Economics The Russian Experience Essay

The delivery of the Soviet Union was based on a system of state self-possession and administrative planning which meant that the state was the single determination organ in economic matters. The economic developing was guided by what was then called Five Year Plans crafted by the national finale makers appointed by the state. This approach made it easy for the resources to be harnessed to achieve set objectives. The economic set up concentrated more in building s salutary goods, machine manufacture and the chemical industry.The economic setup was top down model that offered little option for feedback to move to the decision makers. This made it hard for the decision makers to assess the effects of their decisions with a view to eliminate destructive ones. It therefore made it hard for the decision makers to abandon earlier decisions that failed to work or that produced negative results. (http//www. answers. com/toic/history-d-the-soviet-union-1985-1991). The economic setup, otherwise called communism, often resulted into the problem of everywhere or under production of goods.The system paid little attention to the production of consumer goods and this led to ghastly markets thriving. This black market had a counter effect on the economic agenda of the planners. The system was besides very bureaucratic delaying issues that required urgent decisions. This scenario led to a back logging of decisions, which overwhelmed the decision makers with time. center of attention level managers began to agitate for freedom to deal with customers and suppliers directly for them to more effectively respond to the economic laws of motivation and supply.This agitation built up to eventually break the Soviet Union because the decision makers and the political leadership of the time failed to respond to these demands responsibly. (http//www. answers. com/toic/history-d-the-soviet-union-1985-1991). The economic setup of the Soviet Union had made some big gains, which enabled them to proceed industrialized faster than other economic fronts. Failure to respond to arising issues was what contributed to its downfall. Strong institutions had already been setup oft(prenominal) as the agricultural sector, unusual trade as well as the pecuniary sector.All capital goods were collectively owned with little exceptions. Individual property ownership was minimal. The ownership controversy also contributed to the Soviet Union breakup. Since then Russia has had to undergo intensive reform program to enable them to respond to the broadly capitalist world economy (Moszczynska, undated) A key sector that is the focus of the reform process is the financial sector. The Russian economy is reliant on anoint and the fluctuations of prices affect the economy adversely.To alleviate such adverse effects, the financial sector needs reforms because it offers smoother transition into the envisioned economic setup. A challenge facing Russia and other countries as the y transit from command economy to the free market economy is imbalance created by foreign trade. These countries birth begun to import goods that were in short supply but on the other hand exports have began to decline. This slows down the recovery process since exports spurred growth previously. When the exports atomic number 18 more than the imports, a country is runing well economically and this is reverse for these former Soviets.Consumption growth had for a time led to an increment is accredited wages but productivity growth has stagnated those gains. This again is due to the heavy reliance on the oil industry for economic growth (Barnard, 2000). In addition, there is little enthronization outside the oil and metallic element industries. This means that as frequently as the motive is to create wealth for the citizenly, there cannot be much success if no considerable investment is made. In fact investments in other aras has been declining over time.The investment climate in Russia is still hostile which slows down the ability of the reform process to spur growth. The economic system only favor large business establishments leaving small and medium sized enterprises struggling. The governances authorization requirements are stringent while corruption has been rife. This has led to more resources being allocated to large firms. With the medium sized enterprises grounded, no much growth can be achieved. The banking system is also ineffectual since it only lends to the large establishments.The reform of the banking sector has largely depended upon political climate but a effective framework is needed to effectively reform this sector. A better framework to regulate the banking industry has to be put in place (Kahan, 2001). The reform process of the Russian and other former Soviet countries are on the right track. There are enough challenges in the implementation process of the proposals but they are gaining ground. Under performing areas have shown i ndications of growth. The recovery process, though, calls for political will among the leaders to drive the process.No much progress would be realized if political will is lacking. The effects of the Cold War need to be eliminated from the fore. The Russian economy has great potential and if the strategies respond appropriately to upcoming issues, the Russian economy would perform better. The Russian economy performance had put Russia ahead of other countries. It was not entity based on defective principles. The major problem was the bureaucratic system that had been set that made it difficult to respond to rising issues. If the economy is to acquire the envisioned status it once had, it has to respond to arising issues.