Russia's Economic Woes

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Russia's Economic Woes

In a dramatic and memorable end to the reign of the Soviet Union, the so-called worker's paradise, on December 25th, 1991, the Soviet flag was mournfully lowered from the Kremlin walls for the last time. Finally the reforms and decentralization of the Soviet state that had started in 1980's had met its climax with the destruction of the state itself. The last president of the Soviet Union, Mikhail Gorbachev, declared on national TV the formal end of the Union and handed over full powers of the Russian Federation to Russian president Boris Yeltsin. Within a day, the Supreme Soviet also disbanded itself and Soviet institutions gradually faded out or became transformed into democratic institutions. From this political downfall arose the new democratic Russian Federation, followed by the first democratic governmental institutions since 1917.

In order to expedite the transition from a communist to a capitalist society, Yeltsin implemented his policy of "shock-therapy" with the intent of making the market economy work almost overnight by suddenly releasing state control of prices and currency controls. This sudden lack of government control backfired and caused massive turmoil in terms of unemployment and hyperinflation as the Central Bank just kept on printing rubles without discretion. Despite these general economic downturns, winners did emerge from the system. Among the winners was the new class of entrepreneurs and black marketers that had thrived when Gorbachev instituted perestroika in the 80s. Most of these people, known as the Oligarchs, obtained massive influences within the government and eventually practically dictated policy. These liberal policies, however, meant that the elderly and others on...

... middle of paper ...

...people are no better today under capitalism that they were twenty years ago under communism.

Works Cited

Brown, Archie. "Reform, Coup and Collapse: The End of the Soviet State." BBC. 12

October 2001. Available at: Accessed: 1 December 2006

"Crumble, bumble." The Economist. 31 August 2000. Available at:

Accessed at: 2 December 2006.

Rao, Sujata. "Capital Flight Hitting Record Highs." Moscow Times. 16 October 1998.

Available at: Accessed: 2 December 2006.

Stiglitz , Joseph. "The Ruin of Russia." 9 April 2003. Available at:

Accessed: 1 December 2006.

"Told You So." The Economist. 23 June 2005.Available at:

Accesses: 1 December 2006.

Treisman, Daniel. "Blaming Russia First." Foreign Affairs. Novermber 2000. Available

at: Accessed on: 3 December 2006.

"Watch your back." The Economist. 20 May 2004. Available at:

Accessed at: 2 December 2006.

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