Business News Russia - Page 17

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The Dormition Cathedral in Moscow Kremlin. Built in the 15th century by an Italian architect, it became the site of coronation of Russian Tsars and Emperors.

in money supply leading to inflation. From 1985 onwards, the last Soviet leader Mikhail Gorbachev introduced the policies of glasnost (openness) and perestroika (restructuring) in an attempt to modernize the country and make it more democratic. However, this unexpectedly led to the rise of nationalist movements and dissolution of the Soviet Union.

In August 1991, an unsuccessful military coup, directed against Gorbachev and aimed at preserving the Soviet Union, instead led to its collapse. In Russian SFSR, Boris Yeltsin came to power and declared the end of socialist rule. The USSR splintered into fifteen independent republics and was officially dissolved in December 1991. Boris Yeltsin was elected the President of Russia in June 1991, in the first direct presidential election in Russian history.

Russian Federation

During and after the disintegration of the USSR, when wide-ranging reforms including privatisation and market and trade liberalization were being undertaken, the Russian economy went through a major crisis. The period was characterized by deep contraction of output, with GDP declining by roughly 50% between 1990 and the end of 1995 and industrial output declining by over 50%.

In October 1991, Yeltsin announced that Russia would proceed with radical, market-oriented reform along the lines of "shock therapy", as recommended by the United States and International Monetary Fund. Price controls were abolished, privatization was started. Millions plunged into poverty, from 1.5% of the

population living in poverty in the late Soviet era, to 39%–49% by mid-1993.

Delays in wage payment became a chronic problem with millions being paid months, even years late. Russia took up the responsibility for settling the USSR's external debts, even though its population made up just half of the population of the USSR at the time of its dissolution. The privatization process largely shifted control of enterprises from state agencies to groups of individuals with inside connections in the Government and the mafia. Corruption became an everyday rule of life. Many of the newly rich mobsters and businesspeople took billions in cash and assets outside of the country in an enormous capital flight. The depression of state and economy led to the collapse of social services; the birth rate plummeted while