Four major problems:
Government and Business
Throughout the case, one theme that seems to reappear is the issue of trust. Without trust in the federal government, people take it upon themselves to do what is necessary to survivie. They no longer trust the government to provide a safe environment for them to live. This issue might starts small but gradually affect areas such as the business transaction, the monetary system, the tax system, and ultimately the sovereignty of the government. Distrust in the government led to an increase in bartering. This leads to two major problems - the inability of firms to pay wages and the inability of the government to collect taxes. Additionally, the weak monetary policy led to many quasi-monies to appear in Russia, making it difficult for the government to enact any monetary policy. Another significant problem due to the lack of trust in the federal government is its inability to impose its will on local or regional authorities. The federal government was unable to collect taxes from local and regional authorities. Some regions violated federal law, while others claimed that regional laws took priority over federal law. Some went as far as claiming the right to control its own natural resources and conduct foreign trade. On a more personal level, Putin stated that individuals could not trust in the stability of the businesses, because they could not rely on the law or the honesty of officials. This leads to dissatisfaction and the unwillingness to pay taxes. The inability to collect taxes leads officials to take bribes, and this is a never ending cycle.
Solution - Reorganize federal system to concentrate strong central government A strong central government is needed to impose change in Russia. It will show people that the government still has the power to act for the greater good of the people leading to a building of public trust. Without it, the many regional and local authorities will continue to chip away at its power, leaving the central government unable to act. Pros – A strong central government acts as a guide to align the goals of the nation at all levels. A strong government can impose its will on local authorities and force them to align their goals with that of the federal government. This process of aligning goals will help clarify the inconsistencies that exist between federal and local laws and give the federal government the power to implement any changes it believes to be necessary. This will enable the government once more to collect taxes and bring in much needed funds. A strong government can also enact a monetary policy, and remove corruption by monitoring judges and local authorities.. Cons – Giving the federal government power can lead back to communism or dictatorship. The new government can impose its will on anyone that it believes is not in line with its objectives. This can lead to an abuse of power.
Alternative – Allows Russia to continue it course
Russia had a lot of western advisors helping it during the transition phrase, but ultimately they all failed. Forcing these changes through a strong government might make it worse. The best course maybe to allow Russia to find its own course. This might take longer bu the saying goes “slow and steady wins the race.” Pros – Russia will learn how best to operate through its own mistakes. The United States took over 200 years to get to where we are now to become the most powerful economy in the world. Cons – This process might not work, and Russia could break down in to smaller independent states before they can find a solution to this problem.
Government and Business
The problem of business and government could not be more evident than in the case of the “rise of the Oligarchs.” By 1995, the Russia’s budget was in deep trouble, with expenditures rising faster than revenues. Yeltsin and the government negotiated a deal...
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