Reform for Russia

By Nemtsov, Boris | Harvard International Review, Summer 2000 | Go to article overview

Reform for Russia


Nemtsov, Boris, Harvard International Review


Forging a New Domestic Policy

How has Russian arrived where it is today? In what direction is it headed? To answer the first question, we must return to where change began. Mikhail Gorbachev half-hearted reforms of the 1980s opened the way for further democratization and led to improved relations with the developed countries of the world, but they also led to economic chaos. It is easy to overrate Gorbachev's political reforms and forget the ensuing economic troubles.

Nevertheless, the steps toward political maturity made since Gorbachev's time have been dramatic. In mid-1991, at the time of the Russian Federation's first free presidential elections, only two parties were legally registered in the Soviet Union: the Communist Party of the Soviet Union (CPSU) and Vladimir Zhirinovsky's Liberal Democratic Party (LDP, later transformed into the Liberal Democratic Party of Russia, or LDPR). The latter was perceived by the party nomenklatura as a lackey opposition. The electoral system in place during the legislative elections in the USSR and the RSFSR (the Russian Soviet Federated Socialist Republic) was not democratic. Not only was pluralism absent, but the deputies from civic organizations granted seats in the Soviet parliament as a democratic measure under perestroika were nonetheless co-opted by the CPSU line. A free press already existed, but as before, the government owned Russia's main newspapers. Public demonstrations were restricted, and government TV stations were pl agued by censorship.

The economic situation was extremely grave. The consolidated government budget deficit for 1991 reached 30 percent, and hyperinflation loomed large. Besides increasing the state's foreign debt, the government was also taking over the monetary assets of citizens and enterprises that had always been held in Sherbank (the Soviet Union's lone savings institution) and Vnesheconombank (the Soviet foreign-exchange agent). In the cities, people stood in line for hours to buy sugar, soap, cigarettes, and vodka. Setting up legitimate businesses through administrative channels was a bureaucratic nightmare; authorization to engage in export-import operations could be obtained only through case-by-case decisions by the cabinet, and licenses to open banks were also contingent on case-by-case decisions by the State Bank of the USSR (the Soviet Union's central bank). The penal code of the Russian republic contained articles that penalized private entrepreneurship, "speculation," (in this case, simply normal private-trade tr ansactions) and currency operations. At the same time, whole ministries and enterprises were being privatized for free or for just kopecks. Their directors simply obtained formerly public property for themselves through juridical machinations.

Cause for "Moderate Optimism"

Where is Russia now, a decade later? A full-fledged democratic system functions. Though this does not mean that only deserving individuals are in power, the people have at least been able to elect their leaders. A multi-party system has developed, and the press enjoys fundamental freedoms. Russia has a constitution built on the basic values of the civilized world that posits the supremacy of human rights and guarantees property rights, separation of powers, and civil liberties. Yes, our constitutional space does have a bleeding wound-- Chechnya, where laws have ceased to function. But we must be honest--war alters normal civic conditions. And this time, it was the Chechen extremists who started the war by attacking Russian territory in pursuit of plunder.

The foundation of a market economy has also been built in Russia. Prices are freely determined, the ruble has become a convertible currency, and banks can open and engage in foreign-trade operations without individual permission from the government. Privatization has taken place--a lion's share of Russia's GDP is now produced by the private sector. The labor market has also changed. …

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