Text II

Text I

The Russian Economy in the 19^th century.

The Russian empire grew enormously during the 19^th century, covering land from Poland in the West to the Pacific coast in the East. In economic terms, this meant an increase in two of the four factors of production: land and labour. You might think then, that the Russian economy at this time was booming. But until the 1860s, this was not true at all. Compared to the important powers like Britain, France and America, Russia’s economy was hopelessly underdeveloped. Why was it so?

The main problem was Russia’s feudal economic system. Almost 80 per cent of the population were peasants. They either worked on land owned by the state, or they were serfs. Serfs worked land that belonged to a small number of wealthy landlords. In return for a small piece of land and a place to live, serfs had to work for their landlords. In fact, the serfs didn’t just work for their landlords – they belonged to them.

This system did not encourage economic growth. Peasants’ labour was used in subsistence farming for their families or working to maintain their landlord’s estate. Without surplus goods, there were no profits or savings. With no savings, domestic investment for growth was not possible. Russian agriculture still used the most basic technology and almost the whole workforce was unskilled and illiterate.

In addition, the empire’s industrial base was poorly developed. Before 1850, there were relatively few factories, mostly producing textiles. Some factories were run by the state, but many were run on the estates of landlords. Industrial technology was basic, and engineering education was not encouraged by the authorities.

To make matters worse, the Crimean War from 1853 to 1856 had weakened the Russian economy even more. Eventually, the Russian authorities realized that they had to do something about economy. The empire was now surrounded by modern industrial powers. Russia had to make an economic leap into a new age.

The first step was emancipation of the serfs. Tsar Alexander II finally made this happen in 1861. This meant that the population was no longer tied to the land and could provide labour for industry. With foreign investment, Russia began to build up its industries. The iron and steel industries grew rapidly. Mining of raw materials increased and industrial centres developed along the Don and Dnepr rivers. The output of the iron and steel industries helped to build a huge railway network, including the Trans-Siberian railway.

Growth continued and by the 1890s the Russian economy was experiencing a real boom. From five per cent in the 1860s, annual growth reached nine per cent in the 1890s – higher than anywhere else in Europe at the time. However, much of the growth was built with foreign debt. Agricultural methods and technology were still primitive. And what about the economy’s human capital? The exploited serfs had now become exploited factory workers. The majority of the population remained totally illiterate and desperately poor. With the turn of the new century, how much longer could the boom continue?

Serfs – крепостные.

Subsistence – бытие, жизнь, существование.

To make matters worse – ухудшать, усугубить (положение).

Leap – прыжок, скачок.

Output – производительность; мощность.

Experience - испытывать, чувствовать, переживать.

Text II

Contemporary Russia: the Fall and Rise of the Market Economy.

A recent survey compared the cost of living for expatriates in cities around the world. Not surprisingly, the top ten most expensive cities included Tokyo, London and New York. But more expensive than any of these was … Moscow! Less than two decades ago, Moscow was the heart of the world’s biggest planned economy. There was no property for sale back then. The state-run shops had few consumer goods. Shortages for simple things like shoes were common. Today, things could not be more different. Moscow is the centre of a free market with some of the highest property prices in the world. The state-run shops have been replaced by expensive shopping centres and designer stores. But the change has not been easy.

The figures for Russia’s real gross domestic product since 1991, when the economic reforms began, show that the economy has been on quite a roller-coaster ride. In 1991 GDP was over $350 billion. That fell dramatically year after year until 1998, when GDP was just over $220 billion. However, the situation improved again from ’98. In fact, Russia’s GDP increased steadily year after year from 1999 until 2006 when it reached around $740 billion. What caused such a change of fortunes?

Changing over to a completely different economic system could never be painless. The Russian government of the early 1990s decided to use a shock therapy approach. They introduced severe fiscal and monetary policies. The government drastically reduced its spending. It cut subsidies to its crumbling state industries. Interest rates and taxes were raised. Government price controls on nearly all consumer goods were lifted. Only prices for staple goods like food and energy remained controlled by the government. New laws were introduced to allow private ownership and businesses to exist.

All of these measures were intended to create conditions for a market economy to grow. However, they also caused great hardship for ordinary people. Most workers at that time were on fixed incomes. The measures caused the cost of living to rise, but their salaries did not rise at the same rate. To make matters worse, events in the banking system in 1992 caused the money supply to balloon. This resulted in hyperinflation levels of 2,000%. Despite Russia’s enormous reserves of oil and gas, the economy went into a long and difficult depression. Finally, in 1998, when an economic crisis hit the East Asian Tigers, oil prices began to fall around the world. For Russia, it turned a depression into an economic crisis.

However, from 1999, world oil prices began to rise again. Mostly with money earned from energy exports, Russia began to pay off its foreign debts. Inflation fell and the value of the rouble stabilized. The economy was recovering. GDP grew steadily year after year, and foreign investors began to show confidence in investing in the country. Moscow’s place at the top of the list of the world’s most expensive cities is not enviable. However, it is a clear sign that the Russian economy has survived a difficult time.

Expatriates - эмигранты

on quite – полностью

GDP (per capita) - ВВП (на душу населения)

drastically – решительно; радикально

hardship – трудности, лишения; муки, тяготы жизни

to balloon – быстро увеличиваться, расти

enviable - завидный