Economic System of Russia

By: Kayce Champion | March 9, 2017

Russia is known for having a mixed economy with planned aspects filtered in. A mixed economy is the economic system in which both the state and private sector direct the economy, reflecting characteristics of both market economies and planned economies. A planned economy involves government control of industries and businesses that go along with commerce and markets. The economy transitioned to somewhat of a mixed economy after economic reform in the 1990s after the collapse of the Soviet Union. However, the transition is still undertaking and with current president Vladimir Putin, the planned economy principles are still intact.  Currently, the factors of production is a government centered aspect of their economy. They also allow privatized industry but there are some exceptions and the government will get involved in order to regulate any business that they deem unfit for the economy’s benefit. “Russia remains a predominantly statist economy with a high concentration of wealth in officials’ hands. Economic reforms in the 1990s privatized most industry, with notable exceptions in the energy, transportation, banking, and defense-related sectors” (“Russia Economy – Overview” IndexMundi). Despite allowing privatized industries, they have little to no protection rights over their business. There is a high risk of government meddling into any business when they deem necessary. This is a flaw in the economic system for allowing corruption and undermining long term progress of the economy, especially for mixed economy development (“Russia” Russian Economy).

The goal of Russia’s economy is to export a lot of their goods. Russia is one of the leading producers of oil and natural gas. They are also a top exporter of metals like aluminum and steel. Their economy mostly thrives on their high rate of exports. Some of the ramifications of their economy is having such governmentally funded areas like their oil, they fell into a deep recession in 2015 due to falling oil prices. “A combination of falling oil prices, international sanctions, and structural limitations pushed Russia into a deep recession in 2015, with the GDP falling by close to 4%” ” (“Russia Economy – Overview” IndexMundi). The government’s heavy control continues to struggle while most of the world heads towards a mixed economy. President Vladimir Putin’s political campaign has centered on a market authoritarianism for the economy. The consequence of such has been negative as his centered idea of main government control has dwindled the potential for successful privatized industries (“Russia’s Economy After Communism”). While Russia has remained stable and a strong country in many aspects, the future of their economy appears troublesome and the need for mixed economy seems apparent.

russia economy

“Russia Economy – Overview.” Russian Economy, IndexMundi, 8 Oct. 2016,   www.indexmundi.com/russia/economy_overview.html.  Accessed 13 Mar. 2017. “Russia.” Russia Economy, www.heritage.org/index/country/russia. Accessed 14 Mar. 2017.

“Russia’s Economy After Communism.” Russia’s Economy After Communism,                                      www2.fiu.edu/~milch002/CPO3643/outlines/economy.htm. Accessed 14 Mar. 2017.

http://i.investopedia.com/u53725/rus_gdp_0.png

 

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