Does Russia Need the Thirds Revolution to Compite Glabalization

7/28/2019 Does Russia Need the Thirds Revolution to Compite Glabalization

1/17

Name : Achmad Room Fitrianto

Student Number : 30689438

Unit Code : MBS 531

Unit Name : Economics Of Globalisation

Unit Coordinator : Dr. Ameer Ali

Tutors Name : Dr. Ameer Ali

A Group Essay Assignment

The attached assignment is my own work, and has not been submitted for assessment for

any other course before. Proper reference has been made to all sources, published or

unpublished work, and ideas of other persons that have been drawn upon in completing

this assignment.

________________________ Date: 18/03/2008

(signature)

1


2/17

Does Russia need the Thirds Revolution to compete Globalization?

Introduction

Some economist mentions that globalization is a golden moment facing economic policy

makers. Public services and social protection become main issue in governments

policies. Moreover, global trade and capital movement cannot be denied as dominant

factors that government should adapt to. Soviet Union as country tried to cope with this

pressure by introducing Glasnost and Perestroika in Gorbachev era. Although this

concept not fully success but the changing in Soviet (later known as Russia federation) is

very attractive to learn for.

Azizian (2006) argues that the centralistic administration of USSR was a major obstacle

to globalization. This is because USSR had exclusive ideology, closed and implements

protectionist economic system. However, Gorbachev and Puttins era are very unique as

transition period. Succeed in putting administration on the right track is a key issue. This

succeed determine that does Russia needs his thirds revolutions for struggling in

globalization? Some expert mentions that the changing in Russia is a prologue to a new

cooperative world order (Azizian, 2006:135).

Gorbachev EraThe USSR shifted become federation was a result from rivals, compromise and

difference view between Gorbachev and Boris Yeltsin. Partly Yeltsin did not agree with

Gorbachev policies in Perestroika and he always critics the negative of those policies

(Winston, 1991; 40). As result Yeltsin was exile from communist party politburo. The

position of both Gorbachev and Yeltsin was look like the pair of bird wings, one is left

wing and the other is right wing. Therefore, to make the country get in to the right track,

both wings mush be in motion regarding it own function.

Actually Gorbachev inherited a country with huge economic problems. Economic growth

had come to a halt and in many instances had become negative, the goods were produced

in poor quality and the harvest had consecutive bad and demanding in large grain imports

(Goldman, 1988a; 331). National products had begun to decline in late 1983. The

productivity rate was down 3 percent in 1985 (Goldman, 1988b).

2


3/17

Some expert mentions that if the economic failure of Soviet Union was result from frigid

centralistic planning. Soviet Union economy was developed by top down mechanism

which the planning was developed based on the information that the government agent in

each states and then this information was triangulated in Gosplan. However, the result

was national out put seem to be under produced. Therefore, Soviet consumers were very

dependent to black market that could provide the goods that they need with adequate

portion and prices.

Table 1. Comparison between US and USSR economies in 1987

US USSR

GDP (millions$) 5,093,396 1,965,457

Populations (thousands) 244,942 283,100

GDP Per Capita ($) 20,880 6,943

Employment (thousands) 114,697 138,121

Annual Hours per Person Engaged 1,608 1,700

GDP Per Man Hour ($) 27.62 8.37

Sources: Maddison (1998)

From the table above shows that in 1987 the USSR Gross domestic bruto was

38.6 % from the US. Moreover the GDP Per-capita of the USSR was one-third from the

US. Which mean the USSR economy was left behind the US.

In order to catch up the US Economy and to fix the economy weaknesses, Gorbachev

tried to formulate an economic reform to generate better economy. However, by 1990 the

Soviet administration cannot control their budget and result in overhaul economic. This

was because the government spending to run reformation increased such as to re-stabilize

government enterprises that never get appropriate profit. Moreover the government

3


4/17

earning from tax plumbed. This was because one of national income resources, which

were alcohol tax, halted by anti alcohol champagne. Tax from alcohol was 12 percent of

national revenue (Brown, 1996; p 142).

There are two responses that Gorbachev receives regarding his effort to up grades the

Soviet Union Socialist economy concept by mixing with the market mechanism. Firstly

Gorbachev was adored by the western societies because he would like to promote the

western style of live by promoting Glasnost and perestroika whereas in domestic arena he

became deeply unpopular (Brown, 1998; xi). This judgment cannot be blamed because in

that time when he in power, he tried to develop discipline for the proletarian class and

had much restriction in work world in order to increase national total productivity by

reducing dependencies in alcohol (Winston, 1991; 3). Gorbachev tried to accelerate inenhance productivity in order to catch up with the others countries. He wracked down

the centralistic mechanism in planning that was produced similar development programs

in each state, which in each state have difference characteristics and potencies. As a

result, this system just gives advantages to central bureaucracy to control the programs.

Additionally, the centralistic planning also produces cliptocracy mechanism, which

each states of bureaucracy expected levy for support their programs. Therefore

Gorbachev stride restructured the Kremlin by giving more outonomy for each state to

produce own development planning even tough still have to following the main pattern

from Gosplan (the State Planning Commission).

Likewise, the spirit for providing an equal development in whole Russia is essentials

issue. It is cannot be denied that Russia is the largest country in the words with huge

natural potencies and natural difficulties. With 17,075,400 square kilometers, covering

more than an eighth of the Earths land area. However the centre for development was

just in the certain part such as surround Moscow in the west of Soviet, whereas the other

part such as Tyumen in West Siberian, relatively still left behind. In addition Soviet

Union was a country, which has lack of proper soil and climate for agriculture. Some

region is too dry for crops or too cold. Because of that mostly the area that was developed

well just the west area, which has close distance to other European countries and have

potencies to develop.

4


5/17

The Soviet position in global words was disrupted beside by the domestic situation but

also by the integration between West German and East German in 1989 that was marked

by smashed down the berlin wall. Moreover the result from this unification was the East

Germany administration was integrated totally to the West German style by

implementing democracy and free market and restores capitalism. As a result, they

achieve better economy condition (Reid, 2005). Beside that the dominance of socialist

tough in east European was declined rapidly. Yugoslavia was divided in to separated

countries, Poland, Rumania and others East Europe countries changed their economy

model from centralistic economy to open market economy.

Moreover, Gorbachev recognized that beside Soviet Union experience malaises also

suffering from the negative of central planning administration (Goldman, 1988). He

began to change the centralistic planning in Soviet Union and transfer the mechanism by

giving autonomy in each Republic, Oblash and Kray that under Soviet Union

administration.

Therefore Gorbachev introduced three-reformation system Perestroika, Glasnot and

Democratizationnot only in order to be able to compete with the United States and theWest in the bi-polar world, but the most important thing is to survive as honored nation in

the 21st Century.

PERESTROIKA

Perestroika was a reform program from Gorbachev administration in order to response of

the soviet social changing that was caused by the fall of centralistic economy system.

What is more this reform had objectives to catch up with other countries especially

western european countries and the united state. This reform program was initiated in

1985 and amended in 1987 and 1989 significantly (Maltsev, 1990). Three sectors of

perestroika such as restructuring bureaucracy, military reform and agriculture reform will

be described more detail.

According to Martin (1990; 3) there were three working area of perestroika. Firstly is that

to redesign the command economy system in order to make this economy system more

5


6/17

efficient. Secondly is to strengthen the socialist political system. The last dimension of

perestroika is by giving more autonomy to each state.

In order to create efficiencies in command economy system, Gorbachev tried to reduce

long bureaucracy in central administration as main concern. He tried to make simple but

still use the role of Gosplan, the state planning organization, and the ministries. To

provide simple bureaucracy Gorbachev uses his authority by transferring economic

planning to the outside edge. Martin (1990) point out two key documents that have been

changed the Soviet by mixing centralistic and market mechanism. The first key is the

occurring of the law of the enterprise of July 1987 and the second key is the occurring of

the law on the Cooperatives of May 1988. These laws reduce the role central planning in

Government enterprises. Gorbachev gave autonomy to the managers and encourages

them to earn some profit. Therefore those Laws implemented decentralized decision-

making in order to manage the prices for raw materials, labor and final goods. This

mechanism tried to manage the prices based in the market demand.What is more, these

enterprises were forced to learn how to reduce costs. If they get loss, they can no longer

dependent in subsidies from the state budget. Those enterprises that operate in the

unprofitable condition in certain times, will be declared bankrupt and closed down

The effecting of this restructuring was dispensed to the state committee o f the USSR on

labor and social affair. While the income differential was caused by rationalizing the

number of managerial staff, does not have positive relation to reducing managerial staff

(Maltsev, 1990).

Perestroika was affected not only in bureaucracy but also in the Soviet Armed Forces and

the military industrial complex. According to Joris Jozef Elisabeth Van Bladel (2004,

72-73) Gorbachev used two traditional approaches to reforms the military. Firstly, by

using propaganda Gorbachev tried to enforce of ideological indoctrination. Secondly in

order to anticipate rejection from who is still resisted change, Gorbachev used a method

of personnel and administrative purges. In brief, he tried to convince, coerce, manipulate

and build coalitions among political and military elites. (Joris Jozef Elisabeth Van Bladel,

6


7/17

2004: p). One result from the military reform was The Soviet Pull out their army from

Afganistan.

Beside governmental administration and military had been affected by Perestroika,

agriculture sector was affected as well. First of all, Gorbachev demoralized the peasantry

that has had such a devastating effect on agriculture production. Secondly, Gorbachev

strengthened the central planning in agriculture by establishing a new state ministry for

Agriculture and industry (Martin, 1990; 6). This ministry had authority to formulated new

regulation through agriculture activities such as giving opportunity to individual members

of the cooperative to diversify their crops. Moreover, this reformation also gave more

autonomy to cooperate to buy equipment and sell their produce relatively freely (Brown,

1996; 142). The significant change was when Gorbachev administration gave authority tohave contract leasing between groups of farmers and their parent state farm (collective

farm) (Brown, 1996; 144).

It cannot be denied that these policy were big innovation, however these policies

just make the harvest failed. This is because Soviet farmers not ready to change their

daily activity. They used to cultivate certain crop that was ordered by the government

then suddenly they have to manage their field with their own crops and they have to sell

it by their selves. This policy could be success if the Gorbachev administration

implemented the policies stages by stages until the farmer ready to cope with this new

mechanism.

Another concern was providing incentives to factory managers as well as peasants

and farm manager, However Gorbachev cut the subsidies around $110 billions annual

subsidy on costumer goods and it result in necessitate a twenty to thirty fold increase in

housing cost and almost a threefold increase in meat. As affect that the meat price never

change from 1962 (Goldman, 1988). Reducing Subsidies had double swords effects. On

one side it could help government to reduce their spending but on the other side it make

all prices rocketing. Moreover, if government cannot control the rocketing prices,

economy will experience high inflation.

Moreover, According to Maltsev (1990) estimation the rubles note that was issued

was not supported by an adequate growth in production of goods that reached around 20

7


8/17

billion rubels in 1989. Further an adequate growth cannot support the devaluation of the

rubel from around $ 1.60 to $0.16 in September 1989.As a result from these phenomena

was high demand for consumptions was not supported adequate supply that result in high

inflation.

The Challenge of Perestroika

There were at least three challenges in implementing perestroika. Firstly, the

resistances from elite communist party member especially with politburo, the majority of

politburo was not prepared to cope with Gorbachevs commitment to oppose corruption

in the upper echelons at the socialist system (Winston, 1991; 4). The example of

resistance for Gorbachev reformations was when the military tried to coup Gorbachev

administration in August 1991. Luckily in that time Boris Yetlsin backup for Gorbachev

programs.

Secondly, Conflict between the central Authorities and the dominance state.

Russia as dominant state tried to control the federal government and when Boris Yeltsin

had been elected and he forbid the communist party activity in Russia territory make the

federal administration had been amputated (Brown, 1996; 150).

And the third challenge was incomplete supporting system. For example the

agriculture program which gave opportunity to farmers to have their own land. However,

this program was not accusable by farmers because just the mafia, corrupt official and

foreigner who could buy the land (brown, 1996; 145)

GLASTNOST

The word Glasnost was mentioned by Andropov and then defined clearly by

Gorbachev in the eulogy at Chernenkos funeral which means as symbol of free speech

and this concept was strengthen after the poor designed reactor at Chernobyl power plan

was exploded (Winston, 1991; 6)

In the 1980 when China showed the significant achievement both in economy or

politic that pursued Soviet position. Democratization or openness was ones strategy in

keeping soviet dominances in socialist world.

8


9/17


10/17


11/17

Gosplan (State planning body) since 1921 more over the Gosplan activities was believed

make the economy stagnant and destroy the USSR slowly but surely.

Marshall Goldman, an Russia expertise from US, analyst that the reformation in

Russia was to fast, was compel, and there were many manipulation in governmental

finance (cliptocracy) that make the democracy that has been build does not have strong

foundation. Moreover, these weaknesses have effect in oligarchy system. As result the

central government in politburo cannot prevent the vanishing process from the dominant

state through the democratization that was given by the Union administration.

The mistake of Yetlsin

Some expert mentions that the biggest mistake that Boris Yetlsin made was when

he prepares Vladimir Putin as his ancestor. Whereas the others mention that Putin is the

right person this is because Putin could develop strong leadership that is need in

transition era.

Yeltsin as leader with a huge mandate saw that the one solution for this

cliptocrazy was reformation therefore even though Gorbachev was not in power he

continue his idea with the Russia federation. He was a brave leader who could break

tyrannical administration that was crated by Stalin since 1917. He gave the new

generation more opportunity to get more freedom, freedom from fear and freedom to

expres. However this system that is adopted by recent Russia administration still not

provides freedom from hunger and freedom from poverty.

Figure 1.Lorenz Curves and Gini Indexes ComparisonBrazil (1989), Russia (1993) and Hungary (1993)

11


12/17

Sources: http://www.worldbank.org/depweb/beyond/wren/wnrbw_all.pdf

The Loren Curve above shows that Russia wealth gap is quite moderate compare

to Brazil But worse compare tu Hungary. In Russia the first 20 % richest of population

controlled 53.8 % of total national income. The second 20% richest people controlled

20.4 % of total national income. Whereas the 20 % poorest people just controlled 3.7 %

from total Income.

Despite from pro and contra about Russia, since 2001 World Bank reported thatRussia not only reaches significant economic growth but also this country could reduce

the poverty rate. Which in November 2007 had estimated Unemployment rate at 5.9%

Moreover Russia had 15.8% of their population was in below poverty line. Which mean

in Russia there were around 22.337.685 people live in adequate economy condition:

15.8% (The Word Fact Book, 2008).

Russia income is dependent in Oil and gas production that these sectors

contributed around 30% from all Russia Income (The Word Fact Book, 2008). Oil export

earnings have allowed Russia to increase its foreign reserves from $12 billion in 1999 to

some $470 billion at yearend 2007, the third largest reserves in the world (The Word Fact

Book, 2008). Russia experience 8, 1 % economic growth in 2007 and more specifically

Russia income increase by 10.4% from previous year. (Kholmogorova, 2008). However

Russia still has to be conscious with the inflation which in 2007 they experience 12 % of

12
http://www.worldbank.org/depweb/beyond/wren/wnrbw_all.pdfhttp://www.worldbank.org/depweb/beyond/wren/wnrbw_all.pdf


13/17

inflation. In other hand Russia has significant foreign direct investment from $14.6

billion in 2005 to approximately $45 billion in 2007. Overall In 2007, Russia's GDP grew

7.6%, this growth had generated by non-tradable services and goods for the domestic

market, as opposed to oil or mineral extraction and exports (The Word Fact Book, 2008).

The Future Of Russia

I analyses that there are many factors that are supported or became obstacle for

Russia to have significant position in global world as superpower country.

The Barriers:

Disintegration is the biggest barrier that is faced by Russia federation. Russia as

the largest and the biggest state in USSR has many ethnic and culture, if the

administration cannot integrate the differences among societies it will potential danger.

The shifting administration from RSFSR (Russian Soviet Federative Socialist Republic)

as a part from USSR to Russia federation has their own problem such as political

pressure from the former members of KGB, who tries to return back the centralistic style

in administration. Moreover, Separatism with religion issue become trend, unfair position

among ethnic could make it worse. Chechnya was an example for religious separatism

and rebellion.

The relation Russia among the countries ex USSR state is not binding compare to

when they in USSR. Mostly these countries join in CIS except Balkans countries and

the state in central Asia such as Kyrgyzstan. Basically they are having different ethnicity

and religion (Azizian, 2006:135). Moreover the have own thinking that they will more

have prosperity if they independent from Russia.

Each country has own potencies and would like to maximize for each countries

objectives. This potency was inheritage from former Soviet Union. The Soviet Union

inherited a lot of technology, infrastructure, and other potencies that will be maximum

use if they reunited as one nation. Therefore CIS was founded. CIS is consisting of

eleven former Soviet Republics: Armenia, Azerbaijan, Belarus, Georgia, Kazakhstan,

Kyrgyzstan, Moldova, Russia, Tajikistan, Ukraine, and Uzbekistan

13


14/17

Even though the spirit to return bank the soviet dominance in word is on every

country ex Soviet but there are many obstacles among them such as there is no dominant

power that could coordinate them. That way most of them still implement the old style

administration. Indeed Russia has implemented open market and liberalism however the

Russia citizen is not full understood what is going on. They though that even they

implement democracy they still cannot catch up with global economy.

Realize that this changing not bring advantage for Russia therefore Vladimir Putin

who replace Boris Yeltsin tried to centralize the administration. He tries making Kremlin

powerful again. This policy was supported by all exp USSR officials.

The military technology was left behind especially if compare to US technology.

Even Russia has potencies and has this technology but they cannot develop in further

stages because they have economy difficulties. The most correct example is the Russia

Navy. The Russia Navy just has one carrier plane ship. Moreover, after accident of Kursk

submarine in Barents Sea at 2000 the government evaluates the using of Submarine,

especially that have nuclear power engine.

Russia still has Nuclear weapon and also the other ex Soviet Union such as

Ukraina and Kazakhstan. Soviet have space launcher station (kosmodrom) in Baikonur,

however kosmodrom in Kazakstan territory which has the higher criminal rate in the ex

soviet countries. That is why Russia has to replace this space launcher station for space

science or even tough for military.

Supporting factors:

With the natural resources that Russia has this country could develop their

economy. Moreover Russia was inheritance factor production from former Soviet Union

if they could maintenance they could start to merchant with other nation such as with the

Middle East countries. The market mechanism cannot be denied therefore in order to

compete with open market Russia must reforms all sectors from agriculture such as

maintaining the irrigation system, especially in Russia regulation and administration

services in order to attract the foreign business to invest.

Even tough Russia military technology recently is left behind the US but the

Russian goods still have potencies because of two reason. Firstly is that mostly Russian

14


15/17

offer cheaper price comparing to the US military technology. The second reason is that

Russia never involve in domestic affairs of a country that would like to buy weapon from

Russia. It is different with the US, US administration always relate the weapon

purchasing to domestic human right or democratization. For example, When Indonesia

would like to Up Grade their military weapon (Alutsia) and Indonesia administration

would like to buy from The US, The US administration always have reason to reject or

make it hard to fulfill such as make relation to Human right in east Timor or other region.

Whereas when Indonesia tried to purchase from Russia such as to buy Succoi they give

intensive such as free training for the Indonesia operators and the maintenances.

15


16/17

Bibliography

Avtonomov, V.S. Et.All. 1999. The World and Russia Materials for Reflection and

Discussion. St. Petersburg: World Bank Institute. From the Word bank Web

site : http://www.worldbank.org/depweb/beyond/wren/wnrbw_all.pdf

( accesed March 15, 2008)

Azizian, R. 2006. Russia, America and New Conflict in Central Asia in Patman, R.G,

Eds. Globalization and Conflict, National Security in a New Strategic Era.

New York: Routledge, p.135-167.

Brown. A. 1996.The Gorbachev Factor. New York; Oxford University Press.

Brown. A. 2006. The Gorbachev Era. In The Cambridge History of Russia Volume III.

Ed. Suny, RG. Cambridge: Cambridge University Press.

Crozier, B. 1990. The red blues - Soviet politics. From:

(http://findarticles.com/p/articles/mi_m1282/is_n12_v42/ai_9119705/print).

(Accessed February 25, 2008).

Goldman,M. 1988a. Gorbachev and Economic reform in the Soviet Union.Eastern

Economic Journal. Vol. XIV, No4. October-December; pp.331-335. From

http://college.holycross.edu/eej/Volume14/V14N4P331_335.pdf ( Accesed

February 14, 2008)

Goldman, M. 1988b. Gorbachev and perestroika. From the website of the Western New

England College:

http://mars.wnec.edu/~grempel/courses/wc2/lectures/gorrev.html)(Accesed

February 25, 2008)

Kholmogorova, V. 2008.Five Hours with the Presidentfrom http:

//eng.expert.ru/articles/2008/02/14/putin/%20Five%20Hours%20with

%20the%20President/. (Accessed February 28, 2008).

Maddison, A .1998. Measuring the Performance of a Communist Command Economy: An

Assessment of the CIA Estimates for the U.S.S.R.The Review of Income and

Wealth. September, Number 3. From: http://www.blackwell-

synergy.com/doi/pdf/10.1111/j.1475-4991.1998.tb00284.x (Accessed

February 25, 2008)

16


17/17

Maltsev, Y.N. 1990. Soviet Economy Reforms: an Inside Perspective. The Freeman:

Idea on Liberty. Volume. 40 No. 3 March. The web site of The Foundation

for Economic Education: http://www.fee.org/publications/the-

freeman/article.asp?aid=5629&print_view=true (accessed February 16,

2008).

Martin, B.G. 1990. The Soviet Union at the Crossroads: Gorbachevs Reform Program.

From the Parliament of Australian web site:

http://www.aph.gov.au/library/pubs/BP/1990/90bp20.pdf (Accessed

February 18, 2008)

Reid, D. 2005.How Gorbachev failed to save the Soviet Union. The web site of the

committee for a workers International:

http://socialistworld.net/eng/2005/05/01history.html (accessed February 25,

2008).

The Word Fact Book. 2008. The web site of the Central Intelligence Agency:

https://www.cia.gov/library/publications/the-world-factbook/geos/rs.html

(accessed February 25, 2008).

Winston, V.H 1991. The Early Years of the Gorbachev Era: an Introduction in Hewet,

E.A, Winston, and V.H. Eds.Milestone in Glasnots and Perestroika.

Brooking Institutions Press.

Van Bladel, Joris Jozef Elisabeth. 2004. The all-Volunteer Force in the

Russian Mirror: Transformation without Change. From the web

site of University of Groningen:

http://dissertations.ub.rug.nl/FILES/faculties/arts/2004/j.j.e.van.bla

del/thesis.pdf(accessed February 28, 2008)

17

Does Russia Need the Thirds Revolution to Compite Glabalization

Documents

Transcript of Does Russia Need the Thirds Revolution to Compite Glabalization