Economic and industrial growth revived soon after the crisis,
changing the Russian economy’s nature almost overnight. The
large depreciation of the ruble stimulated import substitution on a
major scale, leading to a rapid growth in domestic output. In
addition, a positive terms of trade change from rising oil prices
gave a further boost to the economy from the third quarter of 1999.
Importantly, the political consensus of policymakers in favor of
budgetary prudence, forged in the wake of the financial crisis, was
maintained over the subsequent years.
As the economy
turns around, it will generate demand for better services in
banking, insurance, accounting, legal services, and advertising,
causing these sectors, which are the blood vessels of a market
economy, to grow and mature. Privatized enterprises come under
increasing competitive pressures to restructure and invest. They are
already being forced to think about cutting costs, marketing their
products, and developing new ones. There
is growing pressure to extend privatization to areas of the economy
where it has been held back until now, especially land ownership and
the so-called natural monopolies, such as natural gas extraction and
power generation.
Many of the
key institutions of a market economy now exist. Money has returned
to a central role in the economy; the borders are largely open to
the flow of people and goods, and hundreds
of thousands of new private businesses, both big and small, operate
in an environment governed by market forces.
Thus, the
reforms seem to have gained a self-sustaining character driven by
the new interests created by the vibrant private sector. The wealth
of the country has passed largely into private hands. A new class
has come to the fore, many members of which are descended from the
Soviet administrative class, the nomenklatura. But they no
longer owe their rank and privileges to the Communist state and the
command economy. They are in business for themselves, and their
prosperity is now bound up with continued marketization.
Moreover,
Russia can hardly escape the powerful pressure of such worldwide
forces as the revival of liberal economic doctrines in the last
generation and the tidal wave of globalization, privatization, and
liberalization. Technological change and global competition will
continue to act powerfully on Russia, as they have done ever since
the time of Peter the Great.
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