Belarus: Prototype for Market Socialism?
Following the break-up of the Soviet Union in December 1991, Russia on 2 January 1992 liberalized most prices, raising them by a large multiple to equilibrium level. This unilateral move forced all other FSU [former Soviet Union] republics to follow Russia, in order to avoid an accelerated drainage of their goods supply towards Russia and those other republics where they fetched highly inflated, liberalized, rouble prices. Russian monopoly of rouble currency issue caused a generalized cash scarcity in other FSU republics and forced them to issue bank-money, which they could still use in settlement of transactions with Russia. But the Russian Gosbank first in June 1992 set a ceiling to these republican issues of non-cash roubles, then disowned them outright. The other republics were forced to transform the republican subsidiaries of Gosbank into proper republican Central Banks, and to issue first their own rouble substitutes then their own republican currency. If the split of the rouble area had preceded Russian price liberalization in an orderly fashion, instead of following it chaotically, the republics could have chosen from the beginning their own independent monetary policy and inflation path. As it happened each republic received an initial inflationary shock from Russian inflation, before following its own macroeconomic path. Monetary disintegration, both within the FSU rouble area and — officially from September 1991 but in practice from early 1991 — within the Comecon (Council of Mutual Economic Assistance or CMEA) transferable rouble area, disrupted traditional trade flows between FSU republics, and any residual form of planned trade between Comecon partners, exposing state enterprises to market forces.
KeywordsCorporate Governance Foreign Trade Transition Economy Exchange Rate Regime State Enterprise
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