From a socialist economy to a capitalist economy: The transition of SOEs in Russia
From a socialist economy to a capitalist economy:
The transition of SOEs in Russia
The privatization reform in Russia – a recipe for economic success?
Sixty nine years of Soviet Union (USSR) existence ended in 1991, when USSR disintegrated into fifteen independent states including Russia Federation as the largest, Estonia, Lithuania,
Latvia, Ukraine, Belarus and Uzbekistan, just to name a few. In the newly established Russia
Federation, the former leader Mikhail Gorbachev was replaced by president Boris Yeltsin.
The main reasons for the collapse were ongoing economic crisis due to ineffective central planning and incompetent government. According to the Swedish economist Aslund “the collapse of the Soviet Union was one of the great dramas of the 20th century (…) because the collapse was multiple: an empire, an economic system, and a political system.” (Aslund, 2007,
p. 81)
Under Yeltsin’s govern Russia underwent through “shock therapy” reform which aim was to move Russia toward capitalist economy immediately. Following the reform, the government released prices and currency controls, liberalized trade, and gave away SOEs for large-scale privatization. In this paper, the author will focus on privatization reforms undertaken in 1990’s during the transition period. Three stages of reform will be presented and evaluated in order to determine whether Russian privatization led to the economic success. The final chapter concludes the paper. 1
Commercialization stage
After the collapse of socialism, Russia began its transition from centrally planned economy to market economy. One of the reform was to transform state-owned enterprises (SOEs) into private companies.
Although, the privatization officially started in 1992, the initial reform known as commercialization stage took place much earlier in 1986 under Mikhail Gorbachev who implemented numerous of legislations that were to create capital to prepare Russia for subsequent privatization
The transition of SOEs in Russia
The privatization reform in Russia – a recipe for economic success?
Sixty nine years of Soviet Union (USSR) existence ended in 1991, when USSR disintegrated into fifteen independent states including Russia Federation as the largest, Estonia, Lithuania,
Latvia, Ukraine, Belarus and Uzbekistan, just to name a few. In the newly established Russia
Federation, the former leader Mikhail Gorbachev was replaced by president Boris Yeltsin.
The main reasons for the collapse were ongoing economic crisis due to ineffective central planning and incompetent government. According to the Swedish economist Aslund “the collapse of the Soviet Union was one of the great dramas of the 20th century (…) because the collapse was multiple: an empire, an economic system, and a political system.” (Aslund, 2007,
p. 81)
Under Yeltsin’s govern Russia underwent through “shock therapy” reform which aim was to move Russia toward capitalist economy immediately. Following the reform, the government released prices and currency controls, liberalized trade, and gave away SOEs for large-scale privatization. In this paper, the author will focus on privatization reforms undertaken in 1990’s during the transition period. Three stages of reform will be presented and evaluated in order to determine whether Russian privatization led to the economic success. The final chapter concludes the paper. 1
Commercialization stage
After the collapse of socialism, Russia began its transition from centrally planned economy to market economy. One of the reform was to transform state-owned enterprises (SOEs) into private companies.
Although, the privatization officially started in 1992, the initial reform known as commercialization stage took place much earlier in 1986 under Mikhail Gorbachev who implemented numerous of legislations that were to create capital to prepare Russia for subsequent privatization
References: • Kim, K.I., Yelkina, A., 2003 Winnie, R., 2011. Privatization in Russia: The rise of market-based system in modern Russia, • Appel, H., 1997 • Slobodzian, L., 1997 • Boycko, M., Shleifer, A., Vishny, R.W., 1993 Perevalov,Y., Gimadii, I., Dobrodei, V., 2000. Does Privatisation Improve Performance of Industrial Enterprises? Empirical Evidence From Russia • Clarke, R., 1997