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After the Bolshevik Revolution, Russia became the world’s first Communist country and became known as the USSR. It seemed to enjoy high economic growth. Even during the Great Depression, It continued growing & experiencing low unemployment rates. In the early 20th century, it seemed like Capitalism was destined to fail and Communism was superior. However, Communism never actually worked well. The USSR systematically lied about its economy, as example, by exaggerating the amount of steel it produced in a given year, using prison labor secretly to run their economy, and showing only a small and well developed part of country to foreigners. Even their own people were not allowed to leave country unless they want to visit another communist country. After the death of Josef Stalin in 1953, the level of government-sponsored authority and the size of the prison population both declined. The slow trends continued up to the end of the Cold War in 1991. Soviet workers became highly unproductive. The lack of market did not provide the incentives to Soviet workers and firms, which seriously undermined their ability to innovate and produce. The arms race with the U.S., other Western countries, and China also severely drained the Eastern Bloc’s resources. By the 1980’s, the USSR was spending almost 1/3 of its GDP on defense, while the U.S. could sustain an equivalent military using less than 10% of its GDP. The size of the USSR’s economy peaked in the 1970’s due to high global oil prices before actually shrinking in the 1980’s due to collapsed oil prices. The problems became too big to hide from the outside, and the rest of the world began seeing at last that Communism didn’t work. As a result, average people in Communist countries began expressing their frustration. Consequently, Reform-minded political groups formed against Communism. By the 1980’s, the USSR’s leadership (Gorbachev) had “gone soft” and did not violently crack down to stop the protesters. Once people realized this and saw that they had a chance to win against their own governments, in various ways they arose to disband the Communist regimes. The Cold War ended with Communism being discredited as a viable social, political and economic system. Gorbachev became leader of USSR, he wanted to restore USSR and the communist system to strength. He erased state control over the economy and allowed low levels of private enterprises in his “Perestroika” reform. After getting rid of British Raj, the Indian government decided to adopt a Soviet-style economy in which all firms were state-owned and production would be centrally planned. The government-run firms were very inefficient at producing goods and services and at innovating. As a result, economic growth slowed. The Indian government protected national firms from foreign competition by banning the import of goods made. Indian consumers were thus forced to deal with decrepit Indian businesses and to pay high prices for everything. Eventually a large and complex black market arose in India as illegal private businesses started, goods were started being secretly imported, corruption became common place even among government officials. After WWII, many Latin American countries used “Dependency Theory”. They wanted to modernize by building up indigenous key industries through a combination of government subsidies and trade barriers to block competing imports. Actually the strategy was a disaster in practice. Salvador Allende became president of Chile in 1970 and passed many socialist reforms, he was a polarizing figure, his domestic opposition only grew as the reforms almost destroyed Chile’s economy. He was killed in military coup in 1973. General Agosto Pinochet became the country’s new leader. His economic advisors were pro-free market, they undid Allende’s policies,

lowering taxes, eliminating trade barriers & price controls, and cutting domestic social benefits. As a result, Chile’s economy quickly rebounded and is now one of the strongest in Latin America. In Poland, Lech Walesa and the Solidarity Union turned against the Communist government thanks to major economic problems. Margaret Thatcher visited Walesa, During an official state visit to Poland, which greatly encouraged and emboldened anticommunists in the country. During the 1980’s, Bolivia was in freefall: Coups happened with unbelievable frequency and the country was experiencing hyperinflation due to the government running massive deficits and just printing more money to pay its expenses. Harvard economist Jeffrey Sachs advised the Bolivian government in 1985 to make “shock therapy.” They would reverse the economic policies that grew out of Dependency Theory. The Bolivian government agreed to make the tough choices and to put Sach’s advice into practice. There were immediate, harsh price spikes, but the economy quickly stabilized. Other Latin American countries began to copy it. Poland tried shock therapy as well and it again showed immediate raise in free markets and drop in prices. Next, the Solidarity government went about privatizing the huge government-owned firms. So the shift to capitalism benefitted Poland. After Mao’s death in 1976, Deng Xiaopeng became the China’s leader and made the monumental decision to reverse Mao’s failed economic policies and to promote a market-oriented economic strategy called “Market Socialism”. that was actually less Communist. Soviet had a very huge system of sorts built around Communism, and changing to Capitalism was had difficulties that Gorbachev considered unbearable. China was still underdeveloped consisting of mostly of poor population living and working in small farms and only few factories present at that time so making pro-market didn’t entail mass disruptions. The Soviet Union collapsed on Christmas Day, 1991, and Gorbachev’s position as leader of the USSR vanished. The USSR disintegrated into several smaller countries, the biggest of which was Russia. Different Eastern Bloc countries handled the transition to democracy better than others. In Russia, still the Communist Party had a powerful influence in the legislature and bureaucracy. They opposed Boris Yeltsin’s pro-market reforms. Under Yeltsin, Yegor Gaidar was Russia’s prime minister and against strong Communist opposition, implemented many elements of Shock Therapy which led to large price spikes for all types of goods. Gaidar was forced out of his office by Communists. India’s experiment with central planning ended in failure: By 1990, the country had zero annual GDP growth and was facing bankruptcy. The government was forced to enact radical reforms that opened India’s economy. As a result, economic growth began again. Yeltsin, who was Russia’s first democratically elected president —first tried to privatize Russia’s Soviet-holdover state-owned enterprises by giving all Russian citizens stock shares in them, and then allowing them to trade shares in a new stock market. which was then recognized to be a corrupt move made for winning 1996 reelection. He had given core state industries to wealthy, well connected insiders for campaign funds in return. Such corrupt government dealing had long been norm during Soviet times. Otherwise he had lost the election and again communists would have retaken the control over Russia. The end of Communism marked the start of the Era of Globalization....