saying that Europe needed talented newcomers to reduce the decline in population and that the tolerance of others could create a stronger political and cultural acceptance.

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Russian Economy in the Aftermath of the Collapse of the Soviet Union. (2018, Aug 26). Retrieved from

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