¶ … Russia and China's economic reform in 1990's
Ever since the beginning of 1990s, the attention of the world has been concentrated on the persistently emerging relationship between the Russian Federation and the People's Republic of China. Much has been authored on the costs and benefits of such relationship and the prevailing analysis already tends to support China as one of the dominating states to come out in the coming decades in comparison to Russia. (Russia and China: Business Partners, Weary Neighbors) Hopefulness over the market restructuring of Russia wiped out with the crash of August 1998, when the ruble depreciated by 70% of its value and banks could not settle the debts and endorse currency contracts. In contradiction to the reform assurances by Yeltsin, the Russian economy of the 1990s more closely resembled a Soviet model than a market driven one. (The Logic of Economic Reform in Russia)
There was complete regulation of economic systems by the state in the era of Soviet Union. Since the central government regulated all the sectors of the economy it made the economic system unproductive and unsuccessful. This resulted in many distortions during the period. To illustrate, it banned the influence of international economic strategies with a view to avoiding the competition from outside that resulted in slow pace of economic and technological transitions. Inadequate technology resulted in wastage of resources. Moreover, the strategy of full-employment made the people become lazy for work and exerted profound impact on the productivity and it is evident from the short supply that the labor was used unproductively. The short supply resulted in depriving many people of the goods and services they desired. All these economic problems contributed towards degeneration of the Soviet Union in the year 1991. (Case study of Client)
The Russian federation could however visualize many market economic reforms. Firstly, the Russian Federation witnessed the liberalization of the international trade and price. This reformation wiped out the economic strategy of the Soviet Union with regard to banning the international economic systems to exert influence in respect of international trade. This permitted the economic competition and liberty of economic activity in Russia. Additionally, this reform permitted the foreign imports into the Russian market that withdraw the authority of the central government to own the local monopolies. The liberty of international trade assisted Russia in improving their technology since people could restructure and know the new technology to enhance the productivity and reduce the excessive utilization of the natural resources. It also withdrew the formal price control measures of the Soviet Union. Leaving the price subject to the free mechanism it is evident that the price increases with enhanced demand and reduced supply and decreases with decrease in demand and increased supply. (Case study of Client)
Moreover, the free flow of price mechanism changed the economic system of Russia from government regulated economy to the free market economy. Irrespective of the fact that the reform of liberalization was infused in Russia it was evident that such restructuring were not as effective as was in China. (Case study of Client) This could be witnessed from the following statistics: Ever since the inception of its reformation the per capita income of China has increased four times. Contrary to this the Russian reformation started in the year 1992 and since then the per capita income decreased by 20-40% taking into consideration the vastness of black market economy. (Could Russia Have Learned from China?) Thus since the economic reform of the 1990's, Russia has made a dismal performance whereas China has emerged successful.
Discussion:
During the past few years Russia had to confront extreme difficult economic situation. The shock therapy in Russia triggered inflation, smashed the industries and made people feel worse. During the early 1997 the Russian economy reached its minimum ever performance index. The Gross National Product seems to have reduced by 6% in 1996 in order to depict a compounding decline of 50% since 1991. Most of the enterprises were on the verge of collapse. About 43% of the enterprises in prime sectors suffered from losses. Even the targets fixed for small enterprise development could not be accomplished in Russia. Not more than 60% of taxes could be raised entailing much difficulty in providing adequate provisions for budgeted programs. Only 25% of the firms and enterprises could fulfill their tax obligations by the end of 1996 and only 73 large enterprises were responsible for the 40% of the overall tax debt to the state budget.
The entrepreneurs...
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