The Russian economy has inherited from the Soviet one a production apparatus of considerable size but of poor efficiency, on which, despite the clear improvements in recent years, social and exchange relations seem to have to burden for a while, which, in a political context difficult and far from delineating a propulsive business environment, do not favor the pursuit of linear development guidelines. After the proclamation of the new political-state entity, the projects to accelerate reforms aimed at a rapid and complete introduction of market relations were in fact hindered, on the one hand, by the impossibility of guaranteeing the population the minimum conditions for survival, on the other, by strong pressure from the establishment for the preservation of pre-existing mechanisms, in a conflict of interest that has made the transition underway in the Russian Federation the most troubled and uncertain in Eastern Europe. A hybrid and disjointed economic system has been configured in which the growing poverty of the population, hit by strong inflationary phenomena, has found as a counterpart the development of forms of parallel economy and the enrichment of speculators, often operating on the margins of legality and oriented towards prevalence of hoarding rather than productive investment. Private trade has experienced a strong expansion, reaching approx. 30% of the exchange activities; the privatization of industries, which we wanted to promote, in a first phase with the assignment of coupons on the other hand, it has been slow and unable to attract foreign capital, coexisting for a long time with the survival of an extensive system of state subsidies. In these initial conditions of rigidity and immobility of the economic structures, the action on prices alone resulted in a first phase in the loss of control of the money supply by the State and, therefore, in the introduction of further elements of macroeconomic instability. in financial policy: this, despite the sharp reduction in expenditure, has considerably increased the budget deficit and the country’s indebtedness. The resulting hyperinflation (approx. 2200% in 1992) thus canceled the benefits derived from the postponement of the divestment of inefficient companies, i.e. from the containment of the level of unemployment (estimated,UN recorded, in 1992 alone, a doubling of the population below the poverty line (up to about 30%). In the persistence of the delay in the effective disbursement of the promised Western aid and the reduced inflow of foreign investments (equal to one fifth of the flight of capital), these conditions resulted in a sharp fall in national income, which decreased by approx. One third. between 1990 and 1992.
In the early nineties, Russian society was therefore in a critical state, having experienced, in addition to notable recession phenomena, the reduction of the cohesion capacity of the economic system necessary to avoid distortions in development. With the exception of the normative-institutional framework, the characteristics of the economy still largely coincided with those of the former Soviet state; and the production system also proposed a marked dichotomy between the European section, more developed and differentiated by sectoral composition of activities, centered on the Moscow region, and the Asian one, specialized mainly in the supply of raw materials and, subordinately, in basic production. Disadvantaged by sensitive climatic conditions, the regions to the East of the Urals had, moreover, only known from the 1940s a systematic enhancement, capable of really affecting a socio-economic reality still largely marked by traditional forms of life. The period of structural reforms, introduced in the 2-3 years immediately following the breakup of the Soviet Union, was followed by a phase of consolidation, during which the unevenness of the progress made and the contradictory nature of the responses given by the various production sectors to the changes imposed were highlighted. A subsequent phase of the privatization program, launched in 1995 with the sale to a small group of large Russian financiers (since then commonly called “oligarchs”) of the thirty largest companies in the country, including those in strategic sectors such as oil, yielded results. financially insufficient, especially with regard to foreign investments. The privatization process in the agricultural sector was then shown to be even longer, gradual and contradictory. The first measures, in 1992, had imposed on collective and state companies to set up commissions in charge of setting up and controlling the process of splitting into individual private enterprises, or the transformation into producer cooperatives: by the end of 1993, more than 95% of the companies had been reorganized on the basis of these formulas. However, most farmers had retained forms of collective work organization and, in many respects, this was only a superficial restructuring. At the end of 1993 the possibility for private citizens to sell and buy land was introduced with a highly contested decree: but for several years the provision remained essentially a dead letter due to the refusal of local authorities (and managers of collective companies, often coinciding with those) to consent to such trades. Alongside those related to privatization, one of the main problems that the Russian Federation found itself facing was that of the control of public spending, which was affected, during the first years of the post-Soviet period, by the decision not to interrupt the concession. subsidized loans to the former Soviet republics and, equally importantly, the refusal of the leaders of the Central Bank to deny the disbursement of subsidies to industry and agriculture, since it was not intended to accept the political consequences. At the same time, however, we were faced with the difficulty of increasing revenues, in consideration of the almost total lack of funding – both internal and foreign – and the permanence of some important sectors of the economy, in particular that of gas. natural, in an under-taxation regime. An increase in the money supply and inflationary pressure inevitably followed (the inflation rate stood at 300% in 1994); the ensuing loss in value of the ruble was very high: in 1991, one dollar was equivalent to 30 rubles, while in 1994, 2200 rubles were needed for one dollar. The depreciation of the Russian currency intensified dramatically in October 1994, when, in a single day, there was a fall of 27%. The need to stem these phenomena led to the decision to intervene drastically to reduce the budget deficit and inflation, also taking advantage of the aid granted by the IMF. The simultaneous replacement of the heads of the Central Bank allowed the re-launch, by this body, of the fight against inflation, carried out by reducing the money supply.
At the same time, measures were taken to guarantee the ruble greater stability: it was decided to create a fluctuation band (4550-5150 rubles against one dollar) within which to contain the fluctuations against the dollar. The effects of these maneuvers on the inflation rate were positive, the downward trend of which, which manifested itself in 1995 (200%), continued in the following years, when rates went, at least apparently, to normalize (20% in 2001).. However, the trend in consumer prices, during the “return” of inflation, was very irregular, with sudden surges and equally rapid decreases. Moreover, it must be said that official data are not always reliable or unambiguous with respect to international sources. There are also contradictory elements in the figures referring to income per capita: compared to an average of 2240 dollars at the current exchange rate in 1995, and even double if compared to the presumed purchasing power (which, however, relegated Russia to 74th place in the relative world ranking), 27.5% of the population it would still be below the minimum vital; the figure, although reduced to 22% in the following year and lower than the aforementioned international estimates of 1992, remained clearly above that calculated at the beginning of 1994, demonstrating – apart from the evident non-homogeneity of the valuations – that the effects of meanwhile, the devaluation of the ruble had not yet been reabsorbed, while the state apparatus was no longer able to pay salaries and pensions. The granting, in 1996, of a loan of 10, 8 million dollars still from the International Monetary Fund wanted to show confidence in the country and its leadership; however, under the pressure of the Duma, it was forced to issue an enormous mass of short-term bonds (which in 1997 were, alone, equal to 5% of the GDP ) precisely to be able to pay the arrears to workers and retirees, increasing the already heavy public debt and channeling foreign capital out of productive investments. Despite this, the privatization process continued internally, involving oil companies, large industries (for example, in nickel metallurgy), financial groups and the mass media themselves, assuming increasing political importance, however in a situation of scarce transparency due to the intervention, from abroad, of notoriously speculative forces. Indeed, 1997 recorded, for the first time, a slight growth in GDP, but it was an ephemeral recovery, followed by a new collapse in 1998 (resuming its course only at the end of the decade and the beginning of the new Millennium). Indeed, at the beginning of 1998, the apparent monetary stabilization had allowed the introduction of the “new ruble” (equal to 1000 old rubles), which the Central Bank, further widening the fluctuation band against the dollar, was able to defend. effectively from speculative attacks, despite the fall in the stock market (-75% in just nine months). But in August a new storm hit the ruble, which was suspended from official quotations, forcing a postponement of the terms of payment of the debt and relegating the Russian Federation beyond any international credibility. More than the change of government, which highlighted incurable internal political conflicts, it was both the will of Western countries not to unduly compromise the world’s geopolitical balances and the volatility of financial markets that shifted attention to other areas of crisis (again the Asian one, which was flanked by the Latin American one), leaving the Russian giant to grapple with all its structural problems: organizational and productive reconversion difficulties, technological obsolescence, regional gaps. at the beginning of the nineties, it had been brought back to more acceptable levels (16% in 2000), but passing through sudden increases, ruinous for small savers and in general for all recipients of fixed income. Unemployment showed an upward trend, exceeding the 10% threshold starting from 1997.
The financial crisis of the South-East Asian countries, which exploded in the second half of 1997, as well as the fall in prices of raw materials on international markets and, last but not least, the political crisis that the country was going through in the late 1990s. The privatization process did not give the state the desired results, as it mostly resulted in a savage hoarding for the benefit of a small group of people, close to the political leadership, and moreover, in the second half of the nineties, it suffered a setback, while the massive flight of capital abroad continued with serious negative effects on the balance of payments and the public budget. Very little progress has been made, throughout Russia’s first decade of life, in modernizing transport and other infrastructure: only telecommunications have made real progress. Fortunately, starting from the world shock of 11 September 2001, the rapid rise in international oil prices, of which Russia is the second largest exporter in the world, and of gas, which sees it in first place. The growing influx of hard currency from of energy, together with a restructuring of the foreign debt agreed in 1999 and 2000 with the creditor countries and a drastic improvement in tax revenues thanks to a reform of the rates and the collection service, have allowed the State to catch its breath and then to start an unprecedented growth mechanism in the last twenty years. GDP grew by an average of 6-7% per year up to and including 2005, driven after 2002-2003 also by a boom in population consumption, whose real incomes increased, and by a recovery in investments, with national and foreign capital. Moreover, the external debt has drastically reduced, from 97.4% of GDP in 1998 to 28% in 2005, and the state budget has always remained in surplus, allowing the accumulation of stocks that could be used to improve the living conditions of the population (a quarter of the residents were below the poverty line in 2004) and thus further expand the consumer base.
However, many serious problems still remain, only partially hidden by the favorable oil contingency: the state of obsolescence and non-competitiveness of a large share of the industrial sector and almost all of the agricultural sector; the persistence of an extraordinary level of corruption among public officials and their too frequent connection with environments of “criminal entrepreneurship”, branched out at all levels; the invasion in every sphere of economic life of aggressive only partially hidden by the favorable oil contingency: the state of obsolescence and non-competitiveness of a large share of the industrial sector and almost all of the agricultural sector; the persistence of an extraordinary level of corruption among public officials and their too frequent connection with environments of “criminal entrepreneurship”, branched out at all levels; the invasion in every sphere of economic life of aggressive only partially hidden by the favorable oil contingency: the state of obsolescence and non-competitiveness of a large share of the industrial sector and almost all of the agricultural sector; the persistence of an extraordinary level of corruption among public officials and their too frequent connection with environments of “criminal entrepreneurship”, branched out at all levels; the invasion in every sphere of economic life of aggressive lobbies linked to political potentates; in general, the lack of respect for laws and rules, which ends up keeping a lot of potential out of business.