Russian Economy Finale

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 

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Nevertheless, Lenin fulfilled his promise of bring peace to Russia www . pdfcoke . com • 

18B

Allied Powers

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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

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• 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

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Need to increase the amount of crops produced by changing farming methods.

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• 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  

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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” 

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• 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 8 7 6 5 4 3 2 1 0

10 8 6 4 2 0 -2 -4 -6 H1-2006

2001

2002

2003

2004

2005

2006

2007-9M

Final consumption

•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

H1-2007 Capital formation

Net exports

2007*

2006

2005

2004

2003

2002

2001

2000

22 20 18 16 14 12 10 8 6 4 2 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

w ithin rea lloc atio n

8%

A gric ulture Industry S ervices 100%

7%

90%

6%

80%

5% 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

Total V alue A dded

1990

Total E m ploym ent

Labor productivity over 1999 - 2004 grew by : 4 . 4 percent in agriculture, 4 . 7 percent in industry and 6 . 4 percent in services

2003

Efficiency gains ‘ within sectors ’ had more impact on total productivity growth than cross - sector shifts

Shrinking and Rapid Aging Population

% of over - 65 population , 2000 % Population Decrease , 2000 - 2025 2025 20

18%

0%

18

Russia

16 14 12

12%

10 -10%

8 6

-20%

12 %

4 2 0

2000

2025

These demographic trends will affect labor supply: -30%

17 million

Declining and aging labor 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 POPULATION

Share of growth due to higher:

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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