Before starting the analysis of transition,

we should ask ourselves a question,

how this transition was at all possible?

I don't know whether you are familiar with the Soviet Union economy which

used to be before the transition started which preceded Russian economy.

It is for a modern student,

for a guy living somewhere in

a western country with long traditions of market economy,

it is hard to believe,

it is hard to understand what was really Soviet economy like.

Nothing was privatized, there was no private ownership of land,

there were no private enterprises, no private flats.

Nothing. Everything belonged to the state.

The state was the only owner of all economic assets within the country.

That's one point.

And the state one day decided to privatize those assets.

That's the first point,

which seems to be unbelievable.

Second point, everything was pre-planned, production volumes, prices,

volume of deliveries, number of shipments

to a single shop from a factory,

from a production unit,

whatever, everything was planned.

Nothing was regulated by the market,

nothing was regulated by supply and demand rule, nothing.

Everything was pre-planned and everything was pre-planned for the five year state plans.

Second, reality.

And then we decided to pass on to the market economy principles.

Again, something unbelievable.

How the transition from

that kind of an economy where everything was planned and pre-planned,

where everything belonged to the state,

how at all was transition possible?

Just think about it, for decades,

it seemed absolutely impossible to change the system.

Total control over economy by the state and total control of

the Communist Party of the Soviet Union of

the then Communist Party of the Soviet Union over the state.

So, just imagine those party officials who hold in

their hands all the valuable assets belonging

to the state and nothing belong to the people.

Great opposition to any kind of reforms,

to any kind of changes.

With that opposition in mind,

with that influence and dominance of the Communist Party in that kind of country,

how could the transition at all was possible?

That's really a question.

I would try to provide answers to that question but just think

about it ahead of suggested solutions.

Nevertheless, the transition without the precedent

in the history of this country happened,

and it happened within a short period of time.

So, still a lot of issues remain unclear and we

will try to answer to those tough questions to understand the current issues.

You can see here some test questions about Russian economy and transition.

After this course, I hope you will easily answer

those questions while I don't know

whether you will be able to easily answer them right now.

Just look at them.

How to overcome the opposition which was so great to reforms?

Everywhere, in each and every sector over the vast economy,

of the vast territory of the then Soviet Union,

there were opponents to reforms.

How could we continue the reforms?

How could we go on with reforms?

That's the big question.

Where do the new Russians come from?

As a famous term new Russians,

well known around the world about their bad behavior. Where do they come from?

Why do they behave in that way?

Not in the modest way like many representatives of other economies.

Again, not clear.

Why some Russians used to easily spend fortunes abroad?

You definitely know the stories and that's become scenes

for the many film makers.

How Russians spend thousands of dollars or euros to buy fancy cars,

drink champagne, eat caviar in

fancy restaurants not counting the money,

how could that be?

In a normal market economy,

if you earn your money with hard labor,

with the years of economizing money,

you would not spend your money in such an easy way.

How could that happen?

Why new Russians used to behave in that way?

Why does the management of the Russian industries of

many Russian companies still remain largely inefficient?

That's also a question.

Transition started already nearly 20 years ago,

but still we speak about inefficiency of many of the Russian companies,

especially belonging to the state,

how could that be?

Was the transition in vain?

That's also a tough question.

Another tough question which you can see here on the screen,

how an ordinary Russian can survive in Moscow,

one of the most expensive cities of the world?

There are different rankings about most expensive cities in the world but Moscow normally

holds third rank on the cities in

the world as being one of the most expensive cities of the world after Hong Kong,

or Tokyo, or cities like that.

While an ordinary Russian has quite a modest salary

and the rich salary over Russian is not so high.

How could that be that an ordinary Russian could go to cafes,

afford a taxi ride to an airport in such an expensive city like Moscow is?

Again, a question which cannot be easily answered, just like that.

But we will try to make a thorough analysis of

problems of transition and you will easily answer those questions.

And you will again,

understand Russian economy in transition.

That's the main focus.

The main idea, the main goal is to make you understand how it works.

Why we have what we held?

How we can explain many things from the first point of view,

which can hardly be explained?

That's our target, that's the goal.

Let's proceed to the thorough analysis of the Russian economy in transition,

which will be done in the following parts.

How the transition was at all possible?

Understanding Russian Economy. Problems of Transition

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