PPE 062 Exam #1

Lenin in Power

1. GOELRO and its Incentives 2. New Economic Policy (NEP)- Justification, Snychka 3. Policies of NEP- PSLPFC 4. Administrative economy of NEP- Trusts, VSNKH and Trusts 5. 1920s Administrative Structure- ranking, Sokolnikov, collision

Bolshevik Revolution

"Land Decree," 1. Land is nationalized and redistributed among the peasants 2. Larger states broken into smaller ones so no one could break up their power 3. Commune (min)- Bolsheviks like the communes, fits their purposes 4. Industry- everything is nationalized, banking, transportation, war related industries Trade unions and workers' Soviets 1. instead of a manager and a team structure, they'll come up with a group of workers that will manage themselves 2. ideologically attractive, wouldn't want to trust managers before 3. don't know what or how to do it

Soviet Russia- Prices 3.

"Planned losses" 1. difficulty when encountering costs of transportation or whatever 2. sometimes cant even get the planned losses bc the enterprise is so small, the ministry will just make an arbitrary price then Marx, Theory of Value 1. labor costs are primary determinant of the cost

Soviet Planned Economy in the 30s

1. Basic Principles of Soviet Planning 2. Three main pillars of soviet planning 3. Manufacturing, Investment and Foreign Trade, Real income 4. Chain of command 5. Productivity, Labor, Increase in Infrastructure 6. Material Balances- CPSU established priorities, Information flows, "Techpromfinplan" 7. Enterprise Direction, Soviet Organizational Hierarchy, CLARIFY 'BASIC STRUCTURE' 8. Breakup of VSNKH

Dimensions of transition ACTUAL- macro (Russian Banking Legislation and tasks assigned to CBR with objectives) 2. CONIIE

1. CBR monetary instruments- encountered problems a. set the reserve requirement to 10%- not enough deposits b. if set the reserve requirement higher- not enough loans 2. Objectives a. understandable for an economy in transition b. follow the Western practices 3. not a straightforward system- new rules created confusion a. forbid cartels- banks cannot collude with each other b. allow any bank to accept consumer deposits c. prohibit to print money in 1995- can't cover BD by printing d. "directed credits" abolished outside of bailouts 4. Independence questioned- under rule of Duma 5. introducing rules that commercial banks are supposed to follow- can charge commission 6. established a two tier system- CBR (central bank) and then commercial banks under that

Impact of War Communism and NEP

1. End of NEP- Kulak, city vs. agriculture, 1924 compared to 1917 2. Money supply, secondary shop, shortage 3. Grain shortage, diplomatic relations, national income, NEP experience

Basic Principles of Soviet Planning:

1. Gosplan is central coordinating body 2. Gosplan develops "control figures"- preliminary plan targets 3. Enterprise's actual plan, promfinplan (production financial plan), must conform to control figures 4. Material balances: materials allocated (a) negotiating the quantity of the necessary inputs that will be provided by the state to produce the outputs 5. long term planning horizon is 5 years- mostly just rule of thumb, nice round number... roughly the amount of time that a capital project will take 6. techpromfinplan- finalized contract

Soviet Russia- Soviet Attempts to Reform

1. Khruschev's agrarian reforms in 1953 2. Khruschev's Reform in 1957 dropping the vertical between ministry and enterprise 3. Liberman's proposal in 1962 4. Light industry experiment 5. Kosygin reforms in 1965 6. Kosygin reform in 1979 7. Perestroika by Gorbachev

Soviet Russia- Soviet Attempts to Reform (1 and 2)

1. Khruschev's agrarian reforms in 1953 GET NOTES FROM BEFORE Khruschev's Reform in 1957 dropping the vertical between ministry and enterprise 1. "Sovnarkoz"- local Soviet authority that says all the enterprises that were a part of the tree structure from Gosplan down, each city has its Sovnarkoz 2. Two supervisors problem 3. Dismantle vertical and go to the regional control 4. Introduced new problems bc the coordination of raw material was even worse- the industry link is so weakened

Agriculture and Stolypin (Prime Minister 1906-1910 Reforms)- Goals

1. Main one: make peasants owners of land- so can beat out the drunken peasants 2. Reach 100% literacy- makes education compulsory 3. Promote fast growth of industry with corresponding development of domestic markets

Dimensions of transition- ongoing transformation

1. Micro: creating markets and privatization 2. Macro: create monetary and financial system, new fiscal role for the state 3. International economic integration 4. Safety net

Three main pillars of soviet economy

1. Nationalized everything 2. Collectivization of agriculture 3. Actual planned economy

Russia in 21st Century: 2nd Generation of Reform (Land reform and privatization) 3.

1. New land code adopted in 2001 2. Sale of land is legalized in 2002 but each region can adopt the law to enact federal law 3. Privatization virtually comes to halt- Rosneft (state oil company will not be privatized) and 90% of all oil companies were privatized but Putin not willing to do that 4. actually nationalize a few other companies New bankruptcy law in 2002

Economic Evolution of Society According to Marxism Leninism

1. Primeval society- slaves, crisis falls 2. Feudalism- peasants who could be owned by the landlord, conflict between the peasants and the landlord which ends with the abolition of serfdom 3. Capitalism- still unhappy and exploited workers, another crisis 4. Socialism- no revolution to Communism

Policies of Wartime Communism

1. Prodrazvertska 2. Nationalization 3. Private trade abolished 4. Changes in Labor Allocation 5. Significant changes in distribution 6. Money as a means of exchange is eliminated income taxes eliminated, no foreign trade 7. VSNKH

Russia in 21st Century: 2nd Generation of Reform (Deregulation to Stimulate Small Business) 2.

1. Simplified registration (with just one agency) 2. Less activities require licensing and longer duration- ex like medical and law need license 3. Reduced number of inspections of business- food inspections reduced 4. Simplified standardization and technical regulation

Dimensions of transition- initial conditions

1. complete state ownership- has to change 2. management was output oriented, needs to change to profits 3. plan vs. loss- no legal environment 4. no free trade policy- trade is administered 5. tradeoff between Soviet and Market-type goods: more opportunity cost the more market-type goods Aslund's Speed and Sequencing 1. Opposition from the people of the leftover communist party and left with monopolies in the industry 2. Demonopolizing or liberalizing the prices first?- Gaidar is advocating for prices first, critics say the opposite: if you give market prices the monopolies take advantage 3. Can result in oligarchies where people make a lot of money quickly

Ivan the Terrible

16th Century No private property Feudalism- mutual help, understanding; large part of Russian society

End of Communism

1964-1982: Brezhnev as leader, stagnation 1985 begins perestroika- aka restructuring

Soviet Russia- Soviet Attempts to Reform (Perestroika)- 3 Stages

1985-6: vision is created 1. GDP would have to increase 4% with nothing to back it up 2. "Anti-alcohol law" in May '85- only thing of substance during this phase 3. making illegal alcohol to get around it 4. had a negative economic consequence, no real social consequence Late 1986 early 1988- actually enacted in the new legislation like ^^ 1. Law of State Enterprise 1989-1991- traditional system collapsing but nothing is replacing it, leads to fall of the Soviet Union

Leading Sectors: Energy 2.

2003 deal- BP merging with Tymel Oil Conoco 1. Phillips and Lukoil- Russian company Re-nationalization of oil industry in 2003- not other industries 1. "Northern Oil" in Russian which is taken by the government and paid a decent amount 2. In 2004, Yukos (one of the biggest oil companies) also nationalized leader is arrested and sent to Northern Russia but escaped 3. thought he was a national hero but really no one cared 4. can get screwed politically

Lagging Sectors: Agriculture 1. (new forms of arrangement)

4 options 1. Break up into peasant farms 2. Joint-stock company like in industrial sector but shares would go only to insiders 3. Producer coop in which individual farms would belong to coop but will maintain a degree of independence 4. Continue existing operation (about 10% did that)- will be a state farm 80% of the collective/state farms were loss making

Russia (Kievan Rus X-XVI)- end

50 city/states formed- Moscow, Novgorod, Vladimir, Pskov most important 1. Much easier to conquer individual city-states Russian states are conquered by Mongols in mid XIII 1. Don't occupy, just tax and plunder 2. Tax on every transaction to Mongols outside of Russia's interior taxes 240 years later when Ivan the Terrible and monarchy is formed

Soviet Russia- Austrian Critique (Mises and Hayek) of Centrally Planned Socialism Characteristics 2. (lack of efficiencies?)

Agents can't have information unknown to principals 1. lack of technical efficiency- if the enterprise is concealing information, they are producing at sub-optimal levels 2. hiding their resources- knowingly going with sub-optimal production process Full information- they're unable to choose the efficient, optimal outcome 1. lack of allocative efficiency - producing at a Pareto sub-optimal outcome aka MR wasn't equal to MC No risk to agents- won't be fired

Soviet Russia- Prices in Agriculture 1.

Agriculture Procurement Prices with state farms 1. Kolkhoz- entity in agriculture where in the beginning couldn't make any money / food 2. Labor system where have compulsory delivery (quotas imposed) and nothing until you need it, once you go above you split it by labor system 3. Later was replaced- compulsory delivery would be paid a little, if you beat the target then they pay you above the target Kruschev 1. Realized the compulsory delivery was not working and tripled the boost you get from compulsory delivery 2. would give more incentive to produce on the goals, more bonus if you go past the surplus 3. only leader that was removed

Soviet Russia- Soviet Attempts to Reform (6)

Another Kosygin reform in 1979- P I E M, last Brezhnev reform addressing stagnation Trying to address three problems 1. Overutilization of inputs- too much capital is used, well aware of the problem but nothing is working 2. Quality of products- introduced grades, superior quality, first quality, second quality 3. Product mix- increased diversity of assortment New indicator aka labor productivity or net output per worker 1. have an idea of where each output / worker should be and penalized if it is not there for wasting resources, in order to minimize costs Gorbachev's Perestroika

Integration to the World Economy and new trade arrangements (exchange rate, import tariffs and taxation) 1.

As of right now, it is a free and floating exchange rate 1. has went through a period of a pretty stable exchange rate 2. 1991 Currency Exchange Rate Import tariffs and taxation 1. relatively minor role for the government and not very burdensome 2. 5% tax on things coming in member of the WTO where they have to uphold those standards

Russia in 21st Century: 2nd Generation of Reform (Aslund and Oomes- symptoms of dutch disease)

Aslund 1. concerns about Putin's presidency, even though economy is good 2. raises concerns about democracy: A. Media censorship B. Elections in Ukraine and influence C. Gives example of Yukos oil dude arrested Oomes and Dutch disease 1. Concern for energy rich countries- real exchange rate will appreciate and put brakes on domestic production and Russian products (other than oil) become very expensive for foreigners Oomes' 4 symptoms of Dutch disease 1. real exchange rate will appreciate and inflow of foreign currency 2. manufacturing growth will slow 3. Services will grow faster 4. Higher wages in oil sector 5. Trend towards resource exploitation

Soviet Russia- Work/Education after College

Assigned work to a specific enterprise 1. have to go there for 2 years and can switch after that 2. helps in the Soviet planning 3. the lower your grades, the less desirable job you get Can continue with education 1. candidate- next degree after college, basically a PhD 2. doctor of sciences- full blown doctor, kinda similar to the PhD

Industrialization Debates- Balanced Growth (Bukharin and the rest of right wing)

Balanced growth, so that high prices of agricultural goods would create savings to finance industry ("Peasants‐get rich!") To promote industrial growth,it is suggested to improve efficiency, increase capital utilization, and give more attention to factor proportions They believed that the left wing approach was wrong as low prices for agricultural goods would force peasants to withdraw from the market. Continue NEP: more attention to factor proportions of capital and labor; don't waste resources and find optimal way to produce

Bolshevik Revolution and after

Bolshevik Revolution 1. What was about 2. Trade Unions and works soviets 3. Land Decree 4. Provisional government 5. Economic situation Was pre-1917 Russia a market economy 1. Chayanov 2. Gerschenkron 3. Actually yes

Material Balances: Procedure- CPSU established priorities, Information flows, "Techpromfinplan"

CPSU (Communist Party of the Soviet Union) established priorities 1. Gosplan prepares control figures for 200-300 product groups (too few) 2. Ministries talk to enterprises, control figures and input requirements are prepared Information flows back from enterprise to ministry to Gosplan 1. Bargaining- between the three to determine inputs, etc 2. Check for equilibrium after bargaining is complete- never is, not solvable 3. Identify priority sectors if equilibrium is not reached Enterprise gets the final plan- called "techpromfinplan," details output targets and the inputs they will get it, supply and transportation flows, financial flows, wages

NEP Experience- can't really trust the markets, keep with old way

Can't really trust the markets 1. 80% of the market in a trust exercising monopoly power wasn't good 2. peasants withholding grain is a market response not good Keep with the old way- one manager running an enterprise, keep trade unions by tight state control 1. protect interest of the workers but controlled by the state 2. Lenin envisioned that NEP was just a temporary form of the planned economy

Russia in 21st Century: 2nd Generation of Reform (Gref's Tax Reforms 2001-2004) 1.

Changed laws and provisions 1. number of taxes reduced- more people paying rather than avoiding Reformed VAT, personal, excise, corporate taxes 1. personal income tax- 13% flat rate, where more people are paying taxes, less people escaping taxation 2. while lowered the rate, more people were willing to pay it instead of escaping it 3. corporate- reduced from 35% to 24% 4. VAT- value added tax (sales) made more simple bc business were confused Reforms for business- deduct ordinary business expenses

Policies of War Communism- Changes in Labor Allocation, Significant changes in distribution

Changes in the methods of labor allocation 1. military discipline in state enterprises, labor is compulsive in 8 hours workday for ages 16-50 2. Commission for the Universal Labor Service- Trotsky is the head who enforces the discipline but private enterprises not subject to them 3. Subbotnik- work on Saturdays, showing Lenin doing it to invoke a moral obligation not just violence Significant Changes in the Distribution 1. rations: get all or most of pay with a prescribed ratio of food 2. class rations- preferred group of people and other groups of people, if unemployed/ an artist won't be in a preferred group 3. 22 lbs of bread, 4 lbs of meat, 1/2 lbs of butter/salt/sugar, .2lbs of coffee

Changing structure of the economy (changing sectors, relative wages)

Changing sectors 1. Agriculture and industry decreases, finance 7 times more 2. US- agriculture and industry large, housing small, finance is small direction is moving towards the US Relative wages 1. agriculture is at the bottom 2. fuels (oil, gas) and electricity are at the top

Was Tsarist economy (pre-1917) a market economy?

Chayanov- no 1. not a market economy already Soviet, the decisions a Russian household makes is different from Western household 2. a capitalist will hire labor based on production, consumption etc. 3. farmers in Russia not hiring labor, so cannot be a market economy bc the base has a different decision making process Gerschekron- no, thought the role of the state was so intrusive that it was preventing the market economy 1. backwards economy theory Actually yes: 1. Even with monopolies / oligarchic economy- ex: SEPTA, US Postal Service, etc. 2. had parts of market economy like iwth grain 3. produced in the South going to the North had a high price, but once built better transportation the price decreased

Planning Theory and Practice- chain of command

City proper and its 'province' (Moscow) with Gorkon Lower cities (Klin) and 'regions' with Raikom Both Raikom and Gorkon report to Obkom

Dimensions of transition ACTUAL micro- 1. (civil code, ruble, D. North, Chubais' state property commission)

Civil Code- is passed, laws on companies (how to liquidate, pursue bankruptcy, form corporation firm, partnership, etc.) Russian ruble is official currency, but allow foreign currency 1. citizens can have and freely exchange foreign currency D. North talks about how institutions can change 1. can write 20 different laws overnight, but can't change the mentality/customs over night 2. if looking for loopholes in the past, will continue to look for loopholes 3. enforcement problems- bribes were common, that's not going to change overnight State property commission by Chubais in 1992 1. gives small business property rights to insiders 2. mom and pop gets mom and pop bakery they worked in

Soviet Russia (late 70s-80s) Agriculture 3.

Climate and weather are very important- no ability to safeguard from this 1. seasonal availability an issue- things not in season would not be seen 2. didn't import- waste of foreign currency in their eyes See some productivity growth from rural to the city 1. Normally, less people working with increases in technology but not the case and no growth

Soviet Russia- Prices in Agriculture 2.

Collective farm market prices 1. Market where collective farm workers can transact 2. Sell stuff they own, like an island of the market economy, determined by supply and demand Secondary market- milk, etc 1. Three choices- drop out of labor force, secondary market, increase savings 2. Monetary overhang= money, just no goods, so put in the secondary market 3. People trying to drop out of the labor force- what's the point of money? or just increase savings

Soviet Russia- Higher Education (College application, college education, technical colleges)

College application 1. Each of them have their own test- composition (language and literature), math, physics 2. Can only apply to one school per year- can't replicate documents in order to apply, one week to apply 3. Gold medal for A and silver for B College education 1. If technical sciences, college lasts 5 if humanities then 4 2. can't change major- bc take the entry level exam 3. equivalent is more than a masters here- very strong math and sciences programs Technical colleges- distinction between technical and humanity school 1. If you want to be a doctor, go to doctor school; if you want to be a teacher, go to teaching school, etc. 2. all one degree, not separate ones 3. had military department- classes at the military department to be officer for males

Impact of War Communism & NEP- grain shortage, diplomatic relations, national income

Creates a shortage of grain, only 10% (4 mil) of workers previously in the industry 1. Stalin will call for 15-20 million in the industry but will need to create jobs 2. 1920- 700 hundred cars produced Diplomatic relations 1. fictional enemies around so build up the industry and the military, NEP not providing this National income tripled during NEP, had a stable currency and banks were alive

Leading Sectors: Energy 1.

Cyclic in production- picks up in the mid 80s, falls in the 90s, then rises 1. indicative of the world demand- when the price is high then they start producing more and export more Transneft- state owned pipeline in Russia problematic bc can just ship to China with a tanker and the pipeline can become a 1. bottleneck- more demand and couldn't supply enough 2. when oil gets cheaper, the transport cost starts to increase 1999 not clean deal 1. $500 million investment into Sidanko had a subsidiary which was bought by Russian company Tyumen Oil which was sold for $100 million less than it should have been 2. BP is very mad

Soviet Russia- Management 2. (how to solve it)

Definition of information asymmetry/principal agent problem 1. when the owner has a different interest than the managers 2. owners want to maximize profit but managers want to maximize revenue 3. Enterprises are maximizing production and don't care about profit Solving it: 1. Span of control and reorganization- play with the tree and move the enterprises to another trust or ministry 2. Improving information flow- solving material balance problems, computerize it, have targets of output and cost reduction 3. Incentive compatibility- align interests, but difficult do that; state police will occasionally audit the enterprises Ratchet Effect- if director overproduced, Gosplan will increase target for next period, don't want higher expectation

Soviet Russia- Measurement of Economic Growth 2.

Difference between extensive and intensive growth 1. intensive- more inputs 2. extensive- included productivity Static efficiency vs. dynamic efficiency 1. dynamic = total factor productivity growth (A) in the total production function 2. GROWTH CAME PRIMARILY FROM INCREASE IN INPUTS 3. technology not growing- why growing in US and not there? Static = want to be somewhere on the PPF (production possibility front) 1. no incentive to innovate since not being driven by profits 2. not on PPF

Planning Theory and Practice- Enterprise Direction, Soviet Organizational Hierarchy, CLARIFY 'BASIC STRUCTURE'

Enterprise Direction 1. Directions from other people depending on where they are in the structure 2. "PPO"- primary party organization, aka a party delegate for each enterprise Soviet Organizational Hierarchy 1. Polibearon of the CPSU- elect General Secretary of the CPSU who runs the country 2. Ministries are setting the price 3. Trusts are at a managerial level bc it is hard for the ministries to enforce for every enterprise Breakup of VSNKH 1. Three ministries- heavy, light, woodworking 2. syndicates and trusts transformed into 'glauk,' basically the same thing

Soviet Russia- Management 1.

Enterprise: Director on top of:Deputy Director, Chief Engineer, Chief Technologist, Chief Economist, Chief Accountant Technical administrative issues 1. The director were the most accountable, people underneath were not accountable really Held by "bounded rationality" 1. Manager is faced with technical/administrative constraints- lacking skills or technology 2. as long as you can sorta justify it / explain it then it would be okay

Overview of Transition (Out) Blueprints- Changing Macro Economy

Everyone is employed No inflation- prices set by the state Changing social contracts- can't affford to pay for all education Communist: 1. Industry nationalized 2. Land nationalized 3. Private trade illegal

Kievan Rus Slides

Feudalism Communes Trade

Dimensions of transition ACTUAL- micro 2. (first stage of privatization by Goldman? different options?)

First stage: Voucher Privatization (Goldman) 1. 10k rubles like talked about before 2. Private outlet that becomes traded- price depends on the growing value 3. Whatever is left out (below) will still be in the government's hands Option 1: Insiders can't vote on the matters and don't have to pay: 40% total with premium of 70% (which is nothing bc price is v. low still)- easiest way Option 2: 51% insiders Option 3: similar to the first (40%)

GOELRO and Incentives

GOELRO (1920) 1. Lenin's plan for the electrification of the country 2. Communism = the power of the Soviets + electrification of the whole country No incentives, so must create them 1. Trade Unions: Kronstadt sailors had an uprising in 1921 bc they wanted more rights for the sailors in St. Petersburg 2. Last straw- 1921 there was a drought too so facing hunger 3. 300k dead- called Red Terror in 1918 4. HAD TO CHANGE SOMETHING THROUGH NEP

Reasons for collapse of USSR

Gaidar is the first Russian Prime Minister (economist) who wrote about immediate collapse of USSR. Why now? 1. there was not enough supply of important manufactured consumer goods 2. anti-alcohol campaign caused revenue problem 3. heavy spending on industry and agriculture, not on trade and services Aslund- Swedish PhD economist; long term reasons for collapse 1. not trading enough with the former Eastern bloc 2. high expenditures on defense/investment and little consumption 3. lacked standard of value- whacked prices, non-stable 4. enterprises had no incentives to improve efficiency 5. no attention to transportation costs

Russia end of 19th Century/ Beginning of 20th Century (Witte's Reforms)- Goals

Goals 1. Industrialization with government support 2. Protectionism and active foreign trade 3. Attracting foreign capital 4. Introduction of hard currency (golden ruble) 5. Modernization of agriculture 6. Elimination of budget deficit

Soviet Russia- Perestroika 1.

Gosplan now has to influence the enterprises through norms rather than directives Transform state enterprises into full economic accounting 1. they go to full cycle (buy products, calculate profits) Law of the State enterprise 1. targets replaced with state orders- gradually moving away from the soviet way of doing things 2. planners- can go to other people to buy inputs, make your own contracts, no more micromanaging just follow norms/rules 3. Gospriemka (quality control) is established Want them to be self-sustainable 1. first time that the enterprise would go out of business if didn't make a profit 2. actually would be enforced Management based on economic incentives 1. self-management: worker's counsel - ???? Reform supply chains, prices, finance, and credit

Dimensions of transition ACTUAL- macro (Crash of 1998) 5.

Had exchange rate but with a minimum or maximum, will be stopped 1. Central Bank puts the dollars on the foreign market to let the ruble appreciate 2. is not sustainable bc finite supply of foreign currency price of oil is not high ($13 per barrel), is a major source of foreign currency at the time Foreigners started selling GKOs and the whole system fell apart 1. government couldn't pay the yield nor could banks so the government defaulted

Dimensions of transition ACTUAL- macro (Capital formation and capital markets) 4. crowding out private investment

Had savings in dollars 1. would buy appliances or other stores of value because of the inflation 2. creates an artificial demand because the dollars will inflate and lose value Try to sell the GKO- treasury bill 1. in which they would get that money to fund enterprises 2. have a high yield and selling a lot of them, which leads to a crash in 1998 3. companies also tried to sell their own debt, but no one bought it People had more trust in the government than the enterprises bc was more transparent 1. not the first time that the enterprise is selling debt

Soviet Russia- Labor (Sex/Ethnicity, Salaries, Directorship

If not ethnically Russian, some colleges and jobs will be closed (unofficially) 1. nationality of the father usually, but will discriminate if see the last name 2. Male and female professions- not a rule but just how it is 3. Strict penalties for not showing up Salaries 1. Siberia salaries were 70% more bc wanted to attract people there 2. Paid monthly and get an extra salary if do well- called "thirteen salary," bc paid 12 times for each month and get a one month bonus Director- must be in communist party

Administrative economy of NEP- Trusts, VSNKH and Trusts

If outside of the first tier of control could organize into trusts (which existed towards the end of the Tsarist economy), dominant form of organization The VSNKH loosely advise them and give some direction but no state-wide planning

Dimensions of transition outline- Micro: creating markets and privatization 1. (soviet context, process for privatization)

In Soviet context, it will be the max- everything has to be privatized 1. "State Agency" was a body to organize it, the legislation that would actually explain how 2. ownership- who is going to own the shares? then distribute the shares Process for privatization 1. mass privatization- agency, laws, properties, etc; most common 2. restitution- redistribute based on ancestors with NEP, but impossible bc 90 years later 3. small scale privatization- no complicated rules, just redistributing??

Soviet Russia- Income Distribution (males vs. females, labor participation rate)

Income distribution isn't that big- everyone being paid relatively similar amounts 1. Engineers made 120 rubles in 1970s 2. Males in the 80% and the women in the 70% in the labor participation rate 3. rate was higher than the US bc everyone was working or in trouble 4. if females have a child, keep the job for two years and that was fine

Industrialization Debates- Unbalanced Growth (Preobrazhensky and the rest of left wing)

Inflation was caused by increased peasants effective demand and no comparable increase in industrial activity, so investment(I) in industry is needed. Benefits of I won't be realized immediately, so "primitive socialist accumulation" in the meantime. 1. State would extract forced savings from agriculture by setting low prices for agricultural surpluses and high prices for manufactured goods Once private (agricultural) sector is eliminated as a threat, socialized sector would become the source of capital accumulation.

Soviet Russia- Austrian Critique (Mises and Hayek) of Centrally Planned Socialism Characteristics 1

Information problems - largest issue with the central planning system 1. unsolvable with the input / output ratio 2. directors not telling the planners efficient production levels Principal agent problem 1. principal and agents' interest is not the same 2. trying to give the agents incentive to act in the interest of the principal 3. if can do it it's fine, if not then the agent is will change its interest away from the principal 4. engage in opportunistic behavior called "rent-seeking?"

Soviet Russia (late 70s-80s) Agriculture 4.

Inputs 1. fertilizer increase was huge- they were expensive but state pays for it and gives more output 2. land use didn't change, but a little bit more capital (more trucks, tractors) 3. labor force basically the same, dropped a little bit 4. so not what expecting given the increase in capital investment / technology Not getting more efficient 1. retail price kept steady but subsidy increase as things become more costly to produce 2. more than half of national income generated is from a subsidy 3. Soviets had 3x more capital than US, 6% as productive 4. 1/3 aggregate output would not get to consumers due to failure in infrastructure Committing fraud- sugar would have water added to it so would be more weight, get more compensation for higher weight when in reality 10% less

Soviet Russia- Growth in Socialist System (Kornai)

Kornai's shortage economy 1. general 2. frequent 3. intensive 4. chronic

Soviet Russia- Soviet Attempts to Reform- ORAIGES (5)

Kosygin (prime minister under Brezhnev for a very long time) reforms in 1965 1. Organizational changes- everything that Kruschev implemented is abolished and encouraging more communication between the enterprises so it would get easier to manage 2. Reduced number of plan targets to 8- value has price built into it 3. Automatic subsidies to loss making enterprise to end- more of a message than reality, some enterprises might get scared 4. Introduced 6% charge (interest) on fixed and working capital- like interest, but not going to call it that 5. Gosbank given expanded role and can provide investment at differentiated rates- vary the rate based on the importance to the state 6. Economic accountability brigades (Khudenko and Pervizky) which are responsible for the whole technological cycle like a farm paid on quality and quantity 7. Self-financing for investment purposes- could invest in workers' housing, bonus incentives, product development fund

Soviet Russia (late 70s-80s) Agriculture 2.

Kruschev (1955-1964) 1. labor day system- stops this 2. up the payments, increase the frequency of payments, guaranteed minimum payments 3. economies of scale- pushed corn among all other agricultural goods 4. mostly in the far north, where corn could grow and begins to import grain- replacing grain fields with corn fields West's idea of "Agribusiness" 1. Soviets borrowed that- thinking about getting rid of Kolhkoz and moving towards state farms 2. Erasing any differences between rural and cities regarding the industry and the agriculture

End of NEP- Kulak, city vs. agriculture, 1924 compared to 1917

Kulak (fist in Russian)- wealthy peasants, viewed as a political threat City vs. agriculture 1. Much better to be in the city because they have to pay much more bc supply in agriculture will increase more dramatically than industry 2. relative devaluation of agricultural goods 3. Price change is much more in agriculture than in industry 1924 compared to 1917 after the Bolshevik revolution: 23% of what it was 1. demonstrated to the public that it was an argument against NEP 2. in reality it would've been a lot less if not for NEP 3. NEP ends in 1928

Soviet Russia- Perestroika 2.

Law on private economic activity- legalizing 20 activities 1. if did the whole thing at once, would collapse the system "Agrarian Policy in Contemporary Conditions"- no real special law on agriculture, but are allowed to set up a private farm Prices 1. buyers and sellers can negotiate prices under some central rules (minimum and maximum) 2. preserve subsidies

New Economic Policy (NEP)- Justification, Snychka

Lenin justified it through: 1. legalizing some forms of activities including those in agriculture 2. giving some incentives through agriculture- taking by force isn't the best; major concern 3. create a partial micro economy- want more money circulating Snychka- Russian word for 'alliance' 1. connection between the regime and peasants is broken and need to fix it

Soviet Russia- Soviet Attempts to Reform (3 and 4)

Liberman's proposal in 1962- economics professor in Ukraine writes "Plan Profit, and Bonus" 1. Central plan should be maintained- doesn't want to dismantle it 2. Profits would be the basis for the managerial rewards- BUT targets for products and assortment must be maxed 3. Bonus would be profits divided by the cost of capital- so there's no other incentive and provides a disincentive from using too much capital and ask the firm to suggest a profit target 4. Managers lobby for higher plans- even if didn't achieve the plan, rewarded for suggesting more ambitious and enterprise plans the material inputs Light industry experiment- with two big factories Bolshevichka, Mayak 1. Bolshevichka- talking directly to the stores and responding directly to consumer demand (will need 100 dresses, order 100 dresses) 2. then evaluate the profits from that- ultimate motivator is the consumer demand but 3. discontinued bc they say the reform having a consumer driven system

18th Century: Katherine the Second and 1854-1856: Crimean War

Losing the war was a sign that the country was going South and the economy needed to be changed

Dimensions of transition ACTUAL- macro (what happens after Russian Banking Legislation) 3.

MMM- pyramid scheme bc bring the money and promise huge return 1. pay it from the people brought before, works only enough to pay interest rates Bloody Thursday, August 1996 1. banks got scared and stopped accepting deposits and requests from each other, system shut down and froze 2. short in cash, people started running to the banks to withdraw and some got it some didn't Had to change banking system 1. 10% reserve requirement isn't working- too low, move it to 30% in case a bank run like that happens 2. where do you keep money if the banks are untrustworthy?- $12-13 billion of US dollars in Russia to accumulate money

Soviet Russia- Younger Education (magnet schools, age, compulsory)

Magnet Schools 1. Criteria determined by the principal 2. Much better than public Age 1. By 7 you should be in first grade 2. Should be in college by 18 in order to avoid draft 3. Needed to apply to special schools Compulsory 1. Education until 8th grade is compulsory, had choice to go to a professional school (dental assistant, etc) 2. 6 days / week and taught all subjects and would add as got older

Russia (Kievan Rus X-XVI)

Main economic activities: agriculture and hunting Feudalism: 1. feudal estate which son inherits from the father 2. Estates were owned by noble men (boyari) or princes (knyazi). 3. They owned slaves as well as horses, cows.• Communes: united independent peasants 1. Commune had to pay tax to the prince. 2. Commune was a from of collective governing using public treaty. 3. Public governing used a council (veche). Prince making a decision had to listen to the opinion of the council. IMPORTANT: Never graduated from communes/group mentality

February 1917 Revolution- what was it about?, provisional government, economic situation

Mainly about the abdication of the tsar Nicholas II, no monarchy in that period Between Feb and Oct, have a "Provisional Government" in Smolny 1. politics were pretty unstable bc couldn't agree on a government 2. Kerensky was the head, who fled to the United States Economically bad situation 1. in the middle of WW1- money supply is 9x more than before the war, inflation is huge 2. fixed the prices of the staples, shortage occurs

Soviet Economy in the 30s- M/I+FT/R

Manufacturing 1. heavy manufacturing doubles in 10 years, light manufacturing is shrinking 2. 66% of all workers in 10% of the enterprises- concentration in the industry 3. Gorky and Moscow -> car factories but very inefficient, terrible process optimization (missing parts, not constant production) Investment and Foreign Trade 1. household consumption drops at the expense of investment which doubles and government's share also increases 2. foreign trade declines bc of world conditions- Hitler in power in Germany, Stalin is serious about exporting grain and importing industrial goods Real income decreasing- quantity of products you can buy for same quantity of money

Soviet Russia Monetary- Investment

Market economy- r (investment rate) = marginal product of capital Interest rate is capitalist- get investments with no strings attached, don't have to pay back with interest Prices don't reflect scarcity in the system, hard to make investment when you don't have the prices

Russia end of 19th Century/ Beginning of 20th Century: Alexander II Reform- Monetary economy, Communes

Monetary economy in the country side 1. the few who chose redemption start the monetary exchanges in the country 2. Some states were especially productive bc of the exports to other countries Communes still existing 1. rich paid the debts to the poor- why do you want to be rich? 2. SO in order to leave, must pay off all the debts of your family, 2/3 of the majority of the commune have to vote to let you go

Policies of War Communism- Money as a means of exchange is eliminated, Income taxes eliminated, No foreign trade

Money as a means of exchange is eliminated 1. Public transportation, mail is free Income taxes eliminated- nothing they could collect anything 1. Output is stalling, no incentive to produce more bc they will take the surplus 2. 1918: decided that 144 millions pounds of grain is necessary, collect 13 million pounds Foreign trade: no foreign trade 1. Repudiate all the debt, no foreign trade when there is no trust to the Bolsheviks bc they can just repudiate whenever they want 2. Industry and transportation is bad, 20% of the level of the 1913 of the Tsarist economy

Impact of War Communism & NEP- Money supply, secondary shop, shortage

Money supply increases 2600% bc Chervonetz taken away, goes back to the ruble and made bad loaning decisions Secondary shop emerges 1. pay more than what the government offers 2. two prices: the government price and the more market price option Causes shortage

Dimensions of transition ACTUAL- macro 1. (new taxes? budget deficit and how to get out of it?)

Move away from turnover tax and go to revenue tax 1. value-added like European or income tax like US- go income tax 2. Income tax to a society that has never had income tax 3. 1995- super low income tax relative to other countries Government revenues as % of GDP lower than other countries- 30-40% Started with big budget deficit out of transition- 10% of GDP 1. uncertainty out of revenue and started to spend money 2. get it under control in the mid 90s, lucky with the oil crisis and the BD is gone 3. until 2011/2012- oil prices fall, mess with the neighbors and the West and sanction introduced two options: to get out of it 1. print money which leads to inflation 2. sell bonds called GKO- crowding out the private investment, interest rate goes up and the savings decreases People avoiding taxes 1. everyone paying minimum wage and just pay under the table- so less income tax 2. changed it from progressive tax to flat 13% tax for everyone and raised revenue

Dimensions of transition outline- Macro (Create monetary and financial system- the state? integration?)

New fiscal role for state 1. trying to figure out how to deal with budget deficit, inflation, unemployment 2. 0 to 4 million unemployed in one yea International economic integration 1. need to do something about trade organizational arrangements change 2. previously was the state trading, now it's the enterprises 3. tariffs, taxes, both ?? 4. need a convertible currency

Russia in 21st Century: 2nd Generation of Reform (Labor market, pension, and judicial reform) 4.

New labor code 1. entitled to unemployment for at least three months and need to give notice 2. parental leave and sick days also in the law Pension reform in 2002- minimum and maximum depending on how many years you worked Judicial reform with more power to the judges 1. prosecutors were previously very powerful 2. had jury trials for the first time

Soviet Russia- Growth in Socialist System (why thinking this is a better system)

Planners impose their preference not the consumers, even though consumers prefer spending 1. state is concerned with spending- less saving so less investment 2. capital isn't increased so then can't grow state makes sure they decide how much the consumers can spend, have to save the rest Can allocate the savings in priority sectors 1. would allocate savings in sectors that did not have a comparative advantage

Russia Mid 19th Century - Beginning 20th

Pre 1860s: serfdom with lords and communes Post 1860s: 1. abolish serfdom / redemption and beggar's allotment 2. Alexander II- monetary economy and communes 1890s: Witte- goals, reforms 1902-1906- Stolypin and his goals / what actually happened

Russia end of 19th Century/ Beginning of 20th Century- Agriculture (BAD/TERRIBLE) in Pre 1860s

Pre-1860s: 1. services for landlord or kind payment (either/or or both) 2. serf, live in the commune, or working the landlord 3. work for your landlord and then work on your own little plot 4. no incentive to work so not effective, so abolishes

Soviet Russia- Prices in market economy aspect (how so and how not)

Prices were assigned by goods were not 1. made decisions like in a private economy except prices were just given to them 2. allocation of goods and labor supply are two exceptions of this system: getting as close to market When demand drops, the firms will respond to demand? (with supply demand curve w/ inelastic supply ^^^) 1. price maybe changes- market clearing price changes, but actually may not and play with the turnover tax 2. prices don't have to be market clearing They don't care, bc just give to the government- profits aren't a point of evaluation 1. Not like market economy 2. Free capital and land

Effect of Mongol Conquer on National Identity

Prince of city-state has to get a "Yarlyk" aka mandate 1. Mongols wanted to humiliate Russian prince and make them partiicapte in Mongol ceremony 2. Promotes being loyal/obedient/tolerating a tyrant and getting used to bad things

Policies of War Communism- Prodrazvertska, Nationalization, Private trade

Prodrazvertska- confiscate grain at a fixed price 1. done by sending out a special police and confiscate all grain that wasn't necessary 2. Supply of manufactured goods is 12-15% the amount than before the revolution Nationalization 1. 80% nationalized, half of smaller ones are also nationalized (not as important) 2. don't know how to run the planned economy or these enterprises Private trade is abolished (1918) 1. Bolsheviks allowed "people with bags" aka "meshochniki" 2. will have grain/bread going to the village or manufactured goods going back, max of 8 pounds 3. abolished however in 1920

Soviet Economy in the 30s- Productivity, Labor, Increase in Infrastructure

Productivity drops 1. collective farms have no incentive built into it 2. "kolkhozniki" (collective farm members) are allowed to establish small parcels of land to use the land- much more productive, 4% produces 45% of product Labor 1. Gulag labor- labor camp, like a prison but weren't killed, put there for the purpose of conducting important studies / info and didn't want leaks 2. create "labor books"- take resume but had to record everything, no control: any infractions or awards will be there Increased infrastructure: 1. Subway built in Moscow 2. opened colleges and universities, college graduates triples

Soviet Russia- Centrally Planned Socialism Characteristics

Property rights are predominantly held by the state 1. "complete anarchy and unpredictability in market system, in the state it was just easier" 2. can direct resources where they want to Information mechanisms for decision making are primarily made through planning 1. consumers' decision making is flawed, why would you promote silly things like jeans 2. how they convey information in the market is through planning 3. producers are told what to do rather than basing it off of market information that is unsure Decision making is substantially centralized in the hierarchy- Gosplan Incentives are mixed, with substantial reliance on moral and material 1. Not only policing everything but also moral incentives ("do it for the country")

Problems of Perestroika

Property rights- did not see a need to change the property rights, but doesn't work without property rights Timing and contemplementarity 1. if contractual order, need legal system to enforce those contracts 2. legal vacuum if something goes wrong in the contract Uncertainty 1. reforms happening but no one knows the next step- changing system? more reforms?

Policies of NEP- PSLPFC

Proportional tax (prodnalog) replaced requisitions 1. not coming to the peasants to take grain, introducing a proportional tax in 1921 2. Annual income- modest tax, 10% Selling output to anyone is allowed 1. restarting micro market economy for grain, government is just another player in the game Lease land and hire labor is allowed 1. if this is allowed it doesn't mean it's going to happen a lot due to history (wasn't popular in the past) but at least was allowed Private enterprises are allowed 1. max 20 people so they don't have any other group become too powerful, only 1/8 every enterprises but produce 25% of industrial output Foreign trade starts to normalize but state monopoly is preserved 1. foreign companies will pay lease on government land 2. ex: coal producer leases land and in 7 years would increase productivity a lot, could be viewed as a potential threat Currency (chervonetz) is introduced, stabilized 1. 10 gold rubles, same thing as pre-Tsarist 2. $1 = 1.94 ruble exchange rate was preserved

Soviet Russia Monetary- Money

Purpose- unit of measure, store of value, and medium of exchange J. Kornai: soft budget constraints 1. negotiating with the state 2. see earlier notes on plan negotiation Gosbank- one bank, branches all over the country 1. Short term loans (to enterprises), oversee plan fulfillment, payments to the population (in cash) 2. monetary overhang- so much money, didn't know how to spend it 3. Couldn't get loans

1920s Administrative Structure- ranking, Sokolnikov, collision

Ranking: 1. Committee of State Orders (big picture) -> VSNKH (break up big picture) -> Trusts -> Enterprises Sokolnikov, Head of Commissariat (Ministry) of Finance 1. controlled economy, decides what to subsidize 2. Gosplan created in 1921 1925- these three collide: 1. Gosplan (tryna get into the VSNKH structure and want the money control) and Sokolnikov and S. loses 2. Commissariat loses influence and Gosplan takes over the VSNKH role

Russia end of 19th Century/ Beginning of 20th Century- Agriculture (BAD/TERRIBLE) Reform

Reform: serfs are free (on paper), but: 1. have to redeem the plots (called redemption) and mortgage 80% of the cost of the plot 2. other 20% is a down payment (to landlord) and pay 80% (to the state) over 49 years 3. OR get the Beggar's allotment- free but so small that may be able to survive; the majority bc don't have enough money

Overview of Transition Blueprints- New Economic Policy (NEP)

Reformed the currency 1. Established convertible currencies known as Chervonetz = 10 rubles; started some trade New market arrangements in agriculture, lower levels 1. however anything on strategic level for country's existence in the state's hands 2. new ownership arrangements and experiments with trade and migration Failed bc it wasn't moving industry as far ahead as they wanted and nationalized everything, put all peasants in state owned farms

Peter the Great (1682-1725)- reforms?, development

Reforms? 1. Yes, but with large cost and low human values 2. Population declined 20% Driven by development 1. Would sacrifice anything 2. Worked to some extent- developed metal industry and became largest producer 3. Foreign capital flowed in

Russia in 21st Century: 2nd Generation of Reform (Oomes' Resource Movement Effect and Spending Effect and its result)

Resource Movement Effect 1. only works when capital is mobile enough to occur 2. when have resources that can move from one sector to another 3. demand for labor/capital in oil goes up so wages/interest rates in oil go up 4. services and manufacturing go down, services'/manufacturing's output go down Spending effect 1. Wages and production of oil goes up, profit goes up; aggregate demand goes 2. prices go up- where? services and real exchange rate appreciates RESULT- other sectors decline

Soviet Russia- Prices 2.

Same three as before, plus: 1. Prices should force certain allocations 2. Price as an instrument of income redistribution- those who can buy premium items buy at premium prices- like cars, want to extract that surplus Price Retail = P industry wholesale + markup (aka retail trade margin) + turnover tax 1. whether the price changes doesn't affect the plan, not like they're finding the profit maximizing quantity 2. the Supply is a vertical line when Demand is normal line down 3. The difference between the two prices is the turnover tax: thinking first about what they wanted the price to be Just decide what the price is without market 1. Bread and milk cheap, cars expensive

Dimensions of transition ACTUAL- micro 3. (second stage, loans for shares? Goldman's piratization)

Second stage: Slowly auction off the rest of what they have 1. Investment Tender- auction where just winner takes the shares 2. Commercial Tender- auction but a condition: developing an oil field for example Loans for Shares 1. Russian government gave certain banks shares of several large corporations and borrowed money from those banks in return. 2. The government never repaid the loans which were used to cover budget deficit. 3.. they auctioned them off but corrupt- many banks ended up with the shares Describes Goldman's "Piratization"- forms oligarchs 1. Berezgovsky- got his entire oil fortune through this

Dimensions of transition ACTUAL- micro 4. (share of personal income, creating a market, monopolies)

Share of personal income from wages drops to below 50% as people gain access to personal property 1. No consumer goods or services 2. One month inflation was 350% Need to think about creating a market 1. allow small personal retail kiosks 2. foreign exchange market opened quick bc banks could trade rubles 1995 Competition and Limitation of Monopoly Activity 1. set up anti-monopoly commission

Dimensions of transition outline- Micro: creating markets and privatization 2. (how are shares sold? evaluation problems?)

Shares are sold in different ways 1. associated agreement- sold to general public 2. "insiders" aka the workers- limiting it only to those who work Evaluation problems 1. how to evaluate a Soviet steel plant- value under Soviet prices? new prices? 2. would you let foreigners to buy shares? 3. Vouchers- issue them, put a number on it (10k rubles), and can only use to buy shares but problems with people buying vouchers 4. Secondary market for vouchers leads to oligarchy

Overview of Transition Blueprints- Divergence

Should they go to ACE (administrative command economy) like Japan/Europe? Sweden?- gov involvement China- mix of command and market system

Soviet Russia- Prices 1.

Stages 1. Factory wholesale 2. Industry wholesale- difference between factory/industry is just a markup so just refer to wholesale 3. Retail- to consumer Three principles to enforce for wholesale prices 1. Prices should reflect necessary costs for society (cost‐plus principle)• 2. Prices should stimulate producers to fulfill certain goals 3. Prices should be stable

Changing structure of the economy

Single supplier issue 1. for many industries you had maybe one or two suppliers 2. now dealing with a lot many, some in other countries 3. now they're on their own- have to find suppliers Single employer and unemployment 1. restructuring of cities- one enterprise or one sector in a city (Chernobyl for ex) 2. strange to think that would be multiple enterprises- pressure to keep unprofitable enterprises open bc they would employ an entire town

Lagging Sectors: Agriculture (Changing and Life expectancy) 3.

Slow to change the way they were operating while they changed the type of farm from collective, joint-stock is kinda similar hurt the environment and froze activities- waiting for the government to decide Life expectancy in rural areas 1. Male is 64- when drink all the time 2. Female is higher- die early 3. Village life so boring, life so miserable that turned to drinking made expectancy a lot lower

Stalin's Consolidation of Power

Stalin waited to show his power of killing people bc in the 20s he didn't have it at the time Light industry and heavy industry plans to increase in 5 years- chose 5 years bc thought that's how long it would take to build factories Wanted to double capital stock in the same time- Bukharin thought 2 or 3% per year 1928- grain collection not good

Soviet Russia- Prices and income inequality/distribution

Some differences- student vs. manager, not huge but still exist 1. Subsidize things like rent- everyone lives in state housing, medical care is free, utilities are extremely cheap and subsidized But if you want to buy a car, will be a lot of money about 5 years of salary 1. Prices would be very different if it was market based

Results of Perestroika

Soviet performance did not improve Shortages- of consumer goods, no detergent for ex 1989 Economic Reform Commission led by Abalkin 1. moderate proposals- continuing perestroika with minor changes, gradually going to market economy 2. Was too radical in its proposals in quick transition to market economy and not accpeted 3. Eltzin challenging Gorbachev all the way, public confrontations

Industrialization Debates: Sah & Stiglitz (1984)- state, welfare of peasants, welfare of urban workers, Preob fail bc economic equilibrium

State is better off with a surplus Welfare of peasants decreasing: if you put pressure on the farmers then also put pressure on the industrial workers In reality, welfare of urban workers condition decreasing: 1. depends on prices and wages 2. prices favorable for urban workers- bc then buy cheap agricultural products 3. wages decreasing Preob wrong 1. economic equilibrium, no way to balance everything out and have wages higher

Russia in 21st Century: Overall assessment

Structural changes are ongoing but not complete 1. moving to market structure but not there yet 2. long term loans and availability for funds for investment are still bad "Addiction" to money from oil that is not going to improve 1. reinvest in declining industries or going to corruption 2. might say it is good to go with strong industry, but the problem is that they're wasted in some sense 3. maybe bc so focused on oil sector, they weathered the recession of 2008 fairly decently

Soviet Russia Monetary- Consumer Goods Equilibrium aka Macroeconomic Balance

Supply of money in consumer sector isn't equal- why? 1. Money supply will be greater bc of overhang 2. Repressed inflation- government sets prices so there's an artificial stop to inflation 3. Obligaciya- a type of bond which is entered into a lottery and was a huge source of revenue, basically gets free loan with occasional payments; forced: prevent services (medical) if didn't buy bond

Soviet Russia (late 70s-80s) Agriculture 1.

Three forms of organizational arrangement in agriculture 1. Kolkhoz (collective farming)- various labor day deliveries 2. did not have social benefits nor pensions 3. were trying to fix it in the late 60s-70s 4. average pay was very minimal State farm- like industrial enterprises referenced before Private sector Garst 1. Kolkhoz members second hand citizens 2. Towards idea of state farm, not collective

Russia (Kievan Rus X-XVI)- trading connections

Trading connections 1. Scandinavia and Byzantine Empire. Exports included furs Barter Economy 1. Furs played function of money, later replaced by Arabic and byzantine golden coins. Finally own coins were made

Overview of Transition Blueprints- Tsarist Economy

Two generations removed 1. Most of property was in private hands- no economic planning 2. State interference but not sure how much 3. Massive foreign capital Lenin's "Development of Capitalism in Russia" 1. backwards economy- trying to be capitalist with semi-feudal agriculture 2. factory workers exploited by capitalism, socialism begins

Russia end of 19th Century/ Beginning of 20th Century (Witte's Reforms)

Unusual- two reform minded leaders in a row 1892-1903: Sergei Witte as finance minister 1. Much more democratic, not like Peter the Great 2. Increased industrial enterprise by 25%, industrial workers by 6%, industrial output doubled Monetary reform 1. Introduced monopoly of liquor- was a problem 2. Introduced import tariffs on foreign trade

Soviet Russia- Measurement of Economic Growth 1.

Use Net National Product 1. Problem with double counting- issue of intermediate goods 2. Some services are not included- would be based on how important it was on industrial production Problematic prices since capital is free 1. no price for capital so no scarcity 2. reluctance to change prices- they just cared about stability, would've changed if they were market prices 3. Index number relativity- STILL NEED HERE A. Bergson 1. trying to fix double counting and index number relativity 2. still problems with the price and growth estimates

Material Balances- V. Leontiet, Simplifications

V. Leontiet: explains the complexity of the task and what they were doing with the material inputs 1. need to figure out what is going to be supplied and what is going to be demanded 2. planned demand > planned supply Simplifications: 1. Gosplan's planning limited to small number of commodities- too few categories 2. Planning process in period were adjustment from the previous period 3. Too simple, not complex enough

Policies of War Communism- VSNKH

VSNKH- Supreme Council for the National Economy headed by Rykov 1. The council speaks to the trusts who speak to the enterprises: leads to the administrative command system, however at this point it is just an idea 2. Debating whether to have a regional control over the enterprises (not just a top down structure from the national government) 3. But can't have both- two managers over the same thing; don't realize this doesn't work

Agriculture and Stolypin (Prime Minister 1906-1910 Reforms)- what actually happened

Weakened communes 1. realized they were troubling, more than 20% of communes became individual farmers 2. created rules that made it much easier to leave the communes Not sure the degree of literacy improvement, but there was something Had 25 year plan but didn't get enough time, not reelected 1. Trotsky takes over, second to Lenin 2. wanted to make sure that the peasants were unhappy in order to guarantee Bolshevik revolution 3. If continued with Stolypin reforms, peasants would've been happier

Industrialization Debates- what to do?, Trotsky vs. Bukhavih

What to do? 1. Global implications and general view of how the economic system will proceed 2. Mixed market with government intervention; market, plan, mixed with elements of both? 3. Or "State capitalism"- state will take over and build industry, make up for the lack of industrial revolution 2 groups: Trostky, Kamehev, Zinoviev- stop NEP Bukhavih, Tomsky, Rykov, Stalin- continue NEP

Industrialization Debates

What to do?, Trotsky vs. Bukharin Unbalanced Growth (Preobrazhensky and the rest of left wing) Balanced Growth (Bukharin and the rest of right wing) Sah & Stiglitz (1984)- state, welfare of peasants, welfare of urban workers

Lagging Sectors: Agriculture 2.

When markets moved and all the prices increased- bc of inputs 1. before the government would just give them the inputs- now have to pay for them so not going to do it Labor decreases as well- resources are drawn out of agriculture bc cheaper to just import grain at that point Private lots preserved- most of the vegetables/potatoes grown there; grain grown on the farms where privatization occurred

Russian General Timeline

X- Kievan Rus XI- Collapse into 50 city-states XII- Mongol conquer, effect of mongol conquer XVI- Ivan the Terrible 1682-1725- Peter the Great (reforms?, development) End of 18th Century- Katherine the Second and Crimean War 1855-1881: Alexander II 1892-1902: Witte and his goals/ reforms 1902-1906: Stolypin and his goals / what actually happened 1906-1917: Bolshevik Revolution 1924: Trotsky, Lenin 1928- Stalin 1930s- Planned economy

Integration to the World Economy and new trade arrangements (trade composition, debt, foreign investment and capital flight)

trade composition 1. Oil, gas, and metals are the majority of the exports 2. delving into the natural resources, not much variety Strong current account surplus 1. current account = exports - imports 2. more exports than imports by a lot Debt- ballooning Foreign Investment and capital flight 1. foreign direct investment was largely placed in countries in oil, trade, and financial industries 2. capital flight is just kept in dollars- $55 billion came in and $45 billion put to use, 10 billion is capital flights and just sits in cash

Dimensions of transition outline- safety net

trying to find source of funding- since given to everyone education- gonna keep the current system or change it? state colleges remain but a lot of people now going to pay for it medical system was free?- no they couldn't, but everyone who works pays a certain percent of their salary