RUSSIAN

ECONOMY
• Bolsheviks vs. Mensheviks.
•
• Bolsheviks came into power.
•
• Vladimir Lenin as their leader.
•
• The Marxist ideologies from das capital.



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According to the Treaty, Russia had to


surrendered:
• 25% of her territories;
• 44% of her population;
• 33% of her agricultural production;
• 73 and 75% of her iron and coal
production


Nevertheless, Lenin fulfilled his



promise of bring peace to Russia

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•
18B Allied Powers (3
Section Focus Transparency 28 - 1
• Lenin adopted the Soviet system as
the Russian political structure.
•
• The Central Executive Committee
elected the Council of Commissars
•
• In 1922, the socialist republics
formed the Union of Soviet.
•
•
• The Bolshevik government under
Lenin carried out an experiment :
1.Private property and trade were
abolished.
2.Natural resources and land were
declared owned by the
government.
3 . All manufacturing industries,

transports, banks, public services

were made state operated.
4. Cash economy was replaced by
5.Workers were paid with wage-cards
instead of cash.
7.Peasants had to surrender all their
surplus grain and live-stocks.
9.People had to ration for food, shelter
and cloth with cards.
10.
11.

Bolsheviks and Lenin's
contributions .
 LENINISM

• LENIN’S IDEALOGIES HAD VARIED

FROM THE PARTY .
•
• Marxist ideologies had a slight
contradiction to the Russian
scenario .
•
• LE N IN ’ S C H A N G E D S T R A T E R G IE S T O
C O N T R O L T H E B A C K FIR E .
•
• D E C E N T R A LIZ A T IO N O F T H E
A U T H O R IT Y
•
• THE BIGGEST CONTRIBUTION OF LENIN TO
THE WORLD IS N.E.P(NATIONAL ECONOMIC
PLANNING)
• Lenin regarded the NEP as a
temporary measure, or taking “One
step backward in order to take two
steps forward”
•
• The result was that the Soviet Union
was on the road to economic
recovery.
•
• C a p ita list m e a su re s w e re ta ke n to
re vive a g ricu ltu ra la n d in d u stria l
p ro d u ctio n
•
• After paying a fixed tax in grain,
peasants were allowed to keep the
surplus or sell it on the free
market
•
• Small businesses and non strategic
industries were allowed to operate
again.
•
• LOT OF LEADERS WHERE AGAINST LENIN’S
FLEXABILITY.
•
•
• By 1927, the national economy was
back to its 1913 levels.
•
•
• Lenin realized the importance of
foreign recognition of his country,
particularly after the Civil war.


•
• Through diplomatic channels, he first
resumed trade relations with other
countries, followed by diplomatic
relations.
•
• Since Russia wanted to promote
‘World Revolution’, the Third
Communist International was
established in Moscow in 1919.
•
How did Stalin come to
power?

– Lenin's Legacy
• Lenin died in Jan 1924.
• Struggle between Trotsky,
Kamenev, Zinoviev and
Stalin to replace him.
•
• Lenin wrote a will about his
successor which he had
called for Stalin’s removal
but this was critical of all
the candidates and this will
was not read out.
Soviet union
 Stalin's Strategies


• Pretended to be close to
Lenin – Lenin’s funeral.
•
• Used his position as
Secretary General –
appointed supporters to key
positions. Controlled the
party machinery and
managed to spread his
influence to many
supporters. Thus he
managed to remove Trotsky
 W h y d id S ta lin in tro d u ce
th e 5 -Y e a r P la n s?

 To industrialize Russia


• Wanted to transform Russia

into a modern industrial
state. Focused on
developing heavy industries
such as steel, oil, chemicals
and electricity.
•
–Le d to :
–Po o r w o rkin g a n d livin g
co n d itio n s. In itia lw o rkin g
a n d livin g co n d itio n s w e re
te rrib le . H o w e ve r, th is la te r
im p ro ve d a s p ro d u ctio n
in cre a se d a n d d ive rsifie d .
–
–Complete control over the
economy – Government was able
to control every aspect of
the economy – What was
produced, how much was
produced.
To fa cilita te co lle ctiviza tio n

 Need to increase the amount

of crops produced by
changing farming methods.


• Make farming
more efficient
•
• Grow more crops
for export.

• Led to:
–:
»Cheap and regular
supply of crops.
»
»Mechanized the
farms – freed up
people to work in
the cities.
»
»Expanded Russia’s
• World war two Stalin and the strong Russian
front had put up with the Nazis.
•
• The loss of the German axis.
•
• Russia won back most of its lost land and
got a lot of land acquisition after the war.
•
• Russia was considered as an upcoming
super power


 .
POTSDAM (Germany)
Date: July 1945
Present: Churchill,
Truman and Stalin
• The disputes of land , agreements ,
lack of understanding and mostly
the conflict of ideologies created a
big drift with the east and the west.
• Thus there was a new world order on
one side there was U.S.A who
where capitalist and other hand
U.S.S.R (Russia) who where
communist.
•
What is communism?

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• Winston Churchill “ an iron curtain
has descended across the
continent .behind that lines lies the
ancient capitals of central and
eastern Europe”
• USA had their foreign intelligence
called the C.I.A and the Soviet
union had the K..G.B.
• There was bipolarization in Europe
between U.S.S.R and America
[Warsaw pact and NATO].
•
• BY 1949 Russia exploded there first a
bomb.
•
• There where two nuclear power
countries in the world.
 North Atlantic treaty
organization
• USA
• Belgium
• Britain
• Canada
• Denmark
• France
• Iceland
• Italy
• Portugal
 Warsaw pact
• U.S.S.R
• Albania
• Bulgaria
• Czechoslovakia
• East Germany
• Hungary
• Poland
• Romania
•
• The new prime minister was Sergei
Kurschev .
•
• By year 1956 both the powers try to
propagate their ideologies.
• Fidel Castro went the communist way
• Cuba was provided with nuclear
missiles political tensions occurred.
 Sputnik 1 the first satellite
launched into orbit.(195 7 )
• Since then U.S.A and Russians have
been competing in orbit by various
launches and tasting's.
Yuri Gagarin first man in space
(1961)
 SOVIET ECONOMIC STRATEGY
1.High levels of capital accumulation
a . Savings ( Investment ) Rate : 1928 = 13 %;
1937 = 26 %; 1955 = 28 . 1 %
ncentration on Industry ( unbalanced growth )
a . Share of new investment -- 1928 -
1933
Industry = 40 %
Agriculture = 19 %
b . " Heavy " industry : production goods
not consumer goods

ral sector reorganization ( collectivization )

a . surplus extraction
b . generates urban labor force
creation of a working class
• The April 9 tragedy of Georgian Soviet
Socialist Republic, 1989.
• The Revolutions of 1989, sometimes
called the "Autumn of Nations“.
• On 6 October and 7 October, Gorbachev
visited East Germany to mark the 40th
anniversary of the German Democratic
Republic, and urged the East German
leadership to accept reform.
• On December 3, 1989, the leaders of the
two world superpowers, U.S. President
George H.W. Bush and U.S.S.R. leader
Mikhail Gorbachev, declared an end to
Mikhail Gorbachev
Petroskia - “reconstruction”

• Gorbachev announced his new policy

and its attendant radical reforms
were enunciated at the 22th Party
Congress between February and
March 1986.
• Glasnost
• 1988 would see Gorbachev's
introduction of glasnost, which
gave new freedoms to the people,
including greater freedom of
speech. This was a radical change,
as control of speech and
suppression of government
criticism had previously been a
central part of the Soviet system
 Russia and its resources
• The two widest separated points in Russia
are about 8,000 km.
• These points are: the boundary with
Poland on a 60 km long.
• Russia has the world's largest forest
reserves and is known as "the lungs of
Europe", second only to the Amazon
Rainforest.
• With access to three of the world's
oceans — the Atlantic, Arctic and
Pacific — Russian fishing fleets are a
major contributor to the world's fish
Important stats
• Currency : Russian ruble (RUB)
• Trade organizations : CIS, APEC,
EURASEC
• GDP $2.076 trillion (2007 est.)
• GDP growth 8.1% (2007 est.)
• GDP per capita $14,600 (2007 est.)
• GDP by sector
 - agriculture 4.6%, industry 39.1%,
services 56.3%
• Inflation (CPI) : 11.9% (2007 est.)
• Population below poverty line :
• Labor force 75.1 million (2007 est.)
• Labor force by occupation
 - agriculture 10.8%, industry 21.9%,

services 60.1%
• Unemployment : 5.9% (2007)
• Exports : $476 billion.
• Imports :$302 billion.
• Public Debt : 7% of GDP.
• Revenues : $341.7 billion.
• Expenses : $243.7 billion.
 1991 - 92
• Monetary is taken on high credit.
• Starting of the year faced a lot of
initial inflation.
• Shortly thereafter, the government
provided 181 billion rubles (about
US$1.1 billion) in credits to
enterprises that were still holding
debt.
• the Russian budget deficit was 20%
of GDP, much higher than the 5%
projected under the economic
program and stipulated under the
 1992 - 93
• The printing of money and domestic
credit expansion moderated
somewhat in 1993. In a public
confrontation with the parliament.
• the Ministry of Finance and the
Central Bank agreed to
macroeconomic measures, such as
reducing subsidies and increasing
revenues, to stabilize the economy.
 1994 - 1995
• The 1993 annual inflation rate was
around 1,000%, a sharp
improvement over 1992, but still
very high. The improvement figures
were exaggerated, however,
because state expenditures had
been delayed from the last quarter
of 1993 to the first quarter of 1994
 1995 - 96
• in 1995 pressures mounted to
increase government spending to
alleviate wage arrearages, which
were becoming a chronic problem
within state enterprises, and to
improve the increasingly tattered
social safety net. In fact, in 1995
and 1996 the state's failure to pay
many such obligations
 1996 - 97
• In 1992, the first year of economic
reform, retail prices in Russia
increased by 250%.
• A major cause of the increase was
the deregulation of most of the
prices in January 1992, a step that
prompted an average price
increase of 245% in that month
alone.
• By 1993 the annual rate had declined
to 240%, still a very high figure. In
 Putin's era

• Putin years
• Under the Putin administration, Russia's
economy saw the nominal Gross
Domestic Product (GDP) double,
climbing from 22nd to 11th largest in
the world.
• The economy made real gains of an
average 7% per year (2000: 10%,
2001: 5.7%, 2002: 4.9%, 2003: 7.3%,
2004: 7.2%, 2005: 6.5%, 2006: 7.7%,
• industry grew by 75%, investments
increased by 125%
 Agriculture

• Following the breakup of the Soviet Union in

1991 and after nearly ten years of decline,
Russian agriculture begun to show signs
of improvement due to organizational and
technological modernization. Northern
areas concentrate mainly on livestock,
and the southern parts and western
Siberia produce grain. Restructuring of
former state farms has been an extremely
slow process. The new land code passed
by the Duma in 2002 should speed
restructuring and attract new domestic
investment to Russian agriculture. Private
farms and garden plots of individuals
account for over one-half of all
agricultural production
2005 Gross Domestic Product
 Current economic scenario
GDP growth, % Contributions to GDP Growth, in %

12
9
10
8
8
7
6
6
4
5 2
4 0
3 -2
2 -4
1 -6

0 H1-2006 H1-2007
Final consumption Capital formation Net exports
2001 2002 2003 2004 2005 2006 2007-9M

•Economic growth remains robust . Having grown by

7 . 9 percent in 2007 , Russia is likely to post full -
year GDP growth of over 7 percent
•Output growth was driven by rising domestic
demand , in particular , buoyant household
consumption ( 9 . 8 percent growth in 2007 ) and
business investment ( 21 percent growth in 2007 )
•Negative contribution of net exports to GDP
growth is explained by rapid import growth and
weak export performance , affected by the real
appreciation of the ruble
22
20
18
16
14
12
10
8
6
4
2

2007*
2000

2001

2003

2004

2005
2002

2006
0

•The aggregate fixed capital investment grew by 21 . 2

percent in 9 - M of 2007
( from 11 . 8 percent growth in the same period in 2006 )

•While capital investments decelerated in September 2007

they still posted
double - digit growth rates ( 16 . 1 percent , relative to the
same month in 2006 )
 LABOUR PRODUCTIVITY
A substantial reallocation of
resources toward services
L a b o r P ro d u ctivity G ro w th , 19 99 -2 0 0 4
S ectoral Shares in R ussia
A gric ulture Industry S ervices 8% w ithin rea lloc atio n
100% 7%

90% 6%

5%
80%
4%
70%
3%
60%
2%
50%
1%

40% 0%

30% - 1%

20% - 2%
R U S S IA E U 15 E U 10
10%

0%
1990 2005 1990 2003

Total V alue A dded Total E m ploym ent

Efficiency gains ‘ within
sectors ’ had more impact on
Labor productivity over 1999 - 2004 total productivity growth
grew by : than cross - sector shifts
4 . 4 percent in agriculture,
4 . 7 percent in industry and
6 . 4 percent in services
 Shrinking and Rapid Aging
Population % of over - 65 population , 2000 -
% Population Decrease , 2000 - 2025 2025
20
0% 18%
18

Russia 16
14
12%
12
10
-10%
8
6

- 4
2
12 0

-20% % 2000 2025

These demographic trends will

affect labor supply:
-30%

Declining and aging labor

17 million force : labor force will
decline by 3 percent ( about 11
million people ). Over 95
percent of the decline will
come from the 15 - 39 age group
62
’s population will shrink by 12 percent (over 17 million people) b

Russian population is also aging rapidly : by 2025 , one

person in every five will be over the age of 65 .
(share of population over 65 will be 18 percent in 2025)
 Russia , Growth decomposition , 1998 -
2005

10%

Labor productivity
32%
58%

Employment rates

Working-age Share of growth due to higher:

POPULATION
 Economy
• To be among top 5 strongest by 2020;
11th now
• GDP est. 2006 (exchange rate) $733.6
billion (compared to USA $13.21 trillion)
• Rapid economic expansion seen after
Russia’s 1998 financial crisis; GDP
growth on average: 6.7% per year
• Population below poverty line: 7.8%
• Unemployment: 6.6%
• + Contributes 30% of worldwide weapons
sales, abundance of oil, natural gas
• - Poor demographics and infrastructure,
dependence on price of energy
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