The Soviet Union’s last leader, Mikhail Gorbachev, passed away on Tuesday at 91 in Moscow after a prolonged illness. The Nobel Peace Prize winner, who negotiated a historic nuclear arms pact with the West, is known for ending the cold war. Here’s a look at the economic policies under the last Cold War era leader and the subsequent Russian heads:
The Gorbachev Era: Under Gorbachev, the Soviet Union witnessed the implementation of two reforms — Perestroika (restructuring) and Glasnost (openness). Perestroika involved decentralizing economic controls in order to bring the Soviet Union at par with capitalist economies like the United States, Japan, and Germany. The majority of the Soviet economic bureaucracy was known to be against this program, fearing it would take away their privileges and powers.
Glasnost intended to increase transparency in government institutions while encouraging public criticism and scrutiny of Soviet leaders.
The Yeltsin Era: After Boris Yeltsin took over, one of the first major steps taken by his government was to remove price controls on many items in January 1992 as a precursor to moving towards a market-based economy.
This, however, resulted in inflation that forced the government to print more money to keep its factories alive and to plug a hole in the fiscal budget, according to Britannica Encyclopedia. This was when the Russian economy gradually became dollarized as faith in the Ruble was diminishing. Barter systems started prevailing in many parts of Russia.
In 1995, the government established a Ruble corridor, an exchange rate range that would be defended by the central bank, after taking loans from the International Monetary Fund as well as on its income from the sale of oil and natural gas. As a result, inflation fell and some amount of macro-economic stability was restored.
Putin's Power-Up: Vladimir Putin came to power in 2000 and secured legislation that created a new tax code. This simplified and streamlined the tax system so as to encourage individuals and businesses to pay taxes and to better the efficiency of paying and collecting taxes. These measures eventually led to a significant increase in tax collection.
Putin also wanted to attract foreign investments to lower Russia’s dependence on Western loans. Under Putin, the country also looked at increasing its exports by promoting the sale of its oil, natural gas and arms.
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