History of The Soviet Union (1982–1991) - Post-Soviet Restructuring

Post-Soviet Restructuring

To restructure the Soviet administrative command system and implement a transition to a market-based economy, Yeltsin's shock program was employed within days of the dissolution of the Soviet Union. The subsidies to money-losing farms and industries were cut, price controls abolished, and the ruble moved towards convertibility. New opportunities for Yeltsin's circle and other entrepreneurs to seize former state property were created, thus restructuring the old state-owned economy within a few months.

After obtaining power, the vast majority of "idealistic" reformers gained huge possessions of state property using their positions in the government and became business oligarchs in a manner that appeared antithetical to an emerging democracy. Existing institutions were conspicuously abandoned prior to the establishment of new legal structures of the market economy such as those governing private property, overseeing financial markets, and enforcing taxation.

Market economists believed that the dismantling of the administrative command system in Russia would raise GDP and living standards by allocating resources more efficiently. They also thought the collapse would create new production possibilities by eliminating central planning, substituting a decentralized market system, eliminating huge macroeconomic and structural distortions through liberalization, and providing incentives through privatization.

Since the USSR's collapse, Russia faced many problems that free market proponents in 1992 did not expect. Among other things, 25% of the population lived below the poverty line, life expectancy had fallen, birthrates were low, and the GDP was halved. These problems led to a series of crises in the 1990s, which nearly led to the election of Yeltsin's Communist challenger, Gennady Zyuganov, in the 1996 presidential election. In recent years, the economy of Russia has begun to improve greatly, due to major investments and business development and also due to high prices of natural resources.