Read for more information
|
|
Text 1. Contemporary Russia: the fall and rise of the market economy |
Task 1. Read and translate the text.
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 The state-run shops have been replaced by expensive shopping centres and designer stores.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’ 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.
Task 2. Now read the text again and match each paragraph with the correct heading.
Paragraph 1 ………….
Paragraph 2 ………….
Paragraph 3 ………….
Paragraph 4 ………….
Recovery
Drastic measures
Ups and downs
Hard times
Then and now
Task 3. Match the words and phrases with the definitions
expatriate very high inflation
consumer goods financial help from the government for a business
state-run change
hardship something that other people want
reform managed by the government
severe very strict or cruel
subsidy basic things like food that everyone needs
crumbling to grow very big very quickly
staple goods things that people buy but don’t really need
fixed incomes falling apart or collapsing
to balloon very difficult times – poverty
hyperinflation someone who lives and works away from their home country
enviable salaries or pensions that do not grow with inflation
stabilize become steady, unchanging
Task 4. You are going to read about three persons expressing their views on the winners and losers in the Russian economic reforms. As you read, make notes in the table.
|
|
Winners |
Losers |
|
People |
|
|
|
Industries |
|
|
|
Places |
|
|
Speaker 1: Well, in my view the only real winners have been the big business people – especially in the early days after the fall of the old system. I mean if you were in the right place at the right time you made a fortune. But what about the ordinary people? The truth is that for most of us things have got worse. Inflation is still high. In the early days lots of older people saw their life’s savings disappear overnight. Education and the health service are also in a mess. Teachers’ and doctors’ pay has really fallen – lots of doctors have left to make a living somewhere else. No, I don’t think ordinary people have been the winners.
Speaker 2: With the rise in oil prices Russia’s energy sector has really grown. I mean our resources of oil and gas are some of the biggest in the world and the new economic reforms have helped us to exploit that. At the same time, though, Russia’s other manufacturing industries have suffered. For example, we used to have a huge transport industry making aeroplanes, cars and ships – but this has almost collapsed. You see these industries used to be subsidized by the Soviet government. They were never able to compete on the world market. And now their equipment and other capital is old and inefficient. So in truth these industries are dying.
Speaker 3: The new economic reforms have been great for the big Russian cities – especially Moscow. They’ve got new shopping centres and expensive shops and new supermarkets. And of course there are lots more tourists visiting those places. But if you go out of Moscow and go to the other regions of Russia things are very dif. Foreign investment goes mostly to Moscow or St.Petersburg – but in the provinces very little has changed. There are still a lot of ‘one-factory’ towns and there is still a lot of poverty.
|
|
Text 2. Economics and the Consumer Society
|
Task 1. Read and translate the text.
Do you agree with Keynes’s idea that the government should actively influence the economy?
In the nineteenth century economists believed that there were limits to human wealth.
In their opinion when one man became richer another grew poorer. If a country wished to improve its standard of living it had to export more than it imported. So in Britain the main argument in those days was about free trade and protectionism.
The owners of textile factories naturally supported free trade. The farmers on the other hand were afraid of foreign competition. Free trade won because Britain at that time was able to import cheap raw materials from its colonies and re-export them as finished goods. If the government had introduced import controls at that time it would have damaged the position of Great Britain as the strongest manufacturing nation in the world.
In America a similar belief in free trade eventually led to the Wall Street crash in 1929. People in the USA benefited from the expansion of the American economy in the First World War. They became convinced that money automatically made more money.
If there had been no excessive speculation in stocks and if people had not become convinced that speculative investments were always profitable the effects of the “crash” would not have been so disastrous.
Following the Wall Street crash the economist John Maynard Keynes introduced a new theory. In simple terms his solution to the problem was that there is no fixed limit to human wealth.
He believed that if government helped factories, factories would create jobs, if factories paid good wages every worker would become a consumer, if people could afford to buy goods, factories would produce more.
For a time, Keyne’s theory was successful. In the 1970s, however, people began to realize that the world’s resources were limited that they would be better off if they had economized. But it is difficult to persuade people to economise, especially when they are used to Keynes’s idea that the less we spend, the more unemployment we create.
Perhaps time and further study will some day reveal whose economic concept are right. But it would be splendid if economists were able to diagnose and prescribe cures for economic problems more accurately.