The first years of the twenty-first century, also called the “Putin era”, remained in the history of the country a rather controversial time. The successful development of the Russian economy, on the one hand, has allowed the Russian Federation to become the first echelon of world leaders, albeit with certain reservations and objections from individual politicians and economists.
On the other hand, periodic crises during these years significantly shook Russia, which was felt by most Russians. A particularly difficult time came in the mid-2010s, when economic roughness superimposed on foreign policy cooling, and Western countries habitually connected various kinds of sanctions against our country.
Growing difficulties in the economy
The year 2014 was one of the most difficult for our country and for the population as a whole in this century. The fall in hydrocarbon prices, the turbulent events in Ukraine, which caused a whole range of sanctions against our state, increased inflation ... All this led to difficulties in the economic situation within the state. A significant reduction in the value of the national currency, a decrease in gross domestic product and increasing inflation rates were the economic causes of the crisis that formed in the main sectors of the Russian economy.
Residents of the country 2014 will be remembered for a major increase in the cost of food, imported goods, the fall in the value of cash reserves due to the devaluation of the ruble. Throughout the year, the level of the Russian ruble only on a large scale decreased twice, bringing down the well-being of individuals and the country as a whole. The Central Bank’s strategic line to preserve the ruble level ultimately helped cut the country's financial stocks by ninety billion dollars, raise prices by at least fifteen to twenty percent and a landslide drop in the standard of living of most Russians.
Anti-crisis Reforms
The difficult situation in the country forced the state to move away from the policy of contemplation in the economy and to carry out some comprehensive anti-crisis procedures to maintain the current level, since fragmented economic reforms were ineffective, and at times worsened the situation. The development of a government anti-crisis plan began back in 2014. On January 28, 2015, with the end of discussions and disputes in the government, the final version of the actions for the current year was published.
The anti-crisis plan of the government contained sixty points and was quite realistic and complete. According to it, a gradual decrease in federal spending this year in the main areas of the economic area by ten percent was expected, and then, for the next three years, each year - by five percent. Basically, the government’s anti-crisis plan included minimizing the costs of minor items. The social sphere, health care, education, the army, and the real economy were not affected.
Anti-crisis plan of the government of the Russian Federation
The main sections of the adopted plan included:
- Support for import substitution and export of the domestic economy on a wide range of products not only raw materials, but also industrial products.
- Support for small and medium-sized businesses by reducing cash and bureaucratic expenses, financial and legal support.
- Compensation of additional inflationary losses to the most sensitive segments of the population (elderly people, students, large families, single mothers and so on) by issuing benefits, additional salaries, benefits, social benefits, and so on.
- Reducing excessive intensity in the labor market and promoting productive employment, both in the capital and in the province.
- Optimization of budget expenditures by detecting and reducing unproductive expenditures, focusing funds on the most important development paths and fulfilling government promises.
- Development of a rehabilitation scheme for problematic system-forming associations and bodies.
Government headquarters
To neutralize the growing economic crisis, the anti-crisis headquarters of the Russian government was created. Such headquarters were organized at all other levels of the power system: from the all-Russian to urban and township. The same headquarters were created in resource monopolies, at large, medium and small production associations to obtain anti-crisis stability.
The formation of the anti-crisis headquarters united all levels from local private firms to state ministries to counter negative phenomena.
State activities during the crisis
Despite a number of diverse anti-crisis solutions, most of them dealt with two problems:
- To neutralize the fall in oil and gas prices. The cost of hydrocarbons is quite tough on other types of raw materials. For Russia with a large share of the commodity industry, the fall in oil and gas prices was the most severe factor in the crisis.
- Opposition to sanctions by foreign states (Europe and America).
In general, the anti-crisis program brings together a total of up to 2.3 trillion rubles. Five hundred and fifty billion was supposed to be transferred from state financial organizations to Vnesheconombank (up to 300 billion) and other banks (up to 250 billion). It was planned to bring the capitalization of especially important financial institutions to the volume of one trillion rubles.
Solving the problems of small and medium-sized businesses
The development of an anti-crisis strategy also concerned the direction of reducing the tax burden on small entrepreneurs. Taxes on a simplified scheme were taken in a number of ways. The volume of mandatory contributions decreased from six to one percent, and the difference between income and expenses - from fifteen to seven and a half percent.
Up to fifty billion rubles were attributed to the strengthening of the agricultural sector, up to fifty two billion - to support the labor market, and about twenty billion rubles were planned to be allocated for stabilization in the industrial sphere. It was this sector of the economy that was actively developing an import substitution program.
Crisis Management
The complexity of the situation in the country reached such a level that the government could not respond to it. The crisis management program was the result of the activities of the authorities. Crisis management means a type of leadership that takes place in tense conditions of a difficult situation in the economy. The management concerned not only the redistribution of financial resources, but also transformation in the field of agriculture and industry, trade, and the banking sector. A revision of the ratio of state and private capital was envisaged. A cautious attitude towards the social sphere is also characteristic - the government did not want to cut pensions, scholarships, and social payments.
Description of the Government of the Russian Federation
The assessment of government activity during the crisis is diametrically opposed: from positive from official analysts to extremely negative from the opposition. But one thing is certain - the economic decline was progressing at a steady pace, the decline in key economic indicators did not fall into the abyss: in 2016, inflation reached from eight to ten percent to fifteen to sixteen percent when calculated according to individual methods. The speed of development was directly dependent on the fact that how tough the state policy will be, the gross domestic product will fall by one to four percent in comparable prices. Due to the smooth ruble exchange rate, the Russian budget was closed with a moderate deficit. Of course, the negative aspects of the weak activity of the government in certain areas will certainly affect the economy in the future: a drop in the standard of living of Russians, a crisis in a number of enterprises and even individual industries. But the collapse of the Russian economy, as was expected by a number of domestic and foreign analysts, will not happen.
Russian economy in subsequent years
In 2015-2016, the economic situation in Russia largely repeated the nineties, but, contrary to the expectations of many pessimists, it did not completely coincide with it:
- the ruble against the dollar amounted to seventy rubles;
- the collapse in oil prices at times was less than twenty dollars per barrel;
- price increases reached fifteen to twenty percent per month;
- the drop in real income reached one hundred percent and so on.
However, the final numbers of the decline turned out to be more moderate, and in 2017 even some positive changes began, which suggests that the crisis (or recession, depending on the views) is gradually being overcome.