The Transition to Capitalism in Russia: The Privatization Programme, Conceived and Financed by the American Government, Was Perhaps the Greatest Theft in Human History

Article excerpt


THE SOVIET UNION, and what remained of its bureaucratically planned and administered economy, fell at the end of 1991 in a "revolution from above." The transformation was led by a coalition of elements of the Soviet ruling elite (the bureaucracy or "nomenklatura"), a variety of neoliberal intellectuals, and the embryonic, still largely illicit, business class. The labour, democratic, and national movements that had arisen in response to Gorbachev's economic and political reforms lacked the experience and the independent organization that might have allowed them to develop their own programme, one that corresponded to the popular will for democracy and social justice. Nor did the international context favour that, as other "socialist" countries were embracing capitalism, while labour movements in the capitalist world were fighting a rearguard battle to defend their historical gains against capital's neoliberal offensive.

The last Soviet leader, Mikhail Gorbachev, had in fact himself opted for capitalism in 1990. But after some hesitation he rejected "shock therapy," the neoliberal strategy promoted by the World Bank and the IMF and embraced by the oppositional forces around Boris Yeltsin, a former member of the bureaucratic elite who was elected President of the Russian Republic in 1991. Gorbachev feared the socio-economic and political consequences of shock therapy and wanted a more controlled, gradual transition. But the dismantling of the USSR at the end of 1991, in which Yeltsin played a central role, cleared away that obstacle to shock therapy.

This economic strategy corresponded to the "Washington Consensus" and included deregulation, privatization, trade liberalization, budget austerity, weak social protection and restricted access to credit. The fact that the starting point was an almost completely nationalized and administered economy, one in which market forces played a negligible role, might seem to call for a cautious, gradual approach. But, in fact, speed was the essence of this strategy, whose promoters liked to repeat that one cannot cross a chasm in two leaps. Speed of execution was required to allow Yeltsin to exploit his predictably brief window of popular support in order to radically undermine the potential of popular resistance. "Greater speed means less time for discussion," explained Anders Aslund, Western advisor to the government.

The devastating effects of shock therapy

Launched in January 1992, shock therapy unleashed hyperinflation that wiped out savings and drastically reduced wages and pensions, both of which over the next several years were paid at very irregular intervals, often weeks or even months late. Moreover, they were not indexed. Mass unemployment, unknown to Russians since the late 1920s, reappeared, while social protection was less than minimal. Mortality rates soared, especially for males; birth rates plummeted. Shock therapy deepened and prolonged a depression begun in 1990: between 1990 and 1998 the GDP fell by 42.5 percent; industrial production by 55 percent; capital investment by 80 percent. Russia was transformed from an industrial giant into an exporter of natural resources.

The privatization programme, conceived and financed by the US government, was perhaps the greatest theft of human history: at the end of 1997, the estimated value of non-state enterprises, the vast majority of which had recently belonged to the state, was 7,307 billion roubles, while the state's revenues from privatization were 35 billion roubles, less than 5 percent of their value (1).

Besides the virtual moratorium on legality that accompanied privatization, shock therapy had another major impact on the political system. A few months into it, the deputies in the Supreme Soviet (Russia was at the time a parliamentary republic), stunned by the consequences of a policy they had unthinkingly approved the year before, wanted to call a halt to it. …