Major Economies in Transition
Key Terms
state farm, collective farm, gross national product
Find Out
• How did economic problems lead to the collapse
of the Soviet Union?
• What are some of the obstacles to change faced
by Russia?
Major Economies in Transition
Understanding Concepts
Comparative Government How did the
Communist Party control the government and
economy of the Soviet Union?
Section Objective
Describe the major obstacles to change in the
Russian and Chinese economies.
After decades in power, the Communist
Party was unable to prevent the breakdown
of the authoritarian economic and political
system of the Soviet Union. Mikhail
Gorbachev’s efforts to reform the communist
system failed. As a leading adviser of
Gorbachev had predicted, “Gorbachev took
on this country like my wife takes on
cabbage. He thought that to get rid of the
dirt, he could just peel off the top layers of
the leaves. But he had to keep going until
there was nothing.”
I. Transforming the Russian Economy
(pages 728–729)
A. Beginning in 1917, the Soviet Union built the
world’s leading communist economic
system; economic decisions were made by
the government. Almost all Soviet
enterprises and farms were state-owned and
state-operated.
B. Mikhail Gorbachev, the last Communist
leader of the Soviet Union, tried to change
many policies to stimulate the stagnating
economy, but the economy continued
to decline.
C. Gorbachev resigned in 1991; several Soviet
republics then declared their independence,
effectively ending the Soviet Union.
I. Transforming the Russian Economy
(pages 728–729)
D. Since the collapse of communism, Russian
leaders have made attempts to move toward
capitalism and democracy.
E. Even with some reform, Russia is being run
much as it was under communism—and by
many of the same leaders.
F. The slow pace of change in Russia has
several causes. For one, former Communist
bureaucrats are unwilling to give up power.
Also, Russians are familiar with living in a
society in which rules have traditionally been
imposed from above.
I. Transforming the Russian Economy
(pages 728–729)
Do you think that Russia can overcome
the problems it faces today? Explain
your answer.
Answers will vary. Have students assess
the current Russian economic and
political situation.
II. Changing the Chinese Economy
(pages 729–731)
A. The Chinese Communist government
followed the model of the Soviet planned
economy until China found itself unable to
compete with the market-based economies
of its neighbors.
B. In the late 1970s, China’s Communist
leaders began to encourage private
enterprise; since then, the Chinese economy
has grown rapidly.
II. Changing the Chinese Economy
(pages 729–731)
C. More recent rapid development in China has
several causes:
i. China’s population provides a large
labor pool.
ii. The Chinese government promotes
manufacturing by giving foreign
companies tax incentives and cheap land.
iii. The Chinese government spends billions
of dollars on communications
technologies to assist manufacturers.
II. Changing the Chinese Economy
(pages 729–731)
D. China is attempting to move to a market
economy while maintaining an authoritarian
political system controlled by the
Communist Party.
E. Several factors threaten the Communist
Party in China:
i. China’s growing middle class will want
more of a say in its government.
ii. Poverty and unemployment creates a
class of urban poor who are angry with
the government.
iii. Transition to a market economy has led
to even greater political corruption.
II. Changing the Chinese Economy
(pages 729–731)
F. Trade with China has opened new markets
for American goods, though Chinese labor
costs have driven many American
manufacturers out of business. American
experts worry that an economically strong
China could become a dangerous political
and military rival.
II. Changing the Chinese Economy
(pages 729–731)
Do you think that rapid economic growth
in China will have a positive or negative
impact on the United States? Explain
your answer.
Answers will vary. Students should illustrate
an understanding of the impact of an
economically strong China on American
business and industry.
Checking for Understanding
1. Main Idea Use a graphic organizer like the one
here to identify four reasons for China’s rapid
economic growth.
large labor pool, low production costs, tax breaks
and cheap land given to foreign companies,
billions spent by Chinese government on
highways, ports, and communications
Checking for Understanding
2. Define state farm, collective farm, gross
national product.
A state farm is a farm owned by the
government and run like a factory, with
farmworkers being paid wages.
A collective farm is a farm in which the land is
owned by the government but rented to a family.
Gross national product, or GNP, is the sum of
all goods and services produced in a nation in a
year.
Checking for Understanding
3. Identify Mikhail Gorbachev, Vladimir Putin.
Mikhail Gorbachev was the last Communist
leader of the Soviet Union; he tried to
implement economic reforms while keeping the
Communist form of authoritarian government.
Vladimir Putin is the current Russian president;
he was elected to office in 2000 and is a former
lieutenant colonel of the KGB, the Soviet secret
police.
Checking for Understanding
4. What was the main source of agricultural
problems in the Soviet Union?
The main source of agricultural problems in the
Soviet Union was government mismanagement
of production.
Checking for Understanding
5. What events in 1991 led to the collapse of the
Soviet Union?
Six years of reform did not cure the Soviet
economy. Citizens revolted and several Soviet
republics declared their independence.
Critical Thinking
6. Analyzing Information How does the growing
Chinese middle class threaten the current
government in China?
As the middle class grows, its members will
want more say in how China is governed.
Comparative Government Before the
1980s, the Soviet economy was under
the control of government planners from
the Communist Party. Create a political
cartoon that illustrates one of the
problems that centralized planning
created for the Soviet economy. Share
your cartoon with your classmates.