The firms of middle India

Create conditions for companies to stay in and fight

In 1989, when the USSR first opened up to international trade, this was a crisis for Soviet firms. These firms were controlled by the government, and they were the creatures of bureaucratic planning and not a market process. Thousands of firms and factories closed down.

A nice intuition into the consequences of such a large economy-wide shock is to think of a bombing campaign. Suppose an enemy air force had wandered around the Soviet Union, destroying factories. This would be an adverse shock to the capital stock of the Soviet Union. Gross domestic product (GDP) is made from labour (“L”) and