The New Russia: The Trauma of Transition from Communism
(Perry 478-80)
 
The collapse of communist power led to attempts at constructing not only Western-style democracy but also free markets. Socialist regimes throughout the Eastern Bloc had earlier experimented with limited private enterprise, achieving notable success in some cases, e.g., Hungary and East Germany. Now, however, post-communist governments undertook "shock therapy," the wholesale marketization and privatization of their economic infrastructure often at the urging of Western academics and consultants. The results, at best, were mixed. In general, the countries of Eastern Europe negotiated the transition more smoothly than post-Soviet Russia, where a Stalinist command economy had been firmly entrenched for well over half a century. In particular, the return of state property to private ownership in Russia turned out to he disappointingly counterproductive; the chief beneficiaries of the changeover were the same elites that had controlled the economy during the Soviet era. In addition, the introduction of a market economy sometimes seemed only to replace socialism's benefits with capitalism's ills. Fixed prices and guaranteed welfare gave way to ruinous inflation and hand-to-mouth subsistence. A new middle class was in the making, but many of its members had amassed their wealth by questionable means, sometimes by criminal methods. In sum, the achievement of economic security, no less than the attainment of participatory democracy, was likely to be a long and painful process.

 

Georgi Arbatov, "The Negative Consequences of 'Shock Therapy' Captialism" (1997)

In the following selection, Russian economist Giorgi Arbatuv discusses the negative consequences of the "shock therapy program" launched in 1992 "to inject laissez-faire capitalism immediately into the Russian economy."

The economic system created by the Soviet Union, and inherited by Russia, was inefficient
and wasteful. It was unable to provide proper economic development of the country and a
decent standard of living for its citizens. By the time Boris Yeltsin took charge, the problems with the "administrative command" system were quite obvious and the main subject of political debate.

Different groups of economists prepared possible programs that were openly debated. But the country was taken by surprise by the "Chicago School" program prepared by Yegor Gaidar, and approved in haste by President Yeltsin. On January 2, 1992, Gaidar launched the shock therapy program to inject laissez—faire capitalism immediately into the Russian economy. The West cheered, perhaps for ideological reasons. Influential Western experts ... all gave their blessings....

The poorly conceived transition program resulted in an unprecedented decline of the national economy. By 1998 Russian GDP was only about one-half its 1990 level, with the crisis spread to virtually all areas of production. Russian industry found itself unable to compete even in its own domestic markets. All of this was accompanied by a sharp reduction in investment and a disintegration of scientific and technological potential. We are now witnessing processes of pauperization and deintellectualization, accompanied by criminalization, as Russia increasingly takes on the appearance of a Third World republic.

The standard of living of most Russians has decreased dramatically. Rampant inflation has eliminated the savings of much of the population, while the increase of salaries and pension has lagged far behind the price rises. The mortality rate has grown, and the birthrate has plummeted. As a result, Russia has been losing more than one-half million in population each year.

The sharp decline in the standard of living of the overwhelming majority is not only expressed in the obvious fact that diet, health, and elementary conditions of life have become worse for millions of people, but also in the loss of social benefits. The customary summer camp for all children has now become an unusual luxury. Few can still afford to vacation at a resort, be it a most modest one Such previously ex-pected amenities have become unaffordable because of large increases in railway and airplane ticket prices, making it hardly feasible to visit relatives. People who settled in the Far North or Far Fast have become "hostages" of these distant places. Because of high tariffs on long-distance telephone calls, for many the usual means of communication with relatives and friends has become a rare luxury.

Life has become especially hard for the millions of people who are dependent on pensions, many of whom now live in impoverished conditions. Their savings were practically eliminated by inflation, and the level of pensions is below the minimum necessary, even by the official calculations for bare survival. Their situation is aggravated by the tremendous increase in the prices of medicines and the lower quality and reduced availability of subsidized health care. In addition, there is a traditionally Russian concern: when you die who will bury you and with what money?

Though the sheer fact of being young makes life look not so hopeless, the situation of Russian youth is also very difficult. Education has deteriorated drastically. Higher education is not free anymore and is unaffordable for many. Even more serious are the problems of unemployment and the financial difficulty that a young family has in getting a house and raising children.

Russians now have less access to culture, books and magazines, museums, libraries, arts, theatres, and music. During the past five years, the overall number of published books fell by 65 percent, circulation of newspapers by 80 percent, and the number of copies of published magazines by over 90 percent. Theater tickets, music concerts, CDs, and traditional records have also become unavailable for the majority. The futures of many theaters, music schools, and the large national libraries are in question.
Faced with overwhelming difficulties and misfortunes, ordinary people have become helpless.

Government agencies, which in the past cared about them, at least to a minimal degree, disappeared or continued in name only with the decline of the state and its power. The old pseudo trade unions, which represented the state, also disappeared. New ones have just started to be organized. As a result, only spontaneous protests are possible against extreme circumstances such as long overdue payment of salaries.

The way of life for ordinary Russians has deteriorated remarkably. The majority are fully immersed in the day-to-day fight for survival. This is now the major subject that people think and talk about. Friends and colleagues meet each other less frequently and rarely travel. Staying at home is also encouraged by the unprecedented rise in crime, which has made big cities and many of the smaller towns dangerous places.... Today most people have little hope for improvement. ..

In a time span of five years, especially during a period of sharp economic decline, it is difficult for a person to prosper in an honest way. There is a practically unanimous belief, to a large degree correct, that the country is being robbed of its wealth. The increasingly obvious growth of crime and corruption have been practically accepted as an inevitable fact of life by the government, which appears to do little to fight back.