The crisis of the century and the reforms
After the economic growth that the State experienced, Russia entered into an inactivity period, where the country stopped growing and started slowly to fall into a big economic crisis. In the 1980’s the Soviet Union, which was very resistant to innovation and change, started falling behind other developing countries. This constraint was technological, structural and institutional.
In 1985, the Soviet Union entered in a crisis. The revolutions and the ignored symptoms that shouted for a reform in the system advocated to this situation.
The society had tolerate the way of government of the Bolsheviks (a system based in the coercion and horror, with no space for democracy) for the sake of the success in the industrialization process, when the industrialized society settled, the Soviet Union could no longer uphold and started to fall apart.
From 1989 to 1991, Russia passed from having “tradicional communist practices” to assuming a “commitment to socialism”
In 1991, after the crash of the Soviet Union, many reforms were needed in order to refloat the Russian economy. During this year, the GDP declined over a 17% and inflation kept increasing, retail prices had already increased by 140%.
That’s why, the president of Russia during this time, Boris Yeltsin took macroeconomic measures. In 1995, to contrarest inflation (that kept increasing) they implemented tight fiscal contraction. During this time the GDP had declined more than 50%, way more than the decline of United States during the Great Depression.
Finally, in 1999, output increased by 6.8%, being this one the second time that it had increased since 1991.
The soviet union left an inefficient State despite their many resources and their educated population, the government, the policies and the many wars that the State faced, led the country to a very difficult point, were many political and economic cuts had to be made.