Shock therapist shines light on ussr

A former prime minister under Boris Yeltsin skates over the painful transition to a capitalist economy following the collapse of the Soviet Union. But his analysis is both compelling and lucid.

Yegor Gaidar is known for having overseen some of Russia’s most striking and momentous market reforms during the chaotic period of the collapse of the Union of Soviet Socialist Republics (USSR) in the early 1990s. As prime minister under Boris Yeltsin, Gaidar was instrumental in instituting the policy of “shock therapy”, opening up the former Soviet state to a global free market economy. His insights into the reasons for the implosion of the USSR in this book, based both on personal experience at the highest level of government as well as the full use of his access to the Soviet archives, have been exhaustively researched and carefully analysed. However, I still find it hard to agree with him at times.

Gaidar’s intention in writing this latest work is not simply to demonstrate the inevitability of the failure of the Soviet system, but to dispel the notion “of a flourishing and mighty country destroyed by foreign enemies”. The author argues that the prevalence of this view across Russian society today is the main stumbling block to the social progression of Russia and its interaction with the global community. For him the answer is simple. The USSR fell because the establishment failed to deal with its most serious internal threat: bankruptcy.

The book deals initially with the more abstract problems of imperialism, including ethnic divisions and the inflexibility of authoritarian government. Gaidar draws interesting parallels between the internal divisions in the former Yugoslavia and the Soviet Union, where the economic collapse of 1989-90 stirred up nationalistic feeling and led to the breaking up of the state along ethnically defined lines. In the case of the USSR these ethnic grievances were compounded, he argues, by the inefficiency of Soviet authoritarian government, which by the 1980s had lost the ideological force that brought about its creation and became a victim of its own liberalising agenda through the policy of “glasnost”. As Gaidar says: “Development undermines the foundations of undemocratic political systems.”

These more abstract musings, however, are merely setting the scene as the author turns his attention exclusively to the flaws of the Soviet economic model and the circumstances that led to their revelation. To make his argument he uses material from the Soviet archives detailing some remarkable statistics. According to the records, in the period between 1907-13 Russia exported on average 45% of its grain production. By 1980-1990 the USSR had to import 16.4% of its grain as agricultural output steadily declined. The cost of these imports placed strains on the country’s struggling economy that relied on the sale of natural resources to offset the cost.

The information he uses is all the more intriguing because the level of access to the archives he enjoys has since been restricted by the current regime in Russia. This is an unsurprising development for Gaidar who points out that it was President Vladimir Putin who called the collapse of the USSR “the greatest geopolitical catastrophe of the century”.

Gaidar deftly draws together his statistical analysis with political commentary to demonstrate how the sharp fall in oil prices during the 1980s pushed the inflexible socialist economic system to its breaking point. As the economic situation deteriorated the government was forced into compromising with the West to secure financial aid. The political and economic liberalisation that followed “provided public access to information about the treacherous regime and how it was formed, [and] undermined what remained of the Soviet Union’s legitimacy.”

The author highlights the failed coup in August 1991, two months after Mikhail Gorbachev, the last General Secretary of the Communist Party, signed a document outlining the dissolution of the Soviet Union, as the death throes of the failed regime. Officers of the KGB, the army and the Interior Ministry aimed to seize control of the White House, which housed the Russian Soviet Federative Socialist Republic’s Congress of People’s Deputies and the Supreme Soviet. The attack never took place as none of the organisations involved were willing to risk a military response that would cause heavy civilian casualties. On December 25 the Soviet Union was officially dismantled and its satellite states gained independence.

Despite the framework having been put in place for the discussion, the former prime minister deals little with his own term in office. Instead he jumps straight to the Putin era in his Afterword, leaving the years between 1991 and 2000 ignored. The omission is suggestive of the old axiom that what an author does not say is just as illuminating as what he does.

It is revealing that he concedes in his introduction: “we had assumed that overcoming the transitional recession and the beginning of economic growth and an increase in real income for the population would allow people to replace the impossible dreams of empire restoration with the prosaic cares of personal well-being. We were mistaken.”

Some historians have argued that the policies instituted under Yeltsin prompted a necessarily painful period in order to drive through the fundamental changes needed to rebuild Russia as a capitalist economy. But all agree that it was an extremely unpleasant transition. What Gaidar dismisses as a “transitional recession” describes a period of Russian history where the state reduced its involvement in public life, cutting off subsidies to industries that were non-profitable, and where inflation rose by about 300% leaving savings and pensions worthless. The newly privatised industries fell into the hands of a select few who used their enormous personal wealth as a sword of damocles hanging over the head of Yeltsin and his cash-starved government, while about 32% of the population were living below the revised official poverty line by 1993.

In these circumstances it is likely that rather than sentimentalising a time of Russian imperial grandeur, as Gaidar suggests, the Russian population in the 1990s felt less economically and socially stable than it had under communism.

The author’s analysis of the fate of the USSR, however, is as compelling as it is lucid.