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Major Economies in Transition
Key Terms
state farm, collective farm, gross national product
Find Out
• What are some of the obstacles to change faced by Russia?
• How did economic problems lead to the collapse of the Soviet Union?
Major Economies in Transition
Understanding Concepts
Comparative Government How did the Communist Party control the government and economy of the Soviet Union?
Section Objective
Describe the major obstacles to change in the Russian and Chinese economies.
After decades in power, the Communist Party was unable to prevent the breakdown of the authoritarian economic and political system of the Soviet Union. Mikhail Gorbachev’s efforts to reform the communist system failed. As a leading adviser of Gorbachev had predicted, “Gorbachev took on this country like my wife takes on cabbage. He thought that to get rid of the dirt, he could just peel off the top layers of the leaves. But he had to keep going until there was nothing.”
A. Beginning in 1917, the Soviet Union built the world’s leading communist economic system; economic decisions were made by the government. Almost all Soviet enterprises and farms were state-owned and state-operated.
I. Transforming the Russian Economy(pages 728–
729)
B. Mikhail Gorbachev, the last Communist leader of the Soviet Union, tried to change many policies to stimulate the stagnating economy, but the economy continued to decline.
C. Gorbachev resigned in 1991; several Soviet republics then declared their independence, effectively ending the Soviet Union.
D. Since the collapse of communism, Russian leaders have made attempts to move toward capitalism and democracy.
E. Even with some reform, Russia is being run much as it was under communism—and by many of the same leaders.
F. The slow pace of change in Russia has several causes. For one, former Communist bureaucrats are unwilling to give up power. Also, Russians are familiar with living in a society in which rules have traditionally been imposed from above.
I. Transforming the Russian Economy(pages 728–
729)
Do you think that Russia can overcome the problems it faces today? Explain your answer.
Answers will vary. Have students assess the current Russian economic and political situation.
I. Transforming the Russian Economy(pages 728–
729)
A. The Chinese Communist government followed the model of the Soviet planned economy until China found itself unable to compete with the market-based economies of its neighbors.
II. Changing the Chinese Economy(pages 729–
731)
B. In the late 1970s, China’s Communist leaders began to encourage private enterprise; since then, the Chinese economy has grown rapidly.
C. More recent rapid development in China has several causes:
i. China’s population provides a large labor pool.
ii. The Chinese government promotes manufacturing by giving foreign companies tax incentives and cheap land.
iii. The Chinese government spends billions of dollars on communications technologies to assist manufacturers.
II. Changing the Chinese Economy(pages 729–
731)
D. China is attempting to move to a market economy while maintaining an authoritarian political system controlled by the Communist Party.
E. Several factors threaten the Communist Party in China:
II. Changing the Chinese Economy(pages 729–
731)
i. China’s growing middle class will want more of a say in its government.
ii. Poverty and unemployment creates a class of urban poor who are angry with the government.
iii. Transition to a market economy has led to even greater political corruption.
F. Trade with China has opened new markets for American goods, though Chinese labor costs have driven many American manufacturers out of business. American experts worry that an economically strong China could become a dangerous political and military rival.
II. Changing the Chinese Economy(pages 729–
731)
II. Changing the Chinese Economy(pages 729–
731)
Do you think that rapid economic growth in China will have a positive or negative impact on the United States? Explain your answer.
Answers will vary. Students should illustrate an understanding of the impact of an economically strong China on American business and industry.
1. Main Idea Use a graphic organizer like the one here to identify four reasons for China’s rapid economic growth.
Checking for Understanding
large labor pool, low production costs, tax breaks and cheap land given to foreign companies, billions spent by Chinese government on highways, ports, and communications
2. Define state farm, collective farm, gross national product.
Checking for Understanding
A state farm is a farm owned by the government and run like a factory, with farmworkers being paid wages.
A collective farm is a farm in which the land is owned by the government but rented to a family.
Gross national product, or GNP, is the sum of all goods and services produced in a nation in a year.
3. Identify Mikhail Gorbachev, Vladimir Putin.
Checking for Understanding
Mikhail Gorbachev was the last Communist leader of the Soviet Union; he tried to implement economic reforms while keeping the Communist form of authoritarian government.
Vladimir Putin is the current Russian president; he was elected to office in 2000 and is a former lieutenant colonel of the KGB, the Soviet secret police.
4. What was the main source of agricultural problems in the Soviet Union?
Checking for Understanding
The main source of agricultural problems in the Soviet Union was government mismanagement of production.
5. What events in 1991 led to the collapse of the Soviet Union?
Checking for Understanding
Six years of reform did not cure the Soviet economy. Citizens revolted and several Soviet republics declared their independence.
6. Analyzing Information How does the growing Chinese middle class threaten the current government in China?
Critical Thinking
As the middle class grows, its members will want more say in how China is governed.
Comparative Government Before the 1980s, the Soviet economy was under the control of government planners from the Communist Party. Create a political cartoon that illustrates one of the problems that centralized planning created for the Soviet economy. Share your cartoon with your classmates.
