Russia Economy Analysis - Research Paper Example

? Topic – Russia Introduction Russia is a country which was once a super power along with USA which is now considered as a developing nation due to their economic and living standards. If we define developing nation, it can be described as one which provides a healthy living environment for its citizen along with much advanced economic status. Russia by the end of the 20th century collapsed as a developed nation and is now joined hands with other developing nations to improve its economic status. In the beginning of 21st century, the country was bankrupt but within a decade its macroeconomic revolution put it as the fifth largest economy in the world. The economic progress of Russia was swift and promising which allowed it to see much change in its economic standards, Russia is on the verge of being classified as a developing nation and it is due to the changes visible in its political and economy sectors. The Russian economy has transformed from a globally isolated country to a globally integrated one with an ambition of becoming a market oriented economy. The Russian economy became an independent nation towards the end of 20th century and its revised economic reforms gave way to privatized business industry. Apart from this, the political and defense system of the country too took a great leap. However the protection of property by the government is still in waters along with energy sector. Russian economy is among globally – competitive producers. In 2011, Russia was acclaimed as the leading producer of oil surpassing Saudi Arabia and is now the second largest producer of natural gas. . 0 coal reserve and eighth position when it comes to crude oil reserve. Russia has the prestige of being the top exporter of steel and aluminum. It is the dependence of the country on export commodity leads to swings in its economy .Their dependance on global prices is shifting the country into a volatile market zone and this also leads to fluctuation in market and economic status of the country. However, Russian government has been planning to reduce this dependency and boost the economy by increasing the concentration on technology sector. However, results on this ambitious program have been dull and less progressive. In the beginning of the 21st century, the country has managed to progress in a minor manner with disposable income of middle class rising. Russia was the country most affected during the 2008-2009 recession as the world bank assistance reduced and the oil prices plummeted globally. The World Bank has analyzed that the country’s financial aid was less than 7% of its GDP. But mid – 2009, the economy hit rock bottom, but by the third quarter economy got revitalized in small way. As the oil price grew, the country was able to lift its economy and could also balance the deficit it inherited from 2008-2009. With reduction in the inflation,the country also lowered it unemployment rates and surprised its counterparts to a great level. In 2012, Russia joined hands with World Trade Organization which helped the country in lifting trade barriers and find new ways to upgrade its export of commercial goods. History and background of the country The history of Russia can be related back to the rule of Soviet Union, when the country was experiencing numerous changes in cultural ,social and political arena. During this period, the economy of Russia was under the control of Bolsheviks but Lenin thought that country’s attempt to switch to a market economy would help the country to recover from the loss attained during previous three years. The new economic policy helped the country to boost its economy and led to prosperity with much advanced infrastructure. Meanwhile , the country also revitalized itself by establishing a good political position as a soviet union government. In this period,Russia also developed its radical novel style of constructivism, futurism and supermatism. During this period the country was in turmoil, still there was optimism and positivity in the midst of challenges. It was during this period that Lenin’s death occurred and this aggravated struggle for power from the part of communist party. This phase was followed by the victory of Joseph Stalin and immediately he directed the country on a different direction. The Stalin’s rule brought new economic plan and it gave importance to agricultural sector and had plans to revive and upgrade the rural state run farms. Industrial development was the main motive of the government and production was directed on capital equipment rather than consumer products. Soviet realism emerged and the art and literature was kept under tight control. . Russia under the governing of Stalin abolished religion and as a result churches were demolished and were converted for other purpose. By the middle of 20th century, the Soviet Union changes in to a country with strict laws and regulations. The life of the citizens was immensely restricted and people had less human rights and freedom. The rule of Soviet Union adhered to discipline rather than experimentation. However, the outbreak of Second World War made the country extremely fragile in encountering its rivals. The country’s military was in turmoil due to the political purges and Russia was unprepared for the war. On top of that, the industrial production was reducing and the conversion of production from civil to military was at stake. Soviet Union with tremendous effort encountered the German invasion towards capital and pushed them back. However, the German launched a new invasion on Northern province of the country with an aim to occupy the rail center of Stalingrad on the Volga and the oil field s of the country. Even though, the Russian army was weak, they managed to face the strong German army and protected their country from being encroached. The German army then onwards faced the German invaders and surrendered them which brought about a turning point in the war. As a matter of fact, the Russian army drove the Germans to Poland in 1945 and in due course Berlin fell. With the collapse of Soviet Union in the beginning of 20th century, Russia gained independence from the totalitarian centralized capitalist rule. “The origin of who call themselves Russians and of the polity that we know as Russia remains somewhat obscure”. Russia has struggled immensely to gain a political system which is of independent nature. However, the country faced opposition from legislative and executive branches regarding its political direction and use of governmental instrument to establish it. Apparently, it was during the end of 20th century that the President of U.S.S.R deployed the military force to topple the parliamentary in order to bring a change in the economic system by dissolving the parliament. This was a turning point for the Russian constitution and the new constitution marks a strong presidency, which was approved in December 1993. After the fall of Russian economy by the end of 21st century resulted in core poverty in the country which was around 40 %.. The country was in desperate condition and people even searched garbage for food. The main people who suffered during this period were the senior citizens in urban area. The urban population had no way to feed themselves unlike rural population who can depend on home grown food items.Hunting for scarce food and leftovers were a regular site in Russia in those period. The ordinary people who invested money in Russian banks also lost their investment. However, by the end of recession which out broke in 2007, the country started to see prosperity in their economy. Economy and Economic Progress of Russia During the earlier times, the Russian government was less keen on privatizing the industrial sector. The country was moving on a restricted laws and rigid economic reforms. The Russian Federation had a Leninist-Marxist kind of economy where in the private produced capital market was absent Ironically, all the companies were owned by the state and every person working in the company received salary for their work. The case was not different for agriculture sector as the farmland was owned by the state .The 95% of the farmland was owned by state or collectivized. It was the government offices in Moscow that the country’s economic policy was formulated. The government officials gave less concentration on market forces. In 1989, the workforce of the country was estimated 7 million and all the working force were employees of the Soviet Union government. During the rule of Gorbhachev, the basic structure of the Society command was weakening. The social control of the country was loosening due to policies of glasnost and perestroika. The government granted privatization of companies and land on a smaller scale in order to strengthen the economy. The country allowed the rise of prices in with the up rise of market forces. Later due to failed August Coup and gaining of independence , the communist party’s assets were seized and new age of economy swept the country. The country opened the doors for the privatization of enterprises and economy was proclaimed as a market economy. Exception was there with companies owning more than 10,000 employees and those who dealt with oil, gas or pharmaceuticals. The swift change from a collapsed economy to a market based economy, the country witnesses many challenges and opportunities. The country faced chaotic conditions and most underwent hardships as privatization of enterprise occurred. Ironically, some Russians gained much from privatization of enterprises but such was not the case for middle class and poor people. By the end of 20th century the country controlled inflation and industrialization started to progress on a slow pace. The country again faced recession as the ruble plummet in the world market. In 1998 due to financial crisis in the Asia financial market the Russian economy suffered a lot. Russia facing difficulty to pay the debts struggled to cope up with the economy and faced problem in maiming its financial service sector from collapsing. The Russian economy slowly recovered and gained from economic reforms and up heave in oil price and raw material exports , and the oil and gas reserves made the country much stronger economy wise. Surprisingly, the Russian parliament passed a law which forbidden the foreigners from buying agricultural land and only allowed lease of the same. The privatization of the industry continued but on a slow pace. The country under the law of Putin engaged freely in market economy and allowed the state ownership of energy based industry. But this slowed the foreign investment in the country. Factually, the liberation of ruble allowed it conversion as the country stopped the restriction on currency transaction. .. . Economy of Russia was in turmoil during the rule of Stalin, Yelstin and Vladimir Putin is the president who gave freedom and economic wellness to the Russian citizens. According to (Schwartz)“Since then, Russia has achieved a virtual macroeconomic revolution to the point where it is one of the largest creditors of U.S. debt in the world”. The country workforce also has been impacted the tremendous economic progress of the country. The fast growing economy has created investments in global business and inherited lot of job opportunities among its citizens. The employment ratio of the country is staggering and the business sector of the country has globalized to a great level. As a matter of fact, when the economic recession hit the world and when Eurozone was collapsing under its grip, Russia was looking strong from an economies stability perspective. Yet, the country is facing many challenges and an analysis of its economy revealed it more clearly. If one consider the achievement of Russia in sixty years many development can be seen in the country. These can be classified as: a) Political Development: In the political arena, the cessation of Soviet totalitarian system was a major victory. Russia became a democratic country with head of state as a President and other legislative bodies assisting him where vote system would choose the President of the country. The country also launched a free press where citizens can raise voice against corruption and social evils in the country. b) Market Development : Market mechanism is the main factor which increased the economic activity of the country. It is reported that 70 percent of the GDP flowed from private business sector. The private sector with all its imperfection became a reason for economic growth in Russia. c) Policy Making : The Russian government started from scratch to control the economy through indirect means rather than direct commands. The monetary policy is now performed by central bank ,which has made consistent progress in the aspect of price stability. The country’s old central planning organization was dismantled and the control was given to agencies for structural reform and regulations were no more mandatory. The country faced problem in formulating fiscal policy as the rudimentary development instruments were at stake. Fiscal management was weak as the tax collecting system and expenditure control was less established. d) Economic activity :The output of the country in terms of economic growth were below than six year ago but the inflation was reduced into single digit level. The financial stability was controlled by keeping an eye on the exchange rate during the presidency election period .The central bank played a crucial role during election period to stabilize the financial stability of the government. The country has the potentiality to upgrade its economic status due to its possession of natural resources, minerals and energy of work force. With demand of consumer goods, Russia can reform its social infrastructure and also can elevate the employment levels of the population. Rapid Economic change on employment status of Russia The country is growing on a consistent pace and one of the mission of Russia is to increase the employment or job creation on a gradual level. Monitory and fiscal policy is to be strengthened as it is the most important strategy of the Russian government in order to enhance employment level in the country. On top of that ,labor enhancement for vulnerable groups of the country is targeted as it would establish an overall progress in the workforce of the country. Apart from this the country is strengthening its commitment with G- 20 to upgrade its work force and employment levels. According to (World Bank) Russia has to step up structural reforms in order to lift its growth potential. Reviving growth requires, among other things, reducing the state’s footprint on the economy and improving the investment climate; The country has strong energy and commodity and energy industry and this has allowed it to grow on employment basis. The country is the fastest growing industry which has high employment status for its citizen. The World Bank states that the country is the fastest growing economy in the western world and is rated as 11th in position among its counterparts. Nonetheless, the country’s employment and economy is facing a lower expansion and immense weakness. The country has high work force in agriculture sector , services and industry sector. Global breakdown in some regions of the Russian nation has led to the down turn of population of Russia on employment scale. Challenges and opportunities facing Russia Since Russia is progressing in a slow pace, the country has its challenges and opportunities to encounter. The various challenges facing the country on the platforms of economy, politics and Security are various. Because of its Soviet Union background, the political system of the country is not flexible. However, when Vladimir Putin rose to power, the country saw changes in the ownership of business, major media and industrial sector. The country still needs to review their human right and freedom policy to come up as strong independent nation. The economy of the country is lowpaced in the current situation and more concentration need to be given to upgrade employment status of the country. In the same manner, military force need to standardized to create effective defense system and security of the country. Russia as a developing nation has more of challenges in its economic sector. It has to face a shrinking employment market along with high level of corruption, difficulty in capital acquirement for energy companies which are small in nature and poor social infrastructure. In case of employment levels, the country’s linguistic barrier and cultural differences make it a low expanding market. According to the U.S government, the country’s labor market is not strong. Many Russian companies have reported to face loss due to the cultural and linguistic barriers in its economy. Many Russians do not change their job due to mobility problem as distance in travelling hamper their travelling pattern and can affect their work adversely. In the same manner, the country also has immense opportunity as a developing nation. If the country strengthen its foreign affairs endeavors it can tie up with US and boom their economy in short span. America being a super power nation has significant opportunities to offer the Russian economy. As per (Suslov) ““The 9/11 attacks gave Russia and the United States a unique opportunity to build a partnership and even a quasi-alliance, but, regrettably, it was not used”. Also , the rural parts of Russia has a vast opportunity from a business perspective .The rural Russia is growing and it is an opportunity for urban business firms to hold hand with rural group and enhance the economy of the country on a consistent basis. Russia is standing in a converging world and the country is emerging at a slow rate. The leading challenge of the country is to face the corruption in the country .The corruption can topple the government on many levels as the country cannot make proper decisions regarding annual economic growth and also the stabilization of government can be hampered. A strong economy needs a string government and corruption is a social evil which can destabilized the government as the well as the future of country. Apart from this , the education of the country is not improving at a fast rate and this can cause stagnation in education sector which is straightly linked with unemployment. Interesting Facts about Russia `Russia being a super power nation in 20th century, collapsed after the failure of Socialistic rule in the country. One of the most prominent facts about Russia was that it had the huge acclamation of being the space and astronautically pioneers of the world .In earlier time,s Russia had the best astronauts and space crafts. Apart from this the country is transcontinental where the railway connects the country with Siberia and China having a route length of 2000 km. Apart from this ,the Ural mountains of Russia divided the country into European and Asian parts and it the most ancient mountain in the world. The country also has 800 glaciers which covers a land of 600 km .The Russia is famous for its ski routes which is the most interesting one in West with 20 Km of ski routes. According to (Italia 4)“More than 60 ethnic groups live in Russia. About 25 have their own republics within the Russian Federation”. Russia is a transcontinental country due to its geographical positioning g where the country is sharing border with eastern and western countries.. The Russian Federation is the official name of Russia and the country is a melting pot of culture and language. When we look at area wise, Russia is counted as the largest country in the world. Surprisingly, the country has 9 time zones, which is a strong fact of interesting nature about the country. The official language of Russia is Russian, but the count try still has many languages spoken by different races and community. The driving is positioned on right side of the vehicle as per the country’s rule. Conclusion Russia being a developing country has many missions and targets to fulfill to attain a positively active economy in the competing world. Russia in early times was a super power nation and it is in early 20th century the country lost its aura . As the country ended its Soviet political system , the Independent state of Russia was formed with the tight political strategies of then Russian Presidents like Boris Yeasting to Vladimir Putin. According to (Charles 11)“Despite some statistical shadow and ambiguities, it is evident that Russia’s aggregate economic growth since 1998 has been relatively strong”. Now the countries’ economy is growing and work force and employment status of the country is showing positive sign. However the country has many challenges to face in political, economic and security platform and this requires a proper foreign policy and formulation of ideal political reforms and strategies. The country has grown more rapidly than its economic status and this has amazed the other developing nature to a great level. Vladimir Putin in his presidential rule has changed the country’s trade views, business nature in industrial sector and opened the door for Russian citizens to act freely in the education and employment arena. The country has large expansion of land and oil reserves which can add as an immense wealth to nation and can support the country on GDP and as a fastest growing exporter in the world. However, the trade practices and export barrier is immense in the country and this can prove as failure to its economy.. Generally speaking, education is an important factor for the growth of any country and improvement can change the face of the country. It is believed that, education sector of the country is in tantrums and development scheme in this direction by the Government can bring expansion on economic and employment grounds. It is a fact that ,corruption is growing the country and this can lead to chaos and instability to the nation’s economic and political field. A strong government can be sustained only if the corruption is controlled and more power is vested to legislative bodies and international organizations of the wortld.The country has a major population of people in poverty in urban and rural sectors .For this education and social infrastructure of the country need to improvised. Russia is the largest country in the world but because of its previous political status, the country is facing many problems on economy political and social basis. The country is indeed a fastest growing country and it has many problems if deeply scrutinized as corruption and political instability and employment problems. It is only because of oil reserves, natural gas and metal export that the country is moving, but economic and political prospective of the country is less developed. The country need to be more open on social infrastructure basis and on political agendas. The country need to make an analysis on its challenges and opportunities and should formulate policies, strategies and reforms in relevance with it.Russia can be a developed country in a decade time but it demands a high profile government and policy makers. Work Cited Borrero, Mauricio. Russia: A Reference Guide from the Renaissance to the Present. New York: Borrero Mauricio, 2004. 3. Print. Italia, Bob. Russia. United States: ABDO, 200. 4. Print. Suslov, Dmitry. "9/11 and US- Russia Relations." www.us-russiafuture.org. Working Group, 2010. Web. 16 June 2013. . Schwartz, Andrew. "Economic Change in Russia." http://csis.org. CSIS, n.d. Web. 8 June 2013. . World Bank, "Russia Overview." www.worldbank.org. The World Bank Group., 2013. Web. 16 June 2013. . Wolf, Charles. Russia's Economy. California: RAND, 2006. 11. Print.. Read More