Globalization Affect on Russian Federation

UNDERSTANDING ON GLOBALIZATION

Globalization, nowadays is a process which gets into all sectors of the economy in all countries around the world, influencing the development of the nations. Globalization is mostly connected to the level of openness of the markets, as around forty years ago command or so called planned type of the economy was highly spread among different states. While economies were switching to market type or mixed type of the economy structure, by opening their markets for trade with other countries, the globalization process began to influence the worlds’ face.

So, it is significant to determine the causes of globalization and integration process occurring and spreading all around the globe. As it was mentioned above, one of the reasons was: change in economics type by major countries, which led to opening of their markets and formation of a global trade platforms. Due to this process, countries got an opportunity of specialization on the production of goods and services which require lower costs for production, providing enough of this good or service to their own nation and getting profit from trade with the other countries. The profit, countries get from selling goods and services produced on national market, allows them to buy products, which require high costs for production on local market, abroad.^[1]

The specialization process also led to appearing of the multinational corporations, which concentrate production process in different countries, according to the aim of reducing costs and getting the most benefit from trade. While countries, in which multinational corporations  base their production plants, factories, branches of the companies, benefit due to investments of their economy and development of infrastructure, appearance of extra job places and other positive impacts.

Technological development played one of the major roles, starting the integration process. Due to level of high-tech in the contemporary world, information sharing, online trade became fastest and one of the most less cost type of trade. What is more, not all countries archived similar high level of technological development, that is why, globalization and integration process is beneficial, as it gives opportunities of sharing the results of technological development among all participants of international market. However, there are also disadvantages, which are important to be mentioned. As globalization leads to appearing on the market competitors for national producers, if local producers are not strong enough to struggle with foreign companies for consumer shares, that can lead to bankruptcy of national companies and stagnation of a hole economic sector. At the same time, if an economic sphere is strong enough, foreign competitors will encourage local companies to produce goods and services of higher quality for lower prices to save the market share they are counting on.

According to the level of the sectors development governments use tariffs and barriers to protect weak industries from foreign invasion. Such ways of lowing competition in exact sector of economy are called protectionism policy.

Some countries cooperate and unite with each other, forming international organizations and connecting their trade flows into one common market by abolishing tariffs and barriers. Also, to encourage investments in the economy, some countries announce part of their territory as a Free Economic Zone. By doing so, they encourage foreign currency flows, development of infrastructure, innovation process development, occurring of new job places, encouragement of local producers to improve quality of their goods and other benefits. Though, there are several disadvantages of FEZ , like: risk of occurring of the "black market", narrow specialization of FEZ, the chance of increase in competition level among other producers which are not doing business in a Free Trade Zone.^[2]

When comparing positive and negative impacts of globalization, it is important to analyze not only business effects, but also influence which globalization has on traditions of local people, national habits. What is more, taking into consideration the fact that countries all around the world have different level of economic development, and, if for well developed countries globalization gives more advantages, the developing countries have controversial consequences, while, the third world countries suffer from internalization and globalization process much more then have profit from these forces. Nowadays the affects of globalization can be found all over the globe, influencing not only trade, economy, policy but , at the same time, traditions, national characteristics and people’s habits.

2. INTEGRATION OF RUSSIAN FEDERATION INTO THE WORLD ECONOMY

Russian Federation, as many other countries around the world, is participating in international economic relations. Historically this process started after the disintegration of USSR in 1991. After that, liberalization process started, but it cleared out, that the country was not ready yet for globalization and integration process. It was connected to the fact that USSR was absolutely economically independent, due to the production centers located all around the country, that is why Russia lost a lot of factories along with railway roads after USSR was disintegrated.

To analyze integration of Russia in world economy, it is important to inquire into trade, investment, production, work opportunity, and finance structure. In order to archive this aim this work will provide an insight into: fiscal , monetary, macro-financial and structural policies of Russian Federation during last years.

Countries integration into the world economy can be identified by its' role in the global world, as it is a common knowledge that economically weak countries do not benefit from globalization due to low competitiveness of their economic sectors. Taking into consideration the fact that economy of Russian Federation is highly dependent on oil trade, fiscal policy of the government regulating oil prices affects overall situation of position of Russian Federation in the world economy. In 2015 authorities proposed a new fiscal rule center on a fixed or real oil price benchmark of 40$ US per barrel, instead of a backward -looking price formula as in the previous rule, and a zero-primary balance target at the benchmark oil price, versus a 1 percent overall deficit under the old rule. While Staff proposed another new rule which is supposed to stabilize and cause the economic growth in Russia. The main idea of this fiscal rule is modification of the old one, by targeting a 1 percent of GDP budget surplus, instead of the primary balance, and, what is more, allowing the benchmark oil price to adjust to persistent oil price changes using futures prices rather than using fixed oil price.