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Swell of economic crisis

In 1985-1988 economic reforms were designed to give a new momentum to the Soviet economics, keeping all the control levers in the hands of the reigning "party-and-federal class".

In 1989 the new law about lease and lease relations was passed in the USSR and the new law about the production unit. Those two laws broadened manufacturer's rights in some way or other. But real changes in economic reform occurred only in 1990, when laws about "the small business", "the joint venture", about "the commercial bank" and "the joint-stock company" appeared. After that the number of non-federal businesses began to go up rapidly.

Gradually federal enterprises and foundations began to convert into private and joint-stock ones of different kind. Very often economic power in those enterprises happened to be in the hands of former nomenclature workers.

In spite of still high profit taxes (35-45%) the laws of 1990 made conditions for commercial structures development. Up to the end of 1991 the question about land hadn't been solved.

Economic changes, an attempt to transfer industry into market relations led to a fall of production. When in 1986-1989 the country's economy had a small growth, in 1990 it was registered a real, approximately 2% fall. In 1991 the output fell 6-10%, and on some certain branches like coal mining, oil, textile and some other branches - 20-25%.

During the whole period, since 1985, there occurred growth of money stock while growth of production dropped behind. That led to growth of deficiency, especially in light industry and foodstuffs producing. Even sharp rise of prices, up to 3-4 times in April, 1991 didn't give the results. At the end of 1991 it was announced that all the prices in 1992 would be free, market ones. That caused a sharp rise of prices already in 1991.

Since 1989 tendency of production fall in federal segment of industry and agriculture became obvious, while in cooperative, lease and later in private sector the process was a contrary one. Already in 1989 in industry 1332 production units functioned on lease conditions, 731 in construction and 1043 in catering. The number of cooperatives, joint-stock companies, private businesses grew since 1989 also. Especially volcanic growth of non-federal businesses began in the middle of 1991.

Output fall in federal segment of industry caused fall of living standard among main layers of population. Only in 1990 the inflation came to 40-50% and more. In 1991 the rate of inflation grew more. By the end of the year it amounted 5-10% per month and more. Tiny compensations for the poorest layers of population couldn't stop constantly accelerating fall of their living standard. Only 10% of population had increased income. Speculation, black market flourished in the country. Mafia groups captured entire spheres in trade and distribution. Crisis in production and distribution in 1990-1991 led to practically food rationing system.

Since late 80-s strikes, which previously had been suppressed by all possible methods, including forensic ones, became a common event. After the coal miners' grandiose wild strikes in 1989 and the threat that reilroad and metallurgy workers would go on strike also, that event no longer surprised anyone. In 1989-1991 workers of almost all branches of industry were on strike or threatened to go on strike. The number of strikes came up to a few thousand, and the number of strikers amounted hundreds of thousands. Basically the workers' demands were of economic sort: to rise wages, to improve working and living conditions.

Since the middle of 1991 strike movements began to fizzle out, as, from the one hand, production units had a possibility to raise workers' wages and, on the other, as the result of closing of industrial enterprises and numberous redundancies such phenomenon as unemployment appeared.

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