Russia — a Market-oriented Economy (Россия - страна с рыночной экономикой)

The assertion that Russia is a market-oriented economy has evoked doubt in the minds of many. The European Commission, Economics Ministers in various countries, and indeed numerous Russian economists themselves, have resisted Russia being accorded that status. They have taken the view that Russia is possibly on the way to being a market-oriented economy — but that it is too early to talk of our country joining a system with that kind of immunity-based" relationships. The fact is, however, that as of 1st April 2002 Russia has been formally accorded the status of "market-oriented economy".

The trend towards a market-oriented economy commenced with the disintegration of the Soviet Union. For 70 years the country had been run according to the dictates of totalitarian economics. The Soviet Union's economy was directed primarily towards strengthening the country's military might. The whole of industry was controlled and financed by the State: privately-run concerns were out of the question. Private initiative was either eradicated or allowed to exist only in the tight grip of the State's ideology. Any other form of economic activity, apart from that of a "state enterprise" or (to a certain extent) "cooperatives'', was prosecuted. For the most part industrial products did not meet the demands of the consumer either in quality or in quantity. The isolation of the Soviet economy from that of the rest of the world also harmed it greatly.

This all resulted in the need to reform the economy by introducing the principles of "market economics" — on the basis of "khozraschot" (plant-based financing) and "samookupayemosf" (product-based financing) within industry itself. During the 1980s a number of political changes were carried out, but these proved ineffective because of opposition from conservative elements. However, the 1991 "putsch" forced Russia to break with its past. With the collapse of the USSR a great number of problems emerged in the economy of Russia. The fact was that the economies of Russia and the constituent republics of the former USSR, together with those of the "socialist" countries of Eastern Europe, represented a unified system, fim» its disintegration greatly multiplied those economic problems.

Major changes have taken place over the past; 10-16 years. Various economic projects have been put forward, and numerous economic reforms carried out. Some of these proved successful, others less so. The first symptoms of a market-oriented economy developing in Russia were the emergence of privately, run enterprises and the gradual spread of individual businesses. People with initiative and energy now had the chance not just to work, but to make money. Whereas the large industrial plants that had been wholly State-maintained went into decline, small enterprises began to develop. Limited-liability companies and stock companies came into existence. "Shares” and "securities” were instituted — which in itself was a further step in the direction of "a market economy”.

A securities market was created in Russia. Issuing of these securities was jointly facilitated by both State- and privately-owned industrial enterprises. "Securities” included bonds, bills of exchange, cheques, stocks and shares, "futures", and a whole range of similar items. Organisations and concerns issuing securities are referred to as "emitters”. A person owning a "security” is entitled to receive part of the stock company's profits in the form of dividends, and to have a say in the running of the company, as well as having a right to part of any assets remaining after the company goes into liquidation. Trading in securities is conducted in stock-exchanges and by broking organisations.

One further principle forms the basis of "a market-oriented economy” — namely, competition. The market mechanisms of supply and demand communicate the wishes of the consumer to the industrial producer, and through him to the supplier of production resources materials. Competition obliges companies to go over to the most efficient production methods available. In a competitive market any companies unable to apply the most economical production methods are ousted by their competitors, using production methods of maximum efficiency.

Competition promotes efficient distribution of resources. The competitive element in the market-oriented system channels resources into producing the commodities and services which society most needs. It dictates the use of the most effective methods of combining resources for production purposes; it also facilitates the development and implementation of novel, more efficient production methods.

In the meantime, inadequate attention to the development of the market-oriented aspects of the economy and to the principle of free enterprise, as well as excessive preoccupation with financial “pyramids", brought the country to an overwhelming financial crisis in August 1998. That crisis has set our country back five years. Only now is Russia's economy regaining the level it reached previously.