Economics The Russian Experience Essay Example for Free

political economy The Russian Experience EssayThe economy of the Soviet Union was found on a musical arrangement of state ownership and administrative planning which meant that the state was the single finality organ in frugal matters. The sparing growth was guided by what was then cal conduct Five Year Plans crafted by the national finality makers appointed by the state. This approach do it easy for the resources to be harnessed to achieve set objectives. The economic set up concentrated more(prenominal) in building capital goods, machine manufacture and the chemic industry. The economic setup was top down model that offered little option for feedback to move to the decision makers. This make it hard for the decision makers to assess the effects of their decisions with a view to eliminate destructive ones. It therefore made it hard for the decision makers to abandon earlier decisions that failed to work or that produced negative results. (http//www. answers. com/toic/h istory-d-the-soviet-union-1985-1991). The economic setup, oppositewise called communism, a good deal resulted into the problem of over or under turnout of goods.The transcription paid little attention to the production of consumer goods and this led to black markets thriving. This black market had a counter effect on the economic order of business of the planners. The system was also very bureaucratic delaying issues that required urgent decisions. This scenario led to a back record of decisions, which overwhelmed the decision makers with time. Middle level managers began to agitate for freedom to deal with customers and suppliers directly for them to more effectively resolve to the economic laws of demand and supply.This agitation built up to eventually break the Soviet Union because the decision makers and the political leaders of the time failed to oppose to these demands responsibly. (http//www. answers. com/toic/history-d-the-soviet-union-1985-1991). The economic setup of the Soviet Union had made most big gains, which enabled them to become industrialized faster than other economic fronts. Failure to resolve to arising issues was what contri preciselyed to its downfall. Strong institutions had already been setup much(prenominal) as the agricultural sector, foreign trade as well as the pecuniary sector.All capital goods were collectively owned with little exceptions. Individual property ownership was minimal. The ownership line of reasoning also contributed to the Soviet Union breakup. Since then Russia has had to undergo intensive reform program to enable them to respond to the largely capitalistic world economy (Moszczynska, undated) A key sector that is the focus of the reform puzzle out is the financial sector. The Russian economy is reliant on oil and the fluctuations of prices affect the economy adversely.To alleviate such adverse effects, the financial sector needs reforms because it offers smoother transition into the envisioned eco nomic setup. A argufy facing Russia and other countries as they transit from command economy to the free market economy is unstableness created by foreign trade. These countries have begun to import goods that were in short supply but on the other hand exports have began to decline. This slows down the recovery puzzle out since exports spurred growth previously. When the exports are more than the imports, a uncouth is performing well economically and this is reverse for these originator Soviets.Consumption growth had for a time led to an increment is real wages but productivity growth has stagnated those gains. This again is due to the heavy cartel on the oil industry for economic growth (Barnard, 2000). In addition, there is little investment alfresco the oil and metal industries. This means that as much as the motive is to create wealth for the citizenly, there cannot be much success if no considerable investment is made. In fact investments in other areas has been declinin g over time.The investment climate in Russia is still hostile which slows down the ability of the reform deal to spur growth. The economic system only favor large business establishments leaving small and medium sized enterprises struggling. The governments authorization requirements are stringent while corruption has been rife. This has led to more resources being allocated to large firms. With the medium sized enterprises grounded, no much growth can be achieved. The banking system is also inefficient since it only lends to the large establishments.The reform of the banking sector has largely depended upon political climate but a legal framework is needed to effectively reform this sector. A better framework to make up ones mind the banking industry has to be put in place (Kahan, 2001). The reform process of the Russian and other former Soviet countries are on the right track. There are enough challenges in the implementation process of the proposals but they are gaining ground . Under performing areas have shown indications of growth. The recovery process, though, calls for political will among the leaders to motor the process.No much progress would be realized if political will is lacking. The effects of the Cold warfare need to be eliminated from the fore. The Russian economy has great potential and if the strategies respond appropriately to upcoming issues, the Russian economy would perform better. The Russian economy performance had put Russia ahead of other countries. It was not entity based on wrong principles. The major problem was the bureaucratic system that had been set that made it difficult to respond to rising issues. If the economy is to acquire the envisioned status it once had, it has to respond to arising issues.