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Russia, Economy

Soviet satellite states, Soviet republics, collapse of Communism, democratic state, International Bank

The Soviet Union had a planned socialist economy, in which the central government controlled everything from production planning and prices to distribution. The Soviet satellite states in Eastern Europe had planned economies as well. After the breakup of the USSR, Russian reformers were confronted with the daunting task of building a modern capitalist economy while simultaneously striving to create a democratic state based on effective laws and reliable administrative structures. The collapse of Communism in Eastern Europe in the late 1980s and the dissolution of the Soviet Union at the end of 1991 disrupted the close economic relations Russia had previously enjoyed with neighboring Communist states and other Soviet republics. Political turmoil and uncertainty inside the Russian government also contributed to the country’s economic woes. Compared with most of the former planned economies of Eastern Europe, Russia experienced an unusually severe and protracted drop in officially reported economic output.

By 1998 the traditional emphasis on heavy industry, especially military output, had shifted sharply toward consumer needs and services, and a few signs indicated that the economy had begun to grow for the first time in nearly a decade. Russia’s vast natural resources and highly educated workforce also enhanced the prospects for a successful transition to capitalism. However, certain governmental and market institutions necessary to generate long-term investment and entrepreneurship had not yet been firmly established, leading some experts to predict that steady economic growth would be impossible for Russia to sustain.

According to the International Bank for Reconstruction and Development (World Bank), Russia’s gross domestic product (GDP) in 2000 totaled $251.1 billion. Services accounted for 54 percent of the GDP, while industry, which includes manufacturing, mining, electricity generation, and construction, accounted for 39 percent. The agricultural sector, including forestry and fishing, contributed 7 percent.

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