Market Reforms in Russia

This research reviews free market reforms in the Russian Federation. Where appropriate, the focus of this review is on the banking industry.

The emergence of the Russian Republic as an international player in its own right has occurred since 1991. With the demise of the Soviet Union, the former Soviet Socialist Republics became politically sovereign nations, among which was the Russian Federation, which includes the Republic of Russia and other autonomous republics. Hopes and dreams ran high in newly independent Russia, where the citizenry expected foreign investors to set up factories that would transform cheap raw materials from Russia into manufactured goods for export to other European countries. As is true of most dreams, things look different in the cold light of day.

Since the collapse of state socialism in Central and Eastern Europe in 1991, democracy and free enterprise have spread sporadically throughout the region. By 1995, more than a third of economic output was being produced by the private sector, shortages had virtually disappeared, and financial fortunes were being accumulated by a new class of entrepreneurs in the former socialist economies of Eastern Europe, especially so in the Russian Federation. Brown stated that: “The casual outside observer may be forgiven for assuming that it will be only a matter of time before these initially disadvantaged countries achieve sustained rates of economic growth and acquire the political and economic characteristics of the richer European nations.”

A closer look at the East European region, however, reveals problems and disquiet. According to Brown:

Among the population at large in the transition countries, enthusiasm for change has greatly diminished. Most are convinced that the economic situation in their countries is deteriorating. People are angry about rising unemployment, falling living standards, growing poverty and inequality, the erosion of social…

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