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development in mongolia

            Mongolia was an economic colony of the Soviet Union until early in the 20th century. Consequently between 1921 and 1990 it had an economic system which reflected the Soviet's control : it had a centralized, socialist political system and an economy based on central planning and collectivization. Under the umbrella of the Soviet Union Mongolia had made significant progress in improving the general living standards of the population, specifically in the areas of education and public health (Tsogtsaikhan: 2003:1). The collapse of the Soviet Union in 1989 resulted in Mongolia shifting dramatically towards a market orientated economy. A parallel development was the replacement of the old centralized style of government with a multiparty system of government of the kind found in Western Europe.
             The attempt to replace the centralized, collectivized economic system with a free market economy was (and continues to be) fraught with difficulties. The attempt at transformation has caused much hardship and dislocation, both economically and politically. Compounding the inherent difficulties of transforming a controlled collective economy into a free market economy were three major shocks. First was the dramatic reduction and subsequent termination of soviet aid in 1989 and 1991. It is estimated that this aid was equal to as much as 30 per cent of the gross national product (Griffin:1995: 3). Secondly the collapse of the CMEA (Council for Mutual Economic Assistance) which had until then provided 93 per cent of Mongolia's trade meant that the country suddenly lost its export market and suffered a sharp deterioration in its external terms of trade. Thirdly the senior technical advisors from the Soviet Union withdrew , leaving the state without experienced people to help them run the economy just as the transition to a new economic system began (Griffin: 4). .
             Symptomatic of the difficulties and destabilization that accompanied the introduction of a market economy where the difficulties that accompanied the privatization of live-stock and the dismantling of the socialist herding collectives.


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