The Impact of Inflation in 90-ies on the Development of Economy in Russia

Author Name(s): Askar N. Mustafin, Margarita N. Maksimova
Author Email: mustafin.ksu@yandex.ru

Abstract

The sixtieth anniversary of the socialist system in Russia did not pass without traces for the economy of the Russian Federation, which was nascent in the 1990s. Strict regulation of economic processes by the state in the USSR had a number of positive consequences, but closer to the mid-60s of the 20th century it could not adapt to the realities and requirements of the world economy. The beginning of the 50’s and 60’s can be considered the time of the birth of inflation in Russia, which was associated with a sharp drop in social production. Since the prices were fixed, inflation had a hidden character and its rates were held back. The socio-economic consequences of inflation have led to the stagnation of the economy in Russia up to the 2000s, and the term “social” is ahead for a reason, since the main negative effect of inflation is the redistribution of income and wealth in the country. The ongoing processes contributed to the gradual process of transition from a command economy to a market economy. Thus, the outwardly stable and prosperous Soviet state concealed behind its facade suppressed inflation and unemployment, which eventually pushed the indefinite development of the market economy in the Russian Federation.

Introduction

At the present stage of the development of the Russian economy one of its main tasks is transition to an innovative model of development [1]. Inflation has a direct impact on innovative development, since its indicators and socio-economic consequences have a negative effect on the economic security of a country.

Inflation is accompanied by a depreciation of money and is manifested in relation to goods, gold and foreign currency. Thus, inflation occurs in the sphere of money circulation, but its primary cause is disproportions in the reproduction process. Therefore, the state of monetary circulation in a country can be considered a barometer of its economic and political life.

The negative social and economic consequences of inflation compel the state being concerned to pursue a certain economic policy, with considerable attention paid to the regulation of the money supply. Anti-inflationary policy has a rich assortment of various monetary and fiscal measures, tax measures and stabilization programs for regulating and distributing incomes.

Conclusions

Inflation in the 1990s had a significant impact on the emerging of market economy in Russia. First, as a result of inflation, there was a deformation of the market mechanism. Unjustified price growth has led to a distortion of information about the real structure of production and consumption in the country. That is, the market mechanism has stopped to provide producers with the right signals for investment, and the disorientation of investments has inevitably led to sectoral and regional imbalances. Secondly, inflation slowed down the process of introducing new high-tech technologies into production, thereby slowing down the scientific and technological progress, while simultaneously increasing the gap from the leading countries. Thirdly, it became much harder to predict changes in prices and costs, and efficiency from financial investments as a result of inflation, and as the consequence, for many years the manufacturers began to make large investments in production with caution and risk, what led to a general slowdown and stagnation of economic development in Russia.

Summary

In view of the fact that inflation processes affect practically all branches of the national economy and the social situation in the country as a whole, they do not remain without the attention of the government. The state conducts an active anti-inflationary policy. The mechanisms of influence on pricing play a leading role in the complex of anti-inflation measures implemented by the Government of the Russian Federation. First, they include limiting the growth of regulated prices for products of natural monopolies and tariffs for utility services in the face of increased control over the costs of monopolies. Secondly, the anti-inflation package includes a reduction in the growth rate of prices for fuels and lubricants by encouraging competition, developing exchange trade, reducing the tax burden and technological renewal of the oil industry. Thirdly, an important element of anti-inflationary policy is the slowdown in the growth of prices for food products against the stimulating the supply of these goods and improving the regulation of their imports.

Acknowledgments

The work is carried out in accordance with the Federal Government Program of Competitive Growth of Kazan Federal University.

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