Until 1991 Russia was the largest republic in the Union of Soviet Socialist Republics, born out of the Russian Revolution that took place in 1917-18. Russia was ruled by a monarchy headed by a tsar until 1917 when, following Russia's disastrous participation in the First World War, the tsar abdicated the throne, leaving a provisional government in power. In the harsh Russian winter of 1917 a band of Marxist revolutionaries seized power. The Marxists called themselves the Bolsheviks ( bolshe in the Russian language means "larger," and this group of Marxists claimed to be in the majority, hence "Bolsheviks").
The Bolshevik Revolution introduced a new form of government and economics to the world. The Bolsheviks promised that they would create a humanitarian Marxist form of economics. The Bolsheviks championed the labor theory of value, claiming that all value was derived from the importance of the human effort that went into creating a good or service. They promised to create a new economic system that would eliminate economic exploitation of people, would substitute cooperative production for boom and bust cycles of production under capitalism , and would free people to take only what they needed from society and contribute whatever they could. The Soviet government followed this economic policy throughout its 73-year rule.
Political and economic discord brought the USSR to a critical juncture in the 1980s, when a new and dynamic political leader, Mikhail Gorbachev, introduced plans for economic restructuring and political reform. Gorbachev announced major political changes at the 19th Conference of the Communist Party of the Soviet Union (CPSU) in June and July 1988. Gorbachev invited the leaders from the 15 Soviet Socialist Republics of the USSR to announce that free elections and economic reform were on the country's agenda.
There were those who thought that the reform efforts would allow the system to release some steam. In reality, once the lid was off, the situation quickly boiled over into a massive change of political and economic systems. A group of high party leaders from 11 of the 15 Soviet republics met in December 1991 in Alma-Ata, Kazakhstan, to pass an agreement that declared the "Union of Soviet Socialist Republics shall henceforth cease to exist." The leading countries in the world rapidly acknowledged this declaration. The Alma-Ata Declaration sealed the fate of the Soviet Union and created a successor, the Commonwealth of Independent States (CIS). The CIS—a loose affiliation of the former Soviet states—has not proved to be a viable political entity, and today exists largely in form. Without a popular referendum or mandate, without parliamentary advice or consent, and without judicial review, the Soviet state simply was declared a thing of the past. USSR President Mikhail Gorbachev, acknowledging the inevitable, resigned on 25 December 1991. The Soviet flag ceased to fly over the Kremlin.
Today, the Russian Federation is a constitutional democracy with 3 branches: executive, legislative, and judicial. The Russian Constitution, which came into effect on 12 December 1993, recognizes a separation of powers. The constitution describes the purposes of government, outlines the rights and responsibilities of citizens, and defines the structure of public institutions in the Russian Federation. The legal framework is based on a civil law system, and there is judicial review of legislation.
Despite the separation of powers, in terms of process, the Russian Federation functions as a presidential style of government, which concentrates most authority in the president as the head of state. The first president of the Russian Federation was Boris Nikolaevich Yeltsin, who was succeeded by Vladimir Putin. The Russian president is elected for a 4-year term. There is no vice-president. In the event of the incapacity of the president to carry out the constitutional mandate, the prime minister succeeds the president. The legislative branch consists of the Federal Assembly, made up of an upper house—the Council of Federation, made up of 1 representative from each of Russia's 89 federal constituent units—and a lower house—the State Duma, made of up 450 seats.
The executive branch includes: 1) the Presidential Administration, which drafts presidential decrees and provides staff and policy support to the entire executive branch; 2) the Security Council, which was established as a presidential advisory body in June 1991 and restructured in March 1992, when it was given responsibility for managing state security; 3) the Cabinet, which includes the ministers—the heads of the government ministries, who are appointed by the president; 4) the Council of Heads of Republics, which includes the leaders of the 21 ethnic-based republics; and 5) the Council of Heads of Administrations, which includes the leaders of the 66 autonomous territories and regions, as well as the mayors of Moscow and St. Petersburg.
Since 1991 the Russian government has frequently tried to minimize its budget deficits by failing to pay for wages and pensions. Weak tax administration, a cumbersome tax system with high rates that invite tax evasion, falling industrial output, the use of barter in the economy, and blunt refusal to pay by large, politically powerful firms has weakened the government's ability to meet its obligations. Under the new leadership of President Vladimir Putin, overcoming the travail of the collapse of the financial markets in Russia in August 1998 is high on the government's agenda. A comprehensive program to transform the Russian economy was approved on 26 July 2000. The Putin government has sought to establish a prudent fiscal policy in part by collecting significantly higher tax revenues than anticipated under the state budget and managing to restrain spending. The government placed considerable emphasis on reforms of the tax code.
But there are other weaknesses in the structure of the government. The Russian state bureaucracy is still at an early stage of its adjustment to the needs of a modern market-oriented economy. The objectives, functions, and competencies of the different governance structures are poorly defined, leaving substantial space open for discretionary action by bureaucrats. Civil servants are underpaid and inadequately monitored, which creates a strong incentive for the use of public office for private gain. Government decisions, privileges, and regulatory exemptions in Russia are routinely and quite openly influenced by bribes to public officials. While there are many civil servants who maintain high professional standards, the institutions within which they serve are poorly equipped to regulate a market-oriented economy.
Fair and impartial adjudication of disputes is a key to an effectively functioning market economy. Russia's judiciary and justice system remain weak. Numerous matters that are dealt with by administrative authority in European countries remain subject to political influence in Russia. The 1993 constitution empowers the courts to arbitrate disputes between the executive and legislative branches and between Moscow and the regional and local governments. The court also is authorized to rule on violations of constitutional rights, to examine appeals from various bodies, and to participate in impeachment proceedings against the president. The July 1994 Law on the Constitutional Court prohibits the court from examining cases on its own initiative and limits the scope of issues the court can hear. President Yeltsin reconvened the Constitutional Court in March 1995 following its suspension in October 1993. The Russian government has begun to reform the criminal justice system and judicial institutions, including the reintroduction of jury trials in certain criminal cases. Despite these efforts, judges are only beginning to assert their constitutionally-mandated independence from other branches of government.
Public accountability is complicated by the existence of a substantial informal sector . One of its features is the practice of barter arrangements. Many enterprises, being unable to meet their commercial or their tax obligations, turn to barter transactions. Because these barters are not always denominated in currency, their true value for purposes of taxation is often obscure. Moreover, many local and regional governments have been willing in the past to sometimes accept barter payments or "in-kind" payments in lieu of taxes from enterprises that could not pay but had an important social role as a major employer in the community.
When Russia liberalized its economy, explicit budgetary subsidies for enterprises were drastically curtailed. However, industrial enterprises have continued to be supported by "implicit subsidies" channeled largely through the energy sector and lax tax enforcement. These implicit subsidies have taken the form of non-cash settlements for energy and tax payments. Sometimes these non-cash settlements were "payments-in-kind," such as when a factory could not pay its tax bill in rubles because it was not selling its goods. It would then agree with the local tax authorities to pay in production of the goods it makes. This might mean that a tire factory, for instance, would pay its local tax bill in the form of tires supplied to the local tax authority. The tires, in turn, would be used or traded by the tax authorities. These forms of payment were also used to pay energy companies for electricity and gas, which are critical for the operation of factories.