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Book Review
The reform journey
C. T. KURIEN
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The inside story of the dramatic unfolding of Russia’s troubled transition to a market economy
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CONVERSATIONS ON RUSSIA — Reform from Yeltsin to Putin: Padma Desai; Oxford University Press, YMCA Library Building, Jai Singh Road, New Delhi-110001. Rs. 595.
The revolutionary emergence of the Soviet Union early in the 20th century, its bold attempt to bring about an economic system radically different from the widely prevalent capitalist order, the recognition it received during and after the Second World War as a mighty military power, the emphasis it gave to education, health and housing for its citizens, its spectacular achievements in the explorations of outer space, and then its rather sudden collapse in the last decade o
f the century will arguably be among the major societal events of the tumultuous century that has gone by.
That Russia is the principal successor to the Soviet Union in the comity of nations is generally known. But beyond that Russia and the happenings there during the past decade and a half remain relatively unexplored. There may be a vague recognition that from the Soviet Union’s centrally-planned economy Russia has moved over to a market economy. What else?
Collapse of the Union
The book by Padma Desai is meant for those who wish to know more about the new Russia. The author is a professor at Columbia University and for long a specialist on the Soviet Union and its successor. It is neither a narrative nor an analysis. Desai tries to combine both through a series of interviews, between 1999 and 2005, with some of the key political and economic players in the ongoing transition — close associates of Gorbachev, Yeltsin and Putin, and former U.S. ambassadors and policy makers. Together they provide an intimate inside story, with the author’s introductory essay providing coherence and some analysis. The collapse of the Soviet Union did not happen all of a sudden and factors from within and without contributed to it. But if one person is to be held responsible for it, it was Mikhail Gorbachev who set out bravely to reform the system, but ended up paving the way for its disintegration and to be ousted by Boris Yeltsin late in 1991.
Yeltsin was audacious and felt that in the new Russian Federation that he was presiding over “the political system had to be overturned, not just changed. In place of the Soviet political system a democratic one had to emerge. The administrative command economy had to be replaced by a market economy, and freedom of speech had to replace censorship. I realized that the transition could not be painless.” But according to an independent observer, familiar with the scene, “He (Yeltsin) was certainly hungry for political power – a political animal par excellence.” According to this observer, Yeltsin brought about the formal dissolution of the Soviet Union and the establishment of the Russian Federation because that was the only way he could be President, as Gorbachev was President as long as there was a Soviet Union in name. Yeltsin (himself a member of the Soviet bureaucracy) formed an alliance between members of the bureaucracy who suddenly abandoned Communist slogans to maintain power and an intelligentsia in Russia eager to usher in a market economy to launch his “reforms”. In this task, he was ably assisted by a few American economists who continued to be firm believers in Reaganomics.
Privatisation
“Privatisation” was the creed and agenda of these new elites in power. And they came up with a brilliant idea to undo the state ownership of the Soviet era. Every man, woman, and child was given vouchers worth 10,000 roubles each (hence referred to as “voucher privatisation”) to buy up assets owned by the state. The theory behind it was that private ownership would promote economic efficiency via incentives and that the initial condition of equality would ensure fairness also. It was forgotten, or conveniently overlooked, that the vouchers available even to an entire family, would not be sufficient to buy any assets and that the bureaucrats had other resources at their command. The net result was the emergence of a powerful oligarchy who now came to own the bulk of the assets, and for the rest, a rate of inflation in 1992 estimated at 2500 per cent!
I saw something of this in Moscow during a visit in 1996. A friend had taken me to his apartment for dinner and during the conversation mentioned that the entire, huge apartment complex, till then owned by the state, and individual apartments assigned on a more or less permanent basis to different categories of owners, was “bought up” by one of the occupants who was a bureaucrat close to the new establishment. What everyone used to think of as common property became privatised overnight with one of them proclaiming to be the owner. Since salaries to academics had become erratic, my friend and his wife (a reputed artist) were managing by the sale of her paintings.
According to those who were interviewed by Desai, such difficult days and the problems that followed the currency crisis of 1998 are gone, and there is a semblance of “normal” conditions now. But most interlocutors admit that what has emerged in Russia is not a “market economy” as the expression is normally understood, but something that can be designated “bureaucratic capitalism”. According to one of them, it is characterised by “an underground economy, unreported incomes, non-payment of taxes, corruption and criminal activity” where “most people, despite extremely trying circumstances, found a modest way to survive, but not without a cost.”
Widening gap
Desai reports that during the five-year period from 2000, the Russian economy improved remarkably on several fronts, and that with a GDP growth rate averaging 6-7 per cent annually, Russia had emerged as one of the fastest growing global economies. However, monopolies dominate the economy, the level of poverty is high and the income gap is widening. According to another observer who was the first Deputy Prime Minister under Yeltsin, “poverty will remain wide-spread because the poor have no more champions to advance their cause.”
He goes on to say: “Authoritarian modernization will not eliminate the strangulating bureaucracy, corruption, and the ruthless hold of the secret service and the military brass.” That is one of the commentaries on Russia under Vladimir Putin’s presidency. And it is endorsed and elaborated by an American official who had close contacts with the Russian establishment during the Clinton administration. His assessment is: “He (Putin) has shown quite often in various ways that his instinct is, if not authoritarianism, then at least tends toward the use of muscle rather than the powers of persuasion and consensus building.” The same view is expressed by one of the Russian commentators also according to whom Putin wants a healthy market economy, but he does not believe that Russia also needs a democracy.
Desai’s account of the Russian expedition is informative and insightful. But those who do not have some acquaintance with the terrain may not find it easy to follow all the nuances.
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