The dynamic behavior of a charged economy as it diffuses into a world market-driven economy

The problem. During the 20th century, the world witnessed major developments in the redistribution of political and economic frontiers. One of the most significant was the political and economic reordering of the former Soviet Union. As the world community raced to embrace these developments, the international business community struggled with the risks associated with conducting business within an unstable international business environment. The international business community is in search of a structured methodology to deal with the unpredictability associated with these emerging democracies. This study was designed to develop a formal mathematical model which can be used to characterize the dynamic behavior of such economies. The study used Russia as a basis upon which to formulate the dynamic model and to assess its validity.;Method. A physical model was used to generate a mathematical model. The mathematical model was presented as a second order differential equation with constant coefficients. The coefficients were translated into identifiable characteristics of the Russian populace. A survey was then conducted to establish numerical values for each of the coefficients. The survey was administered to a group of 500 Russian university students in Moscow, Russia and a group of 500 American university students in Tampa, Florida. Using the collected data, the model was run to characterize the Russian economy.;Results. The model results suggested that Russian economic reform is being implemented judiciously and that the first bottoming out of the ruble would occur in May 1995. This agreed favorably with historical data. The general opinion was that early economic reform would be aggressive but that subsequent reform would be moderate. This observation was based upon the fact that both samples indicated a 34% accomplishment of the goal of a market-driven economy within three years. In summary, the proposed mathematical model appears to be a good representation of an economy in transition in general, and of the Russian economy in particular.