Econ Test 3

Why was Poland a Communist country? When did it happen? After WWII in 1945
Was it voluntary? What is the Iron Curtain? Who imposed it? Why?
– A notional barrier that prevents the passage of information or ideas between political entities, in particular.
– The former Soviet bloc and the West before the decline of communism after the political events in eastern Europe in 1989.
What were economic conditions like? People’s living standards?
Early years of communism right after WWII vs 1960’s and 1970’s
State ownership vs private ownership of businesses
Who owned the farms? Compare to Soviet Union, why different?
– Poland in 1970s: Economic growth slows dramatically and then declines
– Shortage economy
– Falling living standards
Poland: Foreign debt issues and inflation: why so high for both? How much debt?
– $25 billion debt to foreign banks
What was the Solidarity Movement, and how and why was it formed? By whom? When? Where? What were its original goals? How did the communist govt. react? Why? What is their problem with a union?
How did the union gain control of the govt? Was it revolution, election,…? How did the Soviet leadership react?
– spurred by governmental and economic difficulties that had continued to deepen over the course of an entire decade
– Shipyard workers
– 1979
– Gdansk
– To build a memoriam of those who died as shipyard workers; went on strike; challenged the government; the deteriorating conditions and living standards went on strike for
– Gave in to their demands
– Unions were illegal because it meant that communism wasn’t working
– Were able to get elected through elections
– Election
– They shut them down; be re-legalized later
What role did the Catholic Church play in events in Poland? How was Pope Paul II related to Poland? What impact did he have? Why was the church in Poland able to maintain a degree of autonomy? How did the Orthodox Church in Russia fare under the communists?
– Supported the solidarity/opposition movement
– Rekindled faith, confidence and national unity; helped democratic movement; mobilized themselves as a powerful opponent of communism
– Not in Moscow
Once Solidarity is in power, what is its economic program?
Pro-socialist or Pro-free market? What actual steps were taken? What is shock therapy?
– Pro-free market
– Privatize state owned industry
– Reduce money supply
– Reduce govt budget deficit
– Remove price controls
– Currency devalued and made convertible
Poland: What was the result of the shock therapy? Did it help all sectors of the economy equally? What happened to heavy industry employment? Light industry and services?
– Problems: privatization of heavy industry – most polish heavy industry collapsed in bankruptcy (entrepreneurs did not want)
– Successes: Light industry & services (entrepreneurs sprang up)
Poland: Why does the new finance minister obsess over the price of eggs? What do they tell us? What happened in this particular market?
– Eggs prices rise and fall really fast
– That the market is working
– Leveled off and that it was working
Were the economic reforms successful long-run? Is Poland leaning “Westward” or “Eastward” politically now?
– Yes
– Westward
When was the Soviet Union formed? How and by whom? Why then? Political Program? Economic Program?
– 1917 or 1920s; Lenin; Communism; War Communism – take over businesses
New Economic Policy of the 1920’s? Why?
– Private property allowed; previous cause economy to collapse; mixed economy
Russia/Soviet Union: Economic Policy after the 1920’s?
Forced industrialization: What is it? Who instituted it?
– Govt use force to command ppl
– Stalin
– Wanted to do in 15-20 years; all private businesses taken over
What is Collectivization of agriculture, and what happened to the Kulaks of the Ukrain?
– Fought and many got killed because they would not give farm over (former capitalists, 6 million killed)
– Collective farms created (large scale farms)
Russia/USSR: Economic growth in 1950’s and 1960’s? vs Economic growth in 1970’s and 1980’s?
– Went up, then slowed down and declined
What is Sputnik and when? What is it a symbol of?
– 1st satellite orbiting that was created by humans, 1957
Russia/USSR: Who is Mikhail Gorbachev and when does he come to power? What are his politics? Is he a communist or free-market democrat? What are Glasnost and Perestroika? What is Gorbachev trying to accomplish? Are these programs successful? Why does Gorbachev not intervene in Polish affairs when elections there are held? What did the Soviets do when Czechoslovakia and Hungary tried to reform earlier? What years were these reforms attempted?
– Leader of soviet union in 1985
– Wants to reform; socialism with a human face
– Perestroikia – restructuring; later became Glasnost – opening (helped undermine legitimacy and credibility of system
– Economic crisis become more acute; failed
– Possibly a pilot project? Maybe decided it wasn’t worth it? idk
– 1989-1991
Russia/USSR: Who is Boris Yeltsin? When did he come to power? How. Why? President of what country? What is his background? What were his political/economic views early on, and what did they change to? Why? What happens to Soviet Union as a political organization? Did Russia become democratic at this time? What is his economic plan or policy? Pro-market or Pro-communist? What is his plan called? What does it try to accomplish?
– 1991/1992
– President of the Russian federation when originally governor
– When soviet union dissolved
– Starts off as pro-communist and anti-democracy then switches to pro-democracy & free-markets
– “500 days to the market”: privatize state owned industry, remove price controls ect
USSR: How does privatization work out?
For housing units – gave to family occupying it
For small business – gives to workers
For service business – gives to workers
For large scale enterprises
Who ultimately ends up with most stock shares?
Who are the “Oligarchs” that your author refers to? Why is there so much corruption?
– Came from black market, wealthy business ppl
USSR: Who are the “Red Directors” and what do they want? How are they brought on-board to cooperate with reforms?
– Color of political left
– Soviet era govt officials who run govt owned industries
– Oligarchs bribed them
What is a “spontaneous privatization?”
– As new Soviet legislation in 1988-1991 effectively had transferred part of property rights over enterprises from the government to the employees and management and enabled the enterprises to withdraw from associations on their own, in the process of the so-called spontaneous privatization control over some industrial assets was acquired by their managers. However, this accounted for only several thousand enterprises
What was the “loan for Shares” plan and who proposed it? Who benefited? What did they get?
– Business ppl offer loans to Yeltsim to pay for his election campaign
– He has to put up collateral for his loan ( stock shares in govt owned industries are pledge as collateral)
– Defaulted on loan and they took
Is Russia a communist country today? What was the political system in the early 1990’s during the reform period? What about now?
– No
– Communist
– “democratic”
Was the economic transition in Russia as successful as in Poland?
Why did much of the world once model itself on the Soviet Union? What was accomplished economically? How fast? What is Norilsk? How did it get started? Was the Stalinist Forced Industrialization successful? By what standard? Who controlled the economic system? Was it individual capitalists or central planners in Moscow? How widespread was Soviet influence in the world?
– Industrialized a backward country in a single generation
– Gave birth to vast industrial complexes
– Single generation
– Symbolized every stage of Soviet economic history
– Prison camp
– Yes
– Strong & self-sufficient, and military superpower
– Kremlin
– Central planners
– Everywhere in Eastern Europe, Africa, Latin America
By the 1980’s how large a percent of the Soviet economy was being spent on the military?
Why so much? How is the economy performing at this time?
– 50% on military
– Wanted to be a military super power
– Crumbling economy, started to go down all the time
– Were deceiving the world
– The people had no incentives
Why are economists starting to discuss the problems in the economy? Are these discussions held openly, in public or help secretly? Why? What were the economists discussing and how was it different from accepted ideas? When Gorbachev becomes the leader of the Soviet Union, what is the economic condition of the country? What kind of commodities were not easily available in the Soviet Union? ‘What is Gorbachev’s plan to reform the economy called? What economic advice did Margaret Thatcher give to Gorbachev to make his job and life easier? How does her advice make government’s job easier? What advice does Ronald Reagan give Gorbachev?
– The economy was decayed; price of oil collapsed which made the problem more enormous
– Pantyhose, toothpaste, soap power, and other basic necessities of life
– Perestrokia
– Run market economy by itself
– The government will not have to govern the economy
– If you seek peace & liberation, open the gate of the Berlin wall & and tear it down.
What is Solidarity? Where did it originate? When? Who is its leader? Why is Margaret Thatcher visiting Poland in 1988? How was the economy doing in the 1980’s? What were some of the problems identified in the video? Is the Catholic church behind Solidarity from the beginning? What changed to bring the church into support for Solidarity? What did the government do in 1981? How did this affect Walesa personally? What does Thatcher’s visit in 1988 accomplish for Solidarity?
– Free labor union, main opposition to communism
– Gdansk, Poland by shipyard workers
– 1980
– Lech Walesa
– She wanted to see Lech Walesa & port of Gdnask
– It was failing
– Price rises and food shortages
– No
– Learned that it was all about freedom, not for pay rise
– Govt declared martial law & put Walesa under house arrest

– Assured their victory and offered an escape
When Jeffery Sachs arrives in Poland in 1989 what does he find is the economic situation? How well does the Solidarity movement do in the elections? How does the Polish Communist Party react? What does Moscow tell them? What is the immediate effect? How do the other countries of Eastern Europe react? Once Political independence is achieved, what is the next step? How is the economy handled? Why so fast? What are Balcerowicz’s reasons for speed? What is the plan called? What is the plan? What is the initial reaction of prices to the removal of price controls? Why would anyone want to remove the price controls to begin with? What was the signal that the stabilization plan was starting to work? What is the parallel with what happened in West Germany after WWII under Erhard?
– It’s a poor economic situation
– Won 99 out of 100 seats
– Called Moscow for directions
– Do nothing and accept the outcome of the free election
– Ended the Cold War
– Broke free of communism
– Liberate the polish economy
– Sachs had to write up a plan overnight
– Transition had to be rapid and massive
– People are more likely to accept radical solutions when they are euphoric of freshly regained freedom by moving forward quickly
– Shock Therapy
– Cut back on government expenditure and introduce a market system
– Anger because prices doubled and shortages didn’t end
– To bring in supply and demand again, that would eventually bring the products down to a reasonable price
– The prices of eggs, would be working if eggs appear and got cheaper
– Removing price controls allowed the free market to reign and start up the economy again
How easy was it to privatize the old, heavy industries inherited from the Soviet Era? What about the rest of the economy? Was the re-orientation of Poland away from state ownership to a capitalist economy considered a success?
– It was not easy
– It was very easy
– Yes, it was a success
When did the Soviet System officially collapse as a political entity? How did it happen; was it an invasion or coup from within, or what? Once the Soviet Union collapses, who becomes president of Russia? What is his desired economic policy? Pro-Capitalist or Pro-Communist? How fast does he want to make reforms? How does this compare with Gorbachev? What was the condition of the government and the economy when Yeltsin takes over? Does the parliament support the reforms in Russia like in Poland? What causes the difference?
– December 1991
– Coup collapsed and then Gorbachev decided to end the Soviet Union
– Boris Yeltsin
– Market economy
– Pro-Capitalist
– Quickly
– Left the economy in a tailspin and everything was in short supply, queuing everyday to get something
– Government was not functioning and the economy was not working (absolute disaster)
– no
– Parliament was dominated by communists and other parties that opposed reform
What reforms did Gaidar introduce in 1991? What happened to shortages after introduction of reforms? What happened to prices? Did the Central Bank help or hurt (Central bank is the Federal Reserve, the govt. bank that prints the money)? What happened to inflation rate? How is the Central Bank connected to inflation (material from Commanding Heights chapter 1 on German Hyperinflation if you forgot the connection)? How did this affect the common Russian?
– Prices would be freed, abolished the law that prohibited free enterprise
– No more shortages
– Higher prices
– Hurt them
– Fueled inflation, hyper-inflation
– They probably printed more money
– It wiped them out of money and ability to buy
What is a voucher in the Russian context? Who got them? What could you do with them? Why is the government issuing them; what is the economic purpose of the program? Why is the privatization plan rushed into operation so quickly?
– Used to acquire shares of privatized companies
– All Russian cities, including children
– Buy a share of a company
– To get them to buy shares of a company, , to privatize the company and get it away from the government hands
– Communists were going to kill privatization if they did not do it quickly
What is an Aparatchik or Red Director? Were these people in favor of privatization or opponents of it? Who are the Oligarchs? Why is President Yeltsin cooperating with the Oligarchs? What is their plan, and why is it called Loans for Shares?
– Communists/ former soviets
– Against it
– Rich people
– He needed financial assistance
– Acquire key industries at a knockdown price, Russian business for giving the government loans in return for taking the shares of strategic assets as collateral (they wanted the commanding heights – oligarchs)
Did state owned industries get transferred to the private sector? Were the communist Red Directors out-maneuvered, or did communism return to Russia? How does Yeltsin end up by year 2000?
– Yes, but the to the oligarchs
– They were out-maneuvered
– He resigned after the stock crashed
How does China become communist? What year?
– Nationalists lost to Communists in civil war after war with japan
– 1949
Battle between Mao Zedong and Chiang Kai Shek

Long-march, civil war, Japanese invasion, end of WWII
– Flee from nationalists, shrunk down to 5,000 supporters
– Got together when Japanese invaded
Taiwan vs mainland China
Who controls Taiwan after 1949?
– Chiang Kai-shek
Taiwan vs mainland China
What kind of economic system is pursued?
– Capitalism
Why is Hong-Kong able to pursue capitalism?
Who controls Hong Kong after 1949? Until When? Who controls it now? What kind of economic system is in Hong Kong now?
– British had control of Hong Kong for a certain period of time
– 1997
– Chinese
– Free trade market
What is economic program of Mao?
Nationalization of industry
Collectivization of agriculture
– Uncompensated
– Nationalize private farms that are owned by land lords in large states and worked by peasants who don’t own their land
How does this collectivization on communes differ from Soviet collectivization? Why? What impact does landownership have?
– “share croppers”
o Land lord owns everything and to provide for person then take half and person take other half (making deals)
– Communes – collectivized farms under govt control
Great Leap Forward…what is the purpose? When?
Backyard steel furnace….Why not large scale steel mill?
What is Egalitarianism and how does it contrast with a system of heirarchy?
Economic consequences of Leap?
Impact on Mao’s power
– Mao’s plan to industrialize China, Attempt to reach economic level of Great Britain in 15 years, Through govt lead program
– Uneducated agricultural labor which makes low grade steel
– Belief in strict equality, equality in equal results
– Ends up stunting China’s growth; agricultural output goes down; famine; major govt lead disaster
Cultural Revolution…what is the purpose? When? How does it end?
– Bring to revolutionary Mao-ist beliefs
– 1966 to 1976
Who are the Red Guards? What do they want? What is a Capitalist Roader or a re-education camp?
Young people in universities (pro egalitarian faction, therefore supported by Mao)
– Capitalist Roader – communist party officials
– Re-education camps – combo prison chain-gang & political indoctrination
Hierarchical organizations and society vs egalitarian
Impact on China’s economy and culture? What leaders support it?
– Chaos breaks out
What is the Gang of 4, who is their most famous member, what is their political ideology? Why do they ultimately lose power?
– 4 members of “red guard”
– One was Mao’s wife
– Masterminds of Cultural Revolution
Who is Deng Xioping and what Reforms take place in 1978?
Pragmatist or Ideologue? What does the quote, “I don’t care whether a cat is black or white, I only care if it catches mice” mean? Are all communists pragmatic?
– Pragmastist – committed to what works
– An affirmation of pragmatism in economic policy in the aftermath of fanaticism of Great Leap
– No
China/Deng: Why reform agriculture first? Impact of drought
– A local crisis, because of lack of rainfall
– Ground was so dry that neither tractors nor plows could break it; Starvation became an endemic; diseases; people fled from homes;
Household responsibility system
What is it? What did it permit? What impact on income and productivity? Over what time scale?
– All productivity above mandated quota belongs to the peasant
– Allowed family to keep some benefits of its labor
– Farm income 60% & productivity 50%
– Over 6-7 years (1978-1984)
Explain Deng Xioping’s phrase: Socialism with Chinese Characteristics
– Incorporating market into planned economy
China: Contract Responsibility System in Industry
What did it permit? What was impact
– Applied to state-owned industry
– All production above quota belongs to management and workers
– It was not enough; losing out to competition
SEZ’s (Special Economic Zones): what are they? What do they permit? Where located?
Who is allowed to participate?
– Special Economic Zones
– Permitted foreign owned businesses on Chinese soil
– Guangdong, Shenzhen, Fujian
Reformers vs Conservatives in the Chinese Communist Party
What do these two groups believe about capitalism? What does conservatism mean in a communist country?
Explain the Bird cage analogy that the leading conservative puts forward
– Conservatives oppose change; don’t want capitalism
– “You mustn’t hold the bird in your hands too tightly or it would be strangled; You have to turn it loose, but only within the confines of a cage”
Tienamen Square
When did it happen, and what did the students want?
– April 1989, wanted democracy
Tienamen Square
Why was the govt against them? What did the govt do?
– An act of rebellion and challenged the supremacy of the government
– Ordered the military to go in a clear the area, which ended up killing around a thousand people
China: What was the govt’s attitude towards economic reforms?
– Reform causes chaos
How did Deng Xioping respond in 1992?
Deng’s last campaign
– Set out on his private railway on another campaign
– Defend the special economic zones that his enemies attacked
– Nanxun (southern journey)
What has been the economic stance of the govt. since 1992 on the capitalist vs communist economic debate? Move back towards socialism or continue with capitalism?
– Towards market economy/capitalism
What are the problems with further movements towards capitalism in China?
– Privatization is unacceptable to the older generation
What is the Iron Rice Bowl
What is the problem with letting a large State Owned Enterprise go bankrupt?
Economic Divide between the rural population and urban, coastal population
Migration of rural to urban
– Iron rice bowl – guaranteed work and sustenance for urban workers
– Posed a big risk of the country’s financial stability
– Progress has been uneven; create strains on the reform
Where is David Lee originally from? Why is he afraid to go to Communist China? When did he leave China? How long has it been since he was back in China?
– Beijng
– He almost wasn’t able to leave
– 1949
– About 40 years
2) Why has he come back to China? What is a joint-venture, and why locate in the free-trade zone? What is a free trade zone, (a special type of Special Economic Zone) and what does it permit?
– Start a joint-venture
– A business agreement
– Don’t have to pay tariff, build a thing & ship it out for export purpose
3) What are the villagers in China doing to better themselves economically? What is their living conditions like in the countryside?
travel to industrial town, seeking work in new factories
– Very poor life
4) How much did the school teacher in the countryside earn as a school teacher (pay is in Chinese Yuan)? Why does he move to the city to take a factory job? What is his pay? Does he consider himself better off? What is he able to do for his child? Does he have luxurious living accommodations by the developed world’s standards? Would he be considered well off by developed world standards?
– 100 a month
– To have a better life
– 3,000 a month
– He feels more well off than before
– Able send his child to school
– No
– No
5) Why do the Communist Chinese leaders try to copy the capitalist methods of countries like Singapore? How fast are many of the Asian countries growing?
– Transformed once impoverished nations
– 10% or more each year
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