A market economy system means economies that work on the principle of free market. The interference of the government is kept to the minimum in these economies in matters of importance such as public goods (roads, infrastructure, etc.), merit goods (education and healthcare), goods with negative externalities (pollution-causing firms, etc.). The alternative to this system is one that is controlled by the government- a socialist system where all factors of production are owned by the government. The government makes pricing and wages decisions.
Russia has a market economy system on this date. It used to have a socialist system but it converted many years ago, and now the government only owns factors of production in key areas. The path from a socialist economy to a free market economy was not smooth for the country. The country is greatly dependent on oil prices, and keeps on facing rough patches every now and then in terms of GDP (the economy contracted in 2014-16 but did not collapse).
All economic systems affect the economy and people’s welfares greatly. Market economy is said to work the best for an economy with limited government interference. When people’s actions are voluntary and they are prevented from being exploited, their welfare automatically rises.
The country, however, has a special system because it only transformed from a socialist economy two decades ago. Major challenges faced by it include low oil prices (Russian economy’s major source of income) as well as capital movement across the world. Going off of this, I believe that the best move Russia can make is to transition its economy to depend less on oil and fossil fuels. With fossil fuels becoming outdated, Russia needs to find something that will ultimately help the economy in 20 to 30 years. Additionally, Russia needs to adopt the Chinese model of mainstream adoption. By being so dependent on oil, Russia is ultimately creating a need for the consumers to need to have the oil industry do well in the country. Currently, there is a scarcity of resources in the Russian economy, and this is due to the fact that their land is deprived of resources. Russia depends on a lot of imports to feed its people.
- Blasi, Joseph R., Maya Kroumova, and Douglas Kruse. Kremlin capitalism: The privatization of the Russian economy. Cornell University Press, 1997.
- Hendley, Kathryn, Barry Ickes, and Randi Ryterman. “Remonetizing the Russian economy.” Russian Enterprise Reform: Policies to Further the Transition (1998): 101- 120.
- Rosefielde, Steven. The Russian Economy: From Lenin to Putin. Wiley-Blackwell, 2007.