Russia Essay Example | Topics and Well Written Essays - 2500 words

Russia - Essay ExampleRussias transition from communism to capitalism has been a slow, albeit a positive, step. And while Russia is experiencing the melody of creating a new economic system, some progresses are already underway.It was in 1991 that the communist Soviet Union was dismantled and the Russian government proposed numerous shank reforms designed to transform the economy from one that was centrally planned and controlled to one found on capitalist principles. The Encyclopdia Britannica (2007) summed up that the major components of the reforms included establishing privately own industrial and commercial ventures (using both foreign and Russian investment) and privatizing state-owned enterprises. Furthermore, the Russian government issued vouchers to citizens that enabled them to purchase of shares in privatized firms to promote privatization, though in practice these vouchers frequently were change for cash and were accumulated by entrepreneurs. Moreover, a commodity- an d stock-exchange system was also established to uplift the economic transition of a country fraught in policy-making instability.Dolinskaya (2002) maintained that Russias growth performance had already worsened before the beginning of economic transformation. The fundamental reason for the slowdown was the nature of Soviet economic growth, which was based on mobilization of resources rather than increases in productivity. However, at present, is Russia still struggling to get its economy on the right track How does Russia cope with the onset of globalisation Does Russia deserve the attention of international investors This paper will attempt to find answers to these questions by sifting through current economic data and analyzing the potentials of the Russian market. II. environmental OverviewA. Economic FactorsDuring the 1990s, the Russian economy experienced severe disruption as it moved from a centrally-plannedmodel to a free market system. Difficulties in implementing fiscal r eforms aimed at raising government revenues and a dependence on short-term borrowing to finance budget deficits led to a serious financial crisis in 1998. In addition, lower prices for Russias major export earners (oil and minerals) and a loss of investor confidence exacerbated the financial problems (Spulber, 2003, p. 206). The result was a rapid and steep decline in the value of the ruble, the public life of foreign investment, a breakdown of commercial transactionsvia the banking system, and the threat of runaway inflation.Nevertheless, Russia weathered the crisis well. Russias economic performance has been strong in recent years, reflected in robust earthy Domestic Product (GDP) growth, strong external and fiscal positions, and growth in productivity and consumption. These achievements are attributed not only to favorable commodity prices, especially high-pitched oil prices, but also to generally prudent macroeconomic policies. In fact, Russia is presently in its eighth year of strong growth and now has the worlds 5th largest foreign exchange reserves (Euromonitor International, 25