Russia: External Factors

Essay by TaplockUniversity, Master'sA, February 2009

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IntroductionThe fall of Communism created a domino effect as each subsequent Russian political system fell short in its attempt to build a democratic political system and market economy to replace its former Communist regime. The transition from Communism to Democracy and from Socialism to Capitalism created great instability during the early years of the transition process. The Russian economy has stabilized due to the recent stabilization of the political climate that has been the catalyst to the impressive performance of the Russian economy in the past several years.

Looking back into history, the Pre-Revolution Tsarist Russia was an agricultural society whereby the land was owned by wealthy nobles and there was no ideology of capitalism or private ownership in the Russian psyche. The Soviet Revolution brought the period of communist centralized planning that based the economic landscape on state ownership. The impending shift to economic stagnation due to an emphasis on heavy industry was followed by the Soviet invasion of Afghanistan.

Many citizens were disenchanted with the current leadership and looked to Mikhail Gorbachev to save the economic system by introducing the reformation under perestroika. In 1991, Boris Yeltsin was elected as president and ended Communism and instituted attempted to alter the Russian economy by way of a crash program that was suppose to bring reform within one year. The error was committed when Yeltsin brought in young reformer economists to attempt to transform the former communist economy into a market economy.

PEST AnalysisA PEST analysis provides insight into the macro environmental factors that were inherent to Russia's economic position after the reforms took place and how the changed political, economic, social and technological atmospheres have contributed to their current stability.

Political:•Implementation of economic reforms/tight fiscal policy•Oil revenue went to stabilization fund in 2004 which allowed Soviet Union to repays...