Globalisation In Russia

Globalisation in Russia : the challenge of the transition to the world economy

Fifteen years ago, the Soviet Union was a socialist authoritative country, tightly isolated from capitalist countries. Nowadays, its direct heir, Russia, is one of the most quickly growing markets of the world, strongly open on the global economy.

During the 1990s, Russia underwent an extraordinary transformation from a communist dictatorship to a multi-party democracy, from a centrally planned system to a market economy, and from a belligerent enemy of the West to a cooperative partner. This change was as unexpected as exceptional: two decades ago, only an idealist would have imagined the "evil empire" to transform so quickly and peacefully into a democratic and capitalist ally of the West.

The unprecedented nature of this switch raises the question of the role of globalisation in Russian transition to market economy. The process of globalisation can be understood as the interplay of technological, economic, and political changes, leading to new patterns of trade and investment in the world. As the British-born sociologist Michael Mann puts it, "the term of 'globalisation' refers to the extension of social and economic relations over the globe". The whole planet becomes embroiled in a single set of social and economic relations.

How globalisation fastened the transformation of Russian economic system? What have been the consequences of this process? What relationship has Russia today with global economy? These are the main issues of this study.

After sixty years of self-sustaining socialism, the Russian entry to this global phenomenon was doubtlessly difficult. The post communist transition transformed not only the country's economic and political systems but also the state-society articulation at large.

If the disappointing economic results of the first decade of transformation are often understood as results of Russia's opening in the context of globalisation, it also seems that it is globalisation itself which enabled the Russian recent growth. Beyond this debate, the current Russian position as regards the global system has also raised to a major issue.

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I. From transition to crisis: the difficult adaptation to the global economy

 The evolution of Russian economy in the 1990s

The economic causes of the downfall of the USSR

The suddenness of the disappearance of the USSR left many observers perplexed. Neither the transition towards the market economy, nor the fall of the Soviet regime seemed probable before 1987. The end of the USSR is the result of economic factors and particular political dynamics, which can be summarized in three points:

- The Soviet economic system was dedicated to change in depth. Once garnered the profits of the growth related to the mobilisation of the production factors, it was condemned to economic stagnation. In this extend, the transition towards the market economy was probably a necessity.

- Nevertheless, it was not inescapable that this transition occurs since 1987. The economic system had adapted to run durably in managed economy, with its parallel incentives and its markets. Many authoritative regimes live through the stagnation of their economy, Cuba or North Korea for example. Of course, the population did not trust in nomenklatura any more, but was, in its great majority, still supporting the Soviet system itself, which remained associated with social rights and the national power on the international scene.

- Reforms such as Perestroika accelerated the fall of the regime, by amplifying economic unevenness like inflation and shortage. Undertaken measures were partial and incoherent: they all failed. Concretely, a state business leaved to its own devices in an environment where prices are administratively set is not more efficient than a business which suffers from forward planning. It was not only one aspect but all the economic system which was to be re-examined, from the nature of companies to the role of markets.

The difficult transition to the market economy

The years 1992 - 2000 are for Russia a new economic experiment: it is the transition towards the market economy. The term of "transition" reveals by itself the prevailing frame of mind at the beginning of the 1990 decade. The concept of transition intends the passing from a situation -a singular balance- to another. It is an intermediate situation, a transitory state. There would be thus "one" market economy, only one model which it would be possible to reach quickly.

The Russian experiment of the 90ies shows that while wanting to go from a point A (Soviet economy) to a point B (an idealized market economy), Russia reached another balance, a point C (a degraded market economy). For all these reasons it is preferable to speak about a process of transformation rather than about transition.

It seems important, at this stage, to take an interest in the concept of market economy. The market is a central concept in economy, but its definition is seldom explicit. It is at the same time a physical place where are carried out the exchanges, a whole of outlets related to a product and the abstract place of the meeting between supply and demand. For certain authors like Ludwig von Meises, the market economy corresponds to capitalism and can be thus defined as the exact opposite of socialist economies.

Actually, the economies of the Soviet block had, to differing degrees, market components. As a result, it seems more judicious to define the market economy as "an economy whose activity is organized around institutions called markets which make play an essential role in price adjustments".

The Russian transition, implemented with urgency, was finally spread out over more than ten years. It can be divided into three periods, from the collapse of the Soviet Union to the financial crisis of 1998:

- Shock therapy: 1992

This period begins on January 2, 1992 with the price liberalisation (except for energy and for transport). The consumer prices instantaneously sustained a real explosion and were multiplied by eight within only six months. The households' savings were reduced to nothing and the ruble broke down. Nevertheless, thanks to the relief of the importation barriers and the authorization of the private retail