The purpose of the course is to bring the basic knowledge on the specific aspects of Russian economy that had significant impact on the latest development trends in Russia. This course will provide you with knowledge on: 1) the basics of economy; 2) understanding the role of market reforms in developing the key features of modern Russian economy; 3) understanding specific aspects of Russian economy; 4) cause-effect relationship of the most significant trends in Russia’s economic development; 5) instruments for analysis of Russian economy; 6) business climate in Russia and skills required for doing business in Russia. Currently, different aspects of economy have some influence on us and our behavior - e.g. currency exchange rates, inflation and other things define the way in which we distribute our income between savings and investments. In order to understand these principles it is required to have the basic knowledge on economics. So it is not only a lecture on Russian economy. Another main objective of the course is to develop knowledge on the basics of economy as such. So the course will disclose universal patterns by analyzing trends in Russian economy. FAQ: Q: What is targeted audience for this course? What are the course prerequisites? A: The course is mainly developed for students pursuing their master’s degree in the field of international economy and for those who have professional interest in Russian economy. It requires basic knowledge of economic terms. Q: What are the minimum requirements to pass the course? A: In order to pass the course and receive a Course Certificate you will need to have at least 80% of correct answers in each quiz. Welcome to the course “Understanding Russian Economy. Problems of Transition”!
Political challenges to transition
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From the course by National Research University Higher School of Economics
Understanding Russian Economy. Problems of Transition
134 ratings
National Research University Higher School of Economics
134 ratings
From the lesson
Fundamental challenges to the Russian economy
Welcome to the Week 7! Special focus will be on difficulties which Russia has faced as a result of the transition. There is rather long list of current challenges to Russian economic development. These problems have different roots, which we will consider. Please finish with the weekly quiz, which will help you to refresh your knowledge and help us to assess them.
Meet the Instructors
Vladimir ZuevProfessor
Department of Trade Policy
[SOUND]
Hi once
again.
Today, we continue the analysis of the Russian economy in transition and
we pass onto the rather long list of challenges to
the current economic development in Russia.
There will be two lectures dedicated to the topic.
With some of the challenges you are more familiar with.
Less, but any way we'll try to treat them in non-conventional, non-traditional way.
Stimulating thinking,
stimulating brain work, and we'll try to
outline the most important challenges to the present economic development
because otherwise the list is too long and we can't go on through all of the list.
So there will be definitely some preference given to my
thinking most important challenges and let's go through the list.
Starting analysis of
challenges of Russian economy in transition, we should not avoid
to mention some political challenges to transition, although
political issues are not the topic of this lecture,
but there's a direct link between some of
the most important political changes in Russia and economic development.
Then it is worthwhile at least to mention a couple of things about this link.
The first challenge I call it transition trap.
Russian economy transition trap, you will understand why it is a trap
either way of doing things seems to be not the best solution.
So what is the transition trap for Russian economy?
In fact, we have analyzed the history of Russian economy and
transition, and right from the start, we realized that
Russia was in a very difficult situation.
Without the consolidation of political power,
probably the transition was not possible at all.
So in order to make it possible, in order to make the transition happen,
it was necessary to consolidate political power.
But risk consolidation as you know from the history of Russia.
Definitely, it led to deviation from one of the major
principles of the functioning of the market economy and democratic society.
The one which is called the checks and balances.
And you are definitely familiar with that.
Within the society powers
should check and balance themselves and to each and every
power there should be an equal power to control another power.
And then within this checks and
balances there is no monopoly of power and if there is no monopoly of power we know.
The ethics of monopoly are on economy functioning, so
in a similar way this is a kind of handicap for the development or
the society according to the well accepted norms and rules.
So, as a result of that shift,
In the checks and balances system, major decisions
are taken very often by just one person, the president himself.
And then they depend to a logic stand on personal perceptions of that person.
If those perceptions
are right, then we move on in the right direction,
which often happens, but if they are wrong then, we make mistakes.
Dependence on one man in such an important issue
has transitioned into a completely new system, to a system of market economy
that's probably not the ideal situation.
Probably we could not expected it, another situation because otherwise,
as I have told you already, probably the transition would not be possible at all.
But anyway, public filter on major economic decisions does not work.
And that's a challenge.
In a way that's a trap, because we don't know how to
solve this issue, solve that problem.
Well, we'll have to take it into account, and we have to live with that.
For the time being, we have to take on this reality.
Another important issue which is worth a mention,
that's a link between democracy and economic growth.
That's also a very important issue.
Is there a direct link between democracy,
between how much developed and how much ripe is democracy in a state,
and the pace of transition, the pace of economic development.
Whether there is a link between those two core issues of any society development.
Let's first listen to the wise men, what do they think about the issue?
Here I have a quote from Jim O'Neal from Goldman Sachs, and
everybody knows him by inventing the acronym BRICS.
It used to be BRIC at that time when
Jim O'Neal first spoke about Brazil, Russia, India, and China.
So quite, Quite a range.
So anybody can have
trust in a personality which could invent such an acronym and
make the preliminary analysis of the future of those
countries which occur to be right in many respect.
So what this guy thinks about democracy and economic development.
So I quote, there is a link.
Things Jim O'Neal, democracy is a function of economic development.
You can have this quotation from Forbes published
back in September of the year 2011.
And more than that, there’s a further analysis to the issue.
What kind of a link between democracy and economic growth?
And then, that's even more surprising, it's more a surprise.
At least, when I first read that,
I was quite surprised about that kind of analysis.
Again, you can have at look at quotation,
as Jim thinks reaching GDP of about $30,000
on per capita level will push the country to democracy.
So, the assumption is if the wealth where state
reaching a certain level of wealth then there are a lot of
people who are interested to protect this wealth.
And then there is a push, a national push, for the country to become more democratic.
Because in a country where a lot of poor people live,
probably there's no room, or at least, that's not my thinking.
There's no room for establishment of a solid democratic state.
So let's, again,
let's try to understand whether this kind of thinking is a correct one.
Is there, such a direct link?
Frankly speaking I doubt it because we know a lot of examples from the history
where non-democratic countries had
showed quite spectacular pace of economic growth.
Even dictators who controlled countries like in Chile or in Portugal.
At the time of those known democratic countries, there was
a clear fast economic development for the economies they controlled.
So probably,
There's no such evident link.
Or at the time where Germany used to be
a quite well-developed industrial
country and criteria should be different for the old times, that's for sure.
So it didn't prevent from Nazis coming to power,
so probably there's something missing in that kind of theory.
What I think is right and
I want you to share this thinking and to think it over yourself.
Probably there is a link.
But the link is a bit different.
I think that the way the welfare is distributed
within the country is very much dependent on
the level of democracy, of development of democracy within the state.
The more democratic the state is, the more evenly the wealth
is distributed within this economy, within this country.
Probably, that would be a more correct thinking about
a link between democracy and economic development.
Well, but certainly there is a certain link so
and if there is a link then we have to make our own
conclusions to which extent the deficits of democracy
within the Russian Federation do influence,
do impact the economic development and
economic transition within this country.
So that's a tough question, that's a tough thinking.
I leave this question for you to decide upon.
We move on to further challenges.
I've just mentioned a couple of them,
which seem to me among the most important ones.
Having the political and democratic dimension,
at least those two issues had to be mentioned.
Without mentioning them the analysis would not be complete,
certainly in such a special case as Russian economic transition,
so we have to take that into account for sure.
[MUSIC]
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