COUNTRY COMPARISONS     

 

USA - USSR by Eric Brennan, April 2002
 

 

 

 

 

 

INTRODUCTION

 Alexis de Tocqueville stated in his book Democracy in America “Two great nations in the world which seem to tend towards the same end, although they started from different points”.[1]  Here he is referring to the United States and Russia, and as history has proved his prediction has come true.  Now at the beginning of the 21st century we are seeing Russia leaving behind its authoritarian centralized government and moving closer to an American style Democracy.         

The United States is a nation of 278,058,881 people, nearly all descendants of immigrants or immigrants themselves.  And contains roughly 9,629,091 sq. km which is half the size of Russia.[2]  The United States was originally a group of 13 British colonies, and later fought a war for independence (1775-1783) against its mother country.  On July 4, 1776 a delegation signed the Declaration of Independence marking the birth of the United States of America.  Another major event in the history of the US was the Civil war, which lasted from 1861-1865.  This war ended with the freeing of all slaves and led to the consolidation of the power by the federal government.  The expansion into the frontier was where America moved west.  Lead by manifest destiny the nation was stretched from sea to sea.  The Great Depression of 1929-1941 was another traumatic time in American history.  It was a time of great poverty, hardships, and unemployment.  Then the attack of World War II began and thrust isolationist America to the forefront and leader of world affairs.  The Cold war came and went and the conflict in Vietnam was where America lead free nations the in the ideological battle against communism.  The United States of today is a strong and modern nation that still is at the top of the capitalist world and the preeminent power in the world. 

 Russia is a nation with a similar but at the same time different history.  Russia a nation of 145,470,197 people. And 17,075,200 sq. km making it the largest nation in the world and is the only nation to stretch over two continents.[3]  Ancient Russia started out as a group of cities that eventually coalesced into an empire.  Russia has had a long history of invasions from neighboring factions from all sides.  The Mongols, Swedes, Livonian Brothers of the Sword, Teutonic Knights all had dreams of conquering Russia.  Russia was conquered and made a tribute state of the Tartars and it remained so until Ivan III (1480) that Russia was able to throw off their rule.  But it wasn’t until Ivan IV came to power (Ivan III grandson) that Russia became a unified nation.  Under his reign the colonization of Siberia began.  After a series of Polish invasions in the early 1600’s Michael Romanov was elected Tsar when the Poles were ousted from Moscow.  And hence began the Romanov dynasty.  This dynasty lasted until 1917, an the start of the Russian revolution where the Bolsheviks overthrew the last heir, Nicholas II.  The Bolsheviks led by Vladimir Lenin came to power in the October revolution, and consolidated their power in the civil war between the whites and the reds.  After the death of Lenin, Joseph Stalin came to power and instituted a series of his famous 5 year plans.  He is believed to be responsible for the widespread famine that ravaged Russia killing more then 10 million peasants.  World War II brought its share of devastation to Russia destroying the countryside and killing a generation of Russia.  The Soviet rule ended in 1991 when after many years of economic downturn and economic restructuring, the Soviet Union just collapsed.  Today the Russian people are trying to transition their economy from a centralized planning system to a modern free market economy.[4]

FRANKLIN D. ROOSEVELT AND JOSEPH STALIN

All nations at one time or another produce great leaders. Some are loved by the their people others are feared.  Franklin D. Roosevelt and Joseph Stalin were both great leaders and also very different.  Leaders represent more then just themselves, they are the embodiment of their nation’s culture, history, and personality.  Franklin Roosevelt was one of this nation’s greatest and most loved presidents.  He lifted the nation out of its deepest depression and guided it through its darkest hour.  Born in Hyde Park, New York in 1882, he went to Harvard University and Columbia Law School and married his wife, Eleanor, in 1905.  He won election to New York’s Senate in 1910 and Governor of the state in 1928.  At age 39 he contracted polio.  This disease would affect him for the rest of his life and leave him stricken to a wheelchair.[5]  He was elected on the democratic ticket to president in November 1932, during the worst year of the Depression.  The Depression was a dark time for America, many workers were out of jobs and the economy was in ruins.  In response, Roosevelt enacted programs designed to give aid and a job to the common man.  The New Deal was the embodiment of his relief plan, he created such programs as the Civilian Conservation Corps, Social Security, and Tennessee Valley Authority to name just a few.[6]  Not only did these put badly needed dollars in the pockets of the unemployed but they raised their spirits and gave them hope for the future.  Then came World War II for America, with the Japanese attack on Pearl Harbor on December 7th, 1941.  Roosevelt spurred the nation to action and lead America into the worlds worst war.  Roosevelt was arguably one of America’s finest presidents and embodied what makes this nation great.  He was a strong and courageous man who fought for the common man.  He showed what makes Democracy great and protected it against ruthless nations and their ideology.  Roosevelt was a man of the people and for the people.

Russia during the same time produced a very different leader, but one still very much in touch with Russian culture.  Joseph Stalin (born Joseph Dzhugashvili).  Stalin which means man of steel in Russian.  He was not an ethnic Russian he was a Georgian.  Georgia is a small nation to in Central Asia.  Early in his life he always had problems with the authorities, ending up in prison multiple times.  He was an active Bolshevik and in 1922 he rose to the position of general secretary of the Party Central Committee.  He then proceeded to introduce forced industrialization through his five year plans and also initiated the collectivization of farms, which resulted in wide spread famine and killed millions of peasants.  Also during this time he began his purges where he had killed or arrested all party members and military officers he suspected of plotting against him.  As a result of these purges the Soviet Union was unprepared for the Nazi onslaught.  And it was only through Stalin’s iron will and willingness to suffer enormous casualties that the Soviets were able to beat back the Germans.  He died in 1953 at the age of 84.[7]  Stalin left behind a legacy of death and repression.  He is credited with killing the most Communists in history.  It could be said that Stalin also embodied the extremes of the Russian political condition.  He was a very strong and thoroughly autocratic ruler, something that can be traced back to Ivan the Terrible. 

These are two men who lived during the same time and were allies against Hitler. They were two very different men from two very different cultures and political arena’s.  And both represented their nations, Roosevelt for the better and Stalin for the worse. 

ECONOMIC COMPARISON

 The United States is the preeminent capitalist nation in the world.  The US has the largest and one if the most technically advanced economies in the world.  American corporations have lots of leeway in how to conduct their business.  The economy is very market oriented with everyone subject to it.  Even the Government buys equipment and supplies from market based suppliers.  American businesses are very profit driven and base every decision on profit.  The Governments role in the economy is as a mediator and ensure fair competition.  The US economy has been steadily growing from 1989 to 2001.  From 1989 to 2001 there has been two recessions and one boom. The American GDP is about 10 trillion dollars.[8]  The United States specializes in high technology products which require high skilled employees.  This is believed to have resulted in the two tier labour market where unskilled workers do not have the education or skills of their skilled counterparts and hence have not been able to get comparable pay increases.  Problems in the American economy include income inequality and the cyclical nature of economy which is inherent in all capitalist economies.  The United States has a long tradition of Democracy and has strong institutions that preserve the continuation of the government beyond any one person.  Also the Judiciary in the American economy acts as a detached mediator and adductor.  While corruption exists in the American government, it plays a negligible role in the economy.  Currently the American economy is in the midst of recovering from a recession.  This recession came after a 10 year boom. This boom is believed to have been caused by an increase in productivity and computerization of the economy.  The economy is composed of all types of business sizes, but individuals are the driving force of the economy.  Individual Proprietorships make up 14,599 out of 19,286 but account for only 5% of receipts.  Corporations on the other hand make up about 10% of business but account for nearly 76% of receipts.[9] 

 The United States economy is very service orientated with 80% of its GDP being derived from service production.[10]  And services also accounts for the largest amount of employment with 80% of non-farm workers in the sector industry.[11]  Industry accounts for 18% of the economy with 13% of the non-farm labour force, with farming accounting for 2% of the GDP with roughly 1% of the work force.[12]  The United States is very diversified and produces many goods, but specializes in high tech and capital goods such as computers, aircraft, military products, chemicals, and automobiles.  America also boosts a highly educated and productive labour force.

The Russian economy is in a period of transition.  Changing from a Soviet style central planed economy into a capitalist economy.  But the Russians have been very much hampered by the old system in becoming a capitalist nation.  A lot of the old Soviet bureaucracy and practices have been held over from the old system.  This has retarded the change and has led to what Professor Richard Ericson called a more “feudal” style economy then a modern market based one.[13]  A lot of the economy, rather then being based on informal market practices, works in a personalized fashion.  The government is not been providing the arbitration role that a modern capitalist country should.  Another hindrance is the ambiguity of property rights.  American property rights are very definite and all owners have the ability, for the most part, to do what they will with their property.  Another major problem is the widespread corruption and lack of an independent civil service.  This causes distortions in the economy and makes doing business in Russia a very complicated venture, normally subject to a lot of bribes and kickbacks.  Another problem is the decay of infrastructure and the use of obsolete capital.  Since the considerable weakening of the central government after the collapse of the Soviet government in 1991, a lot of public goods have decayed due to lack of funding.  The Russian economy is not as profit orientated as the American economy.  Everything from accounting to philosophy hampers Russian corporations.  Economic behavior is also not in line with classical capitalism. Capital is used for “redistribution of wealth for consumption and political power” rather then for attaining profit.[14]  Russian corporations still measure everything in physical assets rather then financial assets.  And with all this to bear on the economy, it resulted in an economic downturn that was larger then the Great Depression.  With all this said, it should still be noted that Russia has still made progress toward capitalism and currently it’s economy is the best its been since the collapse of the Soviet Union.  The current leader of Russia, Vladimir Putin, has made cracking down on corruption and fighting the current elite (groups of ex-communist officials who run state run industries and other large industries) a priority.  Also, the current regime has instituted much need reforms into the economy such as the Gref program.  Other highly needed structural reforms have taken place such as Fiscal management (tax code), Business Deregulation, and Structural reform of governmental and business sectors.  The relative prosperity of the economy in 2000 and 2001, have created conditions in the political environment conducive to implementing these reforms.  But the main problems to be tackled are the “existing colossal power of monopolies and the low level of property protection rights have long been recognized as a main disincentive to foreign direct investment (FDI) in Russia”.[15]  This has created a much better environment for capitalism to grow but there are still many reforms to be made and some exports are weary that “reform fatigue” may set in.  Another problem is that all these reforms are centered around one man; Russia’s political structure is still not the modern democracy people think it is.  The inner workings of Russian politics are described by some as “ murky, Byzantine, and largely incomprehensible to outsiders”.[16]  The current political stability is centered around the current president Vladimir Putin, and should something come to change this it is impossible to say where the economy and country would go from there.            

Russia has plentiful resources, both natural and human.  But due to an inefficient economic structure they are poorly put to use.  The Russian economy is still dominated by natural resource exploitation and heavy industry.  These commodities are fuels and energy which accounted for 27% of industrial output, metallurgy for 18.4%, and Metal working and machine building accounted for 19.2% of the economy.  But services have been expanding from their Soviet days of 36% in 1990 to 55% in 2000.  Agriculture dropped from its soviet days by 10% to 6.4% in 2000.  And even though industry, especially heavy industry still is a dominate force in Russia, it also dropped to 38.4% from its soviet highs of nearly half.[17]  But the most dominant industry in the Russian economy is oil and gas.  Oil accounts for 20% of the GDP, 50% of all exports, and a $1 change in oil accounts for .4% - .5% change in GDP growth.[18]  Russia is a heavy exporting country with 37.4% of its GDP accounted for in exports.

Analysis of Exports and Imports

In this ever-globalizing world trade is becoming more and more a serious reality of economic life.  This has caused a recession in one part of the world to spread and effect a nation thousands of miles away, but has also increased wealth and prosperity around the world.  The United States volume of imports and exports exceeds any nation in the world and Russian trade accounts for 37.4% of GDP.  But what each nation trades and how important international trade is to each nation varies as well as their barriers.  As stated before, the USA imports and exports more than any other nation in the world, but it’s importance in the American economy is relatively small, with exports only accounting for 11% of the US GDP.[19]  The United States exports primarily capital goods, automobiles, industrial supplies and raw materials, consumer goods, agricultural products.[20]  This is due to the high amounts of capital and skilled labour being present in the economy.  The American economy is normally on the cutting edge of technology and produces a lot of high tech goods that get exported to other nations.  America’s major export partners are Canada (23%), Mexico (14%), Japan (8%), UK (5%), Germany (4%), France, Netherlands.  And their import partners are Canada (19%), Japan (11%), Mexico (11%), China (8%), Germany (5%), UK, Taiwan.   And the products imported are crude oil and refined petroleum products, machinery, automobiles, consumer goods, industrial raw materials, food and beverages.[21]  Russia, on the other hand, exports a lot of petroleum and petroleum products, natural gas, wood and wood products, metals, chemicals, and a wide variety of civilian and military manufactures.[22]  But their biggest export by far is oil which accounts for half of all exports.[23]  Russia’s main exports partners are US (8.8%), Germany (8.5%), Ukraine (6.5%), Belarus (5.1%), Italy (5%), Netherlands (4.8%).  Their import partners are Germany (13.8%), Belarus (10.7%), Ukraine (8.3%), US (7.9%), Kazakhstan (4.6%), Italy (3.8%), with major imports being machinery and equipment, consumer goods, medicines, meat, grain, sugar, semifinished metal products.[24]  Russia and America are trade partners and the flow of trade highlights each other’s comparative advantage.  Russia is the United States’ 35th largest export market and they normally import Poultry, aircraft, machinery (oil/gas), uranium, corn and wheat, computers and components, beef and pork, and telecom equipment.  While the US imports platinum, aluminum, uranium, oil, crab and fish, iron/steel, clothing, nickel, and paintings.[25]  Barriers to trade are also a difference, Russian customs regulations and enforcement are often erratic and unpredictable making trade difficult.  There is also a need for licensing of imported goods that makes importing difficult.  The average Russian tariff is 10.7%. Import tariffs are an important source of revenue and account for 5.5% of total government intake.  As with most other parts of the Russian government there is corruption in the customs agencies, the government has unified tariffs to help combat these abuses.[26]  The United States, on the other hand, has professed a desire for free trade.  And while in practice there have been contradictions, such as the recent steel tariff that for the most part  has remained true.  The United States doesn’t have many tariffs and for most they are particularly low (with the exception of some peak ones).  The average tariff on most products is nearly zero, and revenues from tariffs make up a small percentage of federal. 

Conclusion

The road to transition is hard and long, and for those who do not quite understand or trust capitalism it can be even harder.  The Russian politicians grew up in a society that scorned capitalism and private property.  The people had been promised work and food and now the system guarantees nothing.  The Russian people have a ways to go before becoming a modern democratic capitalist nation.  Recently things have been very promising, the Government has consolidated it power and made some much needed reforms.  Only time will tell if they go all the way or slip back into socialism.  Now the United States and its people have a long history of capitalism.  And even in capitalism’s worst hour the great depression few Americans ever really wanted to change even to socialism.  And I believe as an American that capitalism is a part of the freedom that we enjoy today.  That we’re able to live our own lives and make a living in our own way is a part of the American dream.  And I do not see anything changing this or our prosperity for a long time.

[1] Alexis de Tocqueville. Democracy in America, Vol.1, P. 441

[2] U.S. Central Intelligence Agency, World Factbook

[3] Ibid.

[4] http://www.interknowledge.com/russia

[5]http://www.whitehouse.gov/history/presidents/fr32.html

[6]http://newdeal.feri.org/index.htm

[7]http://search.biography.com/print_record.pl?id=6659

[8]http://www.bea.doc.gov/

[9]http://www.census.gov/epcd/www/smallbus.html#EstabSize

[10]www.cia.gov world book

[11]http://stats.bls.gov/news.release/pdf/empsit.pdf

[12]ibid.

[13]http://www.columbia.edu/~ree3/lisd-paper.pdf

[14]ibid.

[15]www.ratingsdirect.com/apps/rd/controller/article?id=233561
&type=&outputType=prin

[16]ibid.

[17]http://www.economist.com/countries/Russia/

[18]www.ratingsdirect.com/apps/rd/controller/article?id=233561
&type=&outputType=prin

[19]http://www.economist.com/countries/USA/

[20]www.cia.gov world book

[21]ibid.

[22]ibid.

[23]www.ratingsdirect.com/apps/rd/controller/article?id=233561
&type=&outputType=prin

    

[24]www.cia.gov world book

[25]http://www.bisnis.doc.gov/bisnis/country/RussiaFactsheet_2001.htm

[26]http://www.ustr.gov/reports/nte/2002/russia.PDF

 

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