Armageddon Averted The Soviet Collapse, 1970-2000 by Stephen Kotkin

Author:Stephen Kotkin [Kotkin, Stephen]
Language: eng
Format: epub
Published: 0101-01-01T00:00:00+00:00

escape the cul-de-sac whereby state socialism empowered a

sclerotic bureaucracy while ‘market socialism’ proved dif-

ficult to realize in practice. As of November 1991, how-

ever, when Boris Yeltsin tapped the academic to head the

Russian government, all that was moot. ‘We were in a situ-

ation’, Gaidar later admitted, ‘where theory was

powerless’. 4

In 1991 the budget deficit would exceed 20 per cent of

118

survival and cannibalism in the rust belt

estimated GDP, and 1992 threatened to be worse (it was).

Soviet gold reserves and foreign currency accounts had

disappeared, never to be found. Soviet foreign debt had

ballooned to $56.5 billion, and creditors were demanding

that the successor states assume full responsibility. Only

Russia did so—the price extracted for the Soviet seat on

the UN Security Council—assuming a formidable burden

at a time when the rouble was undergoing steep devalu-

ation. 5 Russian industry was in free fall, caught between plan and market and politically severed from suppliers and

customers in Eastern Europe as well as the other Union

republics. The officially measured economy declined 6 per

cent in 1990 and an annualized 17 per cent through the

first three-quarters of 1991. (In the worst year of the Great

Depression in the US, 1929–30, the drop was 9 per cent.)

Inflation at the end of 1991 was estimated at 250 per

cent—per month. Enterprises refused payments in

roubles, insisting instead on foodstuffs, vodka, or televi-

sions, especially of foreign origin, which could be distrib-

uted to workers in lieu of money wages. Shops were

emptier than at any time since the famine years immedi-

ately after the Second World War. Before Gaidar had lifted

a finger, Russia was utterly broke and in chaos.

He and his team—a mix of arrogant Young Turk

‘economists’, mediocre political operatives from Yeltsin’s

hometown, and old-hand former Soviet ministers—hoped

to impose monetary stabilization through fiscal discipline,

while also crushing the remnants of the planning system

and clearing a path for market behaviour. The Russian

119

survival and cannibalism in the rust belt

programme was advertised as ‘shock therapy’, on the

example of 1990 Poland and 1970s Chile, by the Inter-

national Monetary Fund, which was unhurriedly negotiat-

ing a large dollar loan to support Russia’s ‘transition’, and

by a handful of self-promoting foreign advisers. But the

idea of de-statization and painful belt tightening as the

path from socialism to the market derived not from for-

eign models but from Russia’s dire circumstances and

Soviet-era conceptions about the market being the oppos-

ite of the planned economy. Gaidar, in any case, violated

shock therapy, conceding that some prices, such as those

for bread and milk, would remain regulated, to protect

the population. Others in government insisted that liber-

alization of energy and fuel prices be ‘delayed’, to ‘pro-

tect’ Russian industry and enable the country to survive

the winter, and Gaidar acceded to the pressure.

On 2 January 1992 Russia ended most but far from all

Soviet-era administered prices in what was dubbed ‘a sin-

gle leap across the abyss’. Overnight, private trade ceased

to be the crime of ‘speculation’, and the country was soon

transformed into a bustling bazaar of buyers and sellers on

street corners. People who bought what turned out to be

unusable goods had no recourse, but shop queues disap-

peared and the goods famine was overcome. Monetary

stabilization, however, proved elusive.

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