Russia is unique in that it doesn’t easily sit on a spectrum from socialist to capitalist. But many people call it oligarchic capitalism, where control of industry is concentrated in the hands of a small group of elites.
While capitalism has some effect in Russia, there are also still clearly elements of socialism. Indeed, Russia was operating under a communist model until the 1990s!
So, Russia is a country still heavily influenced by a mix of socialist ideology and authoritarian oligarchy.
It is ranked as the 100th most free economy in the world by the Economic Freedom World Index.
Socialism is characterized by the predominance of social ownership over private ownership of the means of production.
Under socialism, social ownership can be collaborative, cooperative, or public.
In a capitalist society, private persons or companies are the owners of the capital commodities.
Employers of labor use the means of production that they do not own; rather, they only use them on behalf of the capital owners (capitalists).
The free market, sometimes known as laissez-faire, is the purest form of capitalism. Private individuals are free to act however they like here. They are free to choose where to put their money, what to make or sell, and how much they will spend on goods and services. In an open market, there are no restrictions or bans.
Russia has a lot of socialist-inspired policies in place. Below are four of the most prominent examples.
The right to free healthcare has been a part of Russian citizens’ and residents’ constitutional rights since 1996.
Through the Federal Compulsory Medical Insurance Fund, the state offers this (also called the OMI or Obligatory Medical Insurance).
Payroll taxes and employer contributions are used to pay for it. The system and its two million personnel are under the control of the Russian Ministry of Health.
Additionally, federal regions like Moscow have their own health agencies in charge of managing local governance.
OMI-based care is thorough overall. It covers the price of inpatient care, including procedures requiring an overnight hospital stay, chronic illnesses, care for pregnant women and new mothers, immunizations, and more.
Since 2007, education has been required through grade 11 (it had previously only been required through grade 9). Article 43 of the Russian Constitution guarantees that all citizens of Russia have access to general education.
Public schools offer education for free, and there are a few private schools as well, but they are few in number. Only approximately 1% of the 42,600 schools that existed in Russia in 2015 were supposedly private schools.
In the Soviet Union, public schools and universities were required by law to provide all citizens with an education.
The education system that developed after the Soviet Union was founded in 1922 gained international renown for its accomplishments in eradicating illiteracy and raising a population with a high level of education. All citizens had complete access to it, and it included benefits including post-education employment.
Russian Railways (RZD), a state-owned natural monopoly, manages the entire network in Russia, which spans more than 85,500 kilometers.
The network transported 1.08 billion people and 1.2 billion tonnes of freight in 2013, ranking third after the US and China (who also has state control over some railways) in terms of freight volume.
Twelve main lines make up the Russian rail network, many of which connect directly to national rail networks in Europe and Asia, including those of Finland, France, Germany, Poland, China, Mongolia, and North Korea.
The longest and one of the busiest railway lines in the world is the 9,289 km Trans-Siberian Railway (the Moscow-Vladivostok route).
One of Russia’s most socialist program may be seen in how much of the railway system is run by the national government.
Since September 8, [O.S. 20] 1802, the Ministry of Internal Affairs has operated as the umbrella organisation for the federal law enforcement agency known as Police of Russia.
By order of Peter the Great, it was formed on June 7, [O.S. 18], 1718, and in 2011, it took the place of the Militsiya, the previous police force.
Tax revenues are used to fund police services. This means that every Russian person will always be able to report crimes or request protection and will have access to police protection.
Because there is no market rivalry among police units, this is a prime illustration of socialism in Russia. A single police department is in charge of the sector. As a result, the Police are not required to make a profit or compete with other services to offer the least priced or most effective services.
Russia features a number of capitalism-related examples. The examples that follow demonstrate how the free market influences several aspects of the Russian economy.
In Russia, anyone can launch a modest business. A wholly or partially owned Russian limited liability company may be founded by anyone, Russian or not.
In most cases, regardless of citizenship or even resident status, you may also create other legal entities. Many other nations don’t operate that way.
Russian law is quite benevolent to foreign investors: Article 4 of Federal Law No 160 of 09.07.1999 establishes a national legal regime with regard to foreign capital.
With a few exceptions, this means that businesses with foreign investment are given the same terms, regulations, and business rights as Russian corporations.
Only their legal standing as the business’s organisers qualifies foreigners to maintain a business in Russia.
Therefore, one example of Russia’s capitalist policies is the ease of foreign investment and the provision of subsidies and tax breaks for the establishment of private firms.
(This doesn’t discount the fact that there’s plenty of corruption and authoritarianism that can mean a business can be nefariously shut down by the government).
In general, anyone can purchase residential property in Russia, regardless of citizenship.
Nowhere in the nation is it expressly forbidden for foreigners to possess residential property. They cannot, however, own land near state boundaries or ports of entry, for instance.
They are thus able to purchase a house but not the land that lies beneath it. That also implies that the property owners are at the whim of the landlord.
A group of people may also purchase real estate together. In this instance, it will be owned jointly by a number of owners, each of whom will be the legal owner of a portion of the property.
Despite the fact that the government owns the real estate assets, they permit anyone to purchase and sell residences in Russia, a sign of that country’s capitalism.
Russia’s flag carrier and major airline is Aeroflot – Russian Airlines. Aeroflot is one of the oldest operating airlines in the world because it was established in 1923.
Aeroflot has its headquarters in Moscow’s Central Administrative Okrug, and Sheremetyevo International Airport serves as its primary hub.
Through the Federal Agency for State Property Management, the Russian government controls 51% of Aeroflot as of March 2020, with the remaining shares being freely tradable.
As one of Russia’s examples of capitalist policies, the national airline has private companies and employees being shareholders.
A little over 60% of people, according to the Federal State Statistics Service, get various forms of social assistance, although 16% of the poor are not at all covered by social programs.
These inadequacies result from both the outdated state social protection system and the incredibly conservative and regressive means testing procedures.
Many citizens lack a basic awareness of the different sorts of social aid.
In the age of advanced technologies, additional pressing issues are brought to light, including the quality of the information infrastructure, the dearth of innovative work practises, the shortcomings of the means testing procedures, the complexity of social legislation, and the population’s information literacy.
Therefore, the lack of social protection for all Russian citizens is one of the examples of capitalism as capitalism is associated with the lack of social protection.
- The Communist Party of the Russian Federation is one of the dominant socialist parties in Russia. Nationalisation of large enterprises, agriculture, and natural resources is one of the party’s objectives.
- United Russia is the dominant political party in Russia. The party supports Putin and declares Russian conservatism as its core ideology. It tends to support the idea of private ownership of businesses.
Different facets of the Russian economy are being influenced by both market and non-market factors. Despite the fact that there are few capitalist influences, particularly in terms of enterprises, a sizable portion of the economy is held by the government.
In Russia, there is evidence of an oligarchic model where large companies are either state-owned or in the hands of a small group of powerful elites. So, we can see there is some form of capitalism evident in the society as well, albeit somewhat corrupted by political influences.
Dr. Chris Drew is the founder of the Helpful Professor. He holds a PhD in education and has published over 20 articles in scholarly journals. He is the former editor of the Journal of Learning Development in Higher Education.