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FREE MARKET REFORMS IN RUSSIA.   Term Paper ID:25113 Click to get this paper

Essay Subject: Political, economic & historical background, leadership, gradualism, wages, privatization, ethics, risk, banking.... More...

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Paper Abstract: Political, economic & historical background, leadership, gradualism, wages, privatization, ethics, risk, banking. Paper Introduction: FREE MARKET REFORMS IN RUSSIA This research reviews free market reforms in the Russian Federation. Where appropriate, the focus of this review is on the banking industry. The emergence of the Russian Republic as an international player in its own right has occurred since 1991. With the demise of the Soviet Union, the former Soviet Socialist Republics became politically sovereign nations, among which was the Russian Federation, which includes the Republic of Russia and other autonomous republics. Hopes and dreams ran high in newly independent Russia, where the citizenry expected foreign investors to set up factories that would transform cheap raw materials from Russia into manufactured goods for export to other European countries. As is true of most dreams, things look different in the c Text of the Paper: The entire text of the paper is shown below. However, the text is somewhat scrambled. We want to give you as much information as we possibly can about our papers and essays, but we cannot give them away for free. In the text below you will find that while disordered, many of the phrases are essentially intact. From this text you will be able to get a solid sense of the writing style, the concepts addressed, and the sources used in the research paper. "While Americansmay consider some current Russian business practices to be questionable oreven unethical, they may fail to appreciate that the reverse is true aswell."[xvii] Article 41 of the Russian law governing foreign investments providesfor the creation of free economic zones to attract foreign capital,advanced technologies, and managerial experience.[xviii] In the freeeconomic zones, preferential treatment will be accorded to foreigninvestors. Two distinct processes of transition are under way: one from dictatorship to democracy, another from socialism to capitalism. J. "Saddled with a legacy of poor assets, but alsowith more recently committed nonperforming loans, many banks ... These hidden subsidies are sources of distortion and will needto be cut further as part of the effort to reduce broadly defined fiscaldeficits."[xii] Privatization policies in the Russian Federation have been implementedin a less effective manner than is desired. Individuals had to define for themselves the proper conduct in business relationships. The transition process is more complicated than initially presumed. The legalization of ... The fragility of thefinancial system poses a major risk for the recovery of activity and mayexacerbate fiscal imbalances, and thereby increase inflationpressures."[xv] Business ethics also are a problem in the Russian Federation in thetransition to a market-driven economy. People are angry about rising unemployment, falling living standards, growing poverty and inequality, the erosion of social services, and soaring crime rates. M. Communist philosophy did not recognize the existence of private property or profits, yet both became legalized and even mandated by Soviet and Russian laws. Brown, "Central Europe and the Former Soviet Union: A Survey,"Business Economics 3 (July 1995), 25. This chaotically evolving legal structure gave little direction to people engaged in business. Since the collapse of state socialism in Central and Eastern Europe in1991, democracy and free enterprise have spread sporadically throughout theregion.[ii] By 1995, more than a third of economic output was beingproduced by the private sector, shortages had virtually disappeared, andfinancial fortunes were being accumulated by a new class of entrepreneursin the former socialist economies of Eastern Europe, especially so in theRussian Federation. Russian enterprise risk is among the highest found in the world. Economic transformation has proven to be a nightmare for a greatproportion of Russia's citizens.[xx] While a majority of the populationremains entranced by the concept of economic freedom, the economic realityfor many Russians is a state of poverty and deprivation that was neverexperienced in the post Second World War Soviet Union.[xxi] Jeffrey Sachs,whose commitment to capitalism is unimpeachable, views the capitalistexperiment in Russia as problematical at best.[xxii] American economists,such as David Kotz are willing to recognize the strong probability that themarket-driven transformation of the Russian economy could stall and couldbe reversed.[xxiii] The Russians were not in 1991 and do not appear to bein the mid-199 s prepared either emotionally or fiscally to support smootha capitalist transformation of their economy.[xxiv] The general assessmentin the West, however, is that "the future of a capitalist Russia has beenaffirmed by the re-election of Boris Yelstin as president" in 1996, andthat "investment by local and foreign sources is picking up ...."[xxv] Endnotes BIBLIOGRAPHYBerger, M. [viii]Szulc, 57. The probability, however, is that similar dissatisfactionand resentment would be expressed against any political party that hadinstitutionalized its power for more than 7 years. They do not necessarily proceed in tandem. [xxiii]D. Within the developing free enterprise system, many such laws were passed. Increased risk, however, is another characteristic of the transitioneconomy in the Russian Federation. They often contradicted one another, were frequently amended or rescinded, and were inconsistently enforced. [xxiv]"Policy Challenges Facing Transition Countries," 62. They came from different backgrounds and often held different values. Sachs, "Betrayal: How Clinton Failed Russia," New Republic 21 (31 January 1994), 15. Asis true of most dreams, things look different in the cold light of day. [xx]Berger, 34. Others, lacking experience in a market economy, simply were ignorant of what constituted ethical behavior in such radically new and uncertain circumstances.[xvi] Ethical perceptions, however, are a two-way street. Most are convinced that the economic situation in their countries is deteriorating. However, the leasingof land, dwellings, and industrial premises is still often carried out onan administrative basis, giving local authorities scope for discretion anddiscrimination."[xiii] The banking system in the Russian Federation remains "veryfragile."[xiv] Many of the problems faced by banks in the RussianFederation were inherited. These low taxation levels represent a form ofsubsidy, which are a part of a wider subsidy framework. private enterprises in the late 198 s became a major source of widespread ethical confusion. [iii]Brown, 25. [x]"Policy Challenges Facing Transition Countries," 64. J. Ominously, once disgraced communist leaders have been recalled to power. [xix]M. [v]Brown, 26. [xi]"Policy Challenges Facing Transition Countries," 64. Hopes and dreams ranhigh in newly independent Russia, where the citizenry expected foreigninvestors to set up factories that would transform cheap raw materials fromRussia into manufactured goods for export to other European countries. [iv]Brown, 25. Kotz, "End of the Market Romance," Nation 258 (28 February1994), 265. [xvii]Puffer and McCarthy, 29. While taxes applicable to foreigninvestments in free economic zones may be reduced, they may not be reducedbelow a level of 5 percent of the tax rate in force in the territory inwhich the free economic zone is located. Such preferential treatment included simplified registrationprocedures, preferential tax rates, reduced rates for land and resourceuse, special customs conditions, and simplified procedures for the entryand exit of foreign nationals. "Finding the Common Ground in Russian and American Business Ethics." California Management Review 37 (Winter 1995), 29-46."Russia: Bleak Statistics, Bleak Politics." Economist 331 (14 May 1994), 52- 53.Sachs, J. The emergence of the Russian Republic as an international player inits own right has occurred since 1991.[i] With the demise of the SovietUnion, the former Soviet Socialist Republics became politically sovereignnations, among which was the Russian Federation, which includes theRepublic of Russia and other autonomous republics. The Soviets found no shortage ofavailable funds in the international financial markets.[xix] In the past,they had been regarded as among the most secure of sovereign borrowers.The implementation of perestroika, however, enabled Soviet enterprises toeffect their own foreign loans, in which the Bank for Foreign Trade(Vneshtorgbank), the chief Soviet borrowing agency that has survived in thesame role in contemporary Russia, need not be a party to the transactions.In such instances, western lenders, for the first time, became exposed toSoviet, later Russian, enterprise risk, as opposed to Soviet sovereignrisk. Some were guided by the values and accepted practices of the former Communist system, others by universal values or religious beliefs, and some by criminal and unscrupulous motives. [xiv]"Policy Challenges Facing Transition Countries," 67. "End of the Market Romance." Nation 258 (28 February 1994), 263- 265."Privatization and Foreign Capital." Foreign Trade (Moscow), (June 1992), 46-48."Policy Challenges Facing Transition Countries." World Economic Outlook (October 1995), 6 -72.Puffer, S. Szulc, "Unpleasant Truths About Eastern Europe," Foreign Policy1 2 (Spring 1996), 52. [vi]T. "Betrayal: How Clinton Failed Russia." New Republic 21 (31 January 1994), 14-16, 18.Szulc, T. [ii]B. Observers, however, see hopefor the future. [xxi]"Russia: Bleak Statistics, Bleak Politics," Economist 331 (14 May1994), 52. [vii]Szulc, 56. "These subsidiesinclude foreign trade regulations keeping domestic energy pricesexcessively low, credits carrying below-market interest rates, and taxexemptions. With respect to economic reform, the leaders of the Russian Federation"lacked the courage to apply the 'big bang' approach and now must pay aneven higher social and political price" for a policy of gradualism.[vii]The leaders of the Russian Federation chose not to implement a stabilizingprice-and-wage control policy, and "a serious economic crisis may now bearound the corner."[viii] The level of economic output remains low in the RussianFederation.[ix] Inflation remains high. It has been said that the country's "disappointinginflation performance ... According to Brown: Among the population at large in the transition countries, enthusiasm for change has greatly diminished. On 1 January 1998, the Russiancentral bank introduced the "new ruble," which is worth 1, "old rubles." The introduction of the new currency is said to be an effort to improvemonetary stability. [ix]"Policy Challenges Facing Transition Countries," World EconomicOutlook (October 1995), 6 . [xxii]Sachs, 18. The system displaced in the Russian Federation was a system ofinstitutionalized one-party rule.[vi] The one party in this case was theCommunist Party. "Unpleasant Truths About Eastern Europe." Foreign Policy 1 2 (Spring 1996), 52-65.----------------------- [i]J. is in part due to a decline in the effectivereserve requirement ratio, and to the surge in base money resulting fromintervention on the foreign exchange market aimed at containing the nominalappreciation of the ruble. Inertia in the inflation process may alsoreflect lingering doubts about the stance of financial policies, and thememory of earlier failures to stabilize."[x] Real wages in the Russian Federation remain low by Western standards-less that US$7 per month.[xi] At the same time, the government of theRussian Federation continues to resist realistic levels of taxation on thecountry's petroleum industry, leaving tax levels on that industry wellbelow Western averages. M. [xvi]S. History has shown that it is possible to have capitalism without democracy; whether one can have democracy without capitalism has yet to be demonstrated.[iv] While all transition economies face common problems, considerabledifferences exist in their initial starting points and in the policies theyhave adopted.[v] These differences inevitably affect their performance andhow they are perceived by outside observers as suitable targets forinvestment and trade. Puffer, and D. eitherhave been closed or are vulnerable to adverse shocks. [xiii]"Policy Challenges Facing Transition Countries," 66. [xviii]"Privatization and Foreign Capital," Foreign Trade (Moscow),(June 1992), 46. M., and McCarthy, D. "Central Europe and the Former Soviet Union: A Survey." Business Economics 3 (July 1995), 25-31."Europe." (1996, October). "The Economy: Disintegrating." Bulletin of Atomic Scientists 49(January-February 1993), 32-35.Brown, B. Among those who entered into business were managers from state enterprises, former high-ranking Party officials, academics, students, and other professionals, as well as black marketeers. free market reforms in russia This research reviews free market reforms in the Russian Federation.Where appropriate, the focus of this review is on the banking industry. [xii]"Policy Challenges Facing Transition Countries," 65. [xv]"Policy Challenges Facing Transition Countries," 67. McCarthy, "Finding the Common Ground inRussian and American Business Ethics," California Management Review 37(Winter 1995), 34-35. Marketing Computers, 16(1 ), S5-S7.Kotz, D. The system isattempting to emerge is democratic pluralism; however, more often than notevents cause the system in place to resemble anarchy. Brown stated that: "The casual outside observer may beforgiven for assuming that it will be only a matter of time before theseinitially disadvantaged countries achieve sustained rates of economicgrowth and acquire the political and economic characteristics of the richerEuropean nations."[iii] A closer look at the East European region, however, reveals problemsand disquiet. M. Berger, "The Economy: Disintegrating," Bulletin of AtomicScientists 49(January-February 1993), 34. "While many Russian privatized enterprises are stilloverstaffed, handicapped by obsolete technologies, and poorly managed,survey evidence points to improvements in product lines, marketingcapabilities, employment levels, and wage structures. [xxv]"Europe," (1996, October). Marketing Computers, 16(1 ), S7. If this paper is not what you are looking for, you can search again: Search for: or Click here to request an essay written just for you.