Twenty years ago, the self-proclaimed State Committee for the State of Emergency (GKChP) attempted to seize power in the Soviet Union. The August Putsch, as it came to be known, led to the final demise of the Soviet Union and the beginning of rapid market changes in post-Soviet Russia.
RIA Novosti asked experts to evaluate the results of the 20 years of economic reforms in Russia since, in order to understand whether there was any alternative to the economic course pursued since the coup attempt in distant 1991.
Liberal, left-wing, and conservative experts have shared their views with us.
However, for all the differences in their views, the experts agree that the end of the Soviet era with its planned economy was a historical inevitability.
Ruslan Grinberg, Director of the Russian Academy of Sciences’ Institute of Economics
I think there was no alternative because a normal economy is synonymous with a market economy. But the devil is in the details. There were two approaches that we could have taken to the transition to a market economy. The first involved controlled reform and a controlled systemic transformation. But the second approach, based on adventurism, is the one that ultimately prevailed. Its motto was: Let’s go into battle and see what happens. “Advanced” people thought that freedom would magically produce bread, but this was an illusion.
Many of our reformers are profoundly influenced by a right-wing liberal ideology that is now being heavily criticized in connection with the global economic crisis and the absolutely unprecedented economic inequality in the world.
We could have taken a gradualist approach. We could have started building capitalism without touching the resource-producing industries. This would have afforded us revenue that we could have spent on industrial policy, which has been neglected for a long time. However, at that time there were unfounded fears that the Communists would take revenge and retake power unless billions of dollars in assets were given away to private owners immediately for next to nothing. In reality, nobody thought of revenge and return to the old system.
Now we have market economy, with more or less functioning market institutions, but the price of the reforms has been huge.
Our first defeat is the primitive condition of our economic structure. In the past we were losing the scientific and technological competition with the West, but now we are losing it to the East as well. The second defeat is the scandalous economic inequality in Russia. As a result, we don’t have a unified nation and we have essentially no ability to make a social contract. I call it “anarcho-feudal capitalism.” Our third defeat is institutional – the bureaucracy has essentially won out over the law.
I think the balance is negative. Our position leaves much to be desired, because our prosperity entirely depends on the price of a barrel of oil, which is a dangerous, shameful and unsustainable. We must pursue serious economic diversification, and for that we need massive government investment.
Needless to say, this could cause inflation, or the money could be spent irrationally, to put it mildly, but we must take risks, develop production and perhaps close our markets temporarily in order to develop the commercial manufacture of high-tech products. Much has been said on this score but little done.
Boris Kagarlitsky, director of the Institute of Globalization and Social Movements
Everything was preordained even before perestroika. Without realizing it, Brezhnev set the country down its current path of development in the mid-1970s by reorienting the Soviet economy toward oil exports. Everything else is trivial compared to this transformation.
It would be incorrect to ask whether economic policy is right or wrong. The answer depends on whose interests are served by a certain economic policy. In the eyes of the beneficiaries, everything was done correctly – they achieved their set goals. The beneficiaries included most of the Soviet party and economic bureaucracy, which transformed itself into a bureaucratic bourgeoisie. The transition to capitalism was necessary to allow this part of bureaucracy to live even better.
Market reforms were a disaster for those who found themselves at the bottom of the social ladder, but their opinion does not count for much because they don’t burn, break or explode anything. As long as Russia’s lower strata try to live as they did under Communists (obeying the government and waiting patiently to get what they are entitled to), living standards will continue to deteriorate. To live like the Brits, it is necessary to behave like the Brits. We have become a peripheral country, like Bolivia and Algeria. We are consistently moving from Europe towards Asia and Africa. The European-style consumption of the Russian middle class is based not on European economic efficiency but on the remnants of Soviet economic potential – industrial facilities, technology, etc. As soon as these resources are exhausted – and the end is near – the middle class will collapse. This will be the end of the era in which we now live.
Yevgeny Yasin, research director at the National Research University Higher School of Economics
I don’t think we had much of choice in 1991-1992, because the crisis was mounting and it was necessary to make the necessary (in a sense, the only possible) decisions. Russia had to transition to a market economy and that’s what was done.
People have said that the market reforms should have been carried out slowly rather than quickly. But that ship has long since sailed. It’s easy to make assumptions about the past now, but a slow, gradualist approach was not possible. I’m convinced that Yegor Gaidar has carried out the 500 Days program with certain adjustments made in response to the conditions on the ground at the time. All qualified, professional proposals at that time boiled down to one and the same thing, and that’s what was done.
There is cause to claim that we succeeded and created a market economy that ensures the development of society. However, there was no need to curtail democratic institutions starting in 2001-2003. The existing political system is already impeding economic development and may become even a more serious impediment in the future.
Now we must carry out serious institutional reforms to enhance trust between the business community, the government and society. This will increase business activity and civil initiatives in the country. Business activity will boost economic growth and civil initiatives will eradicate the unacceptable abuses of money, power, etc.
The gap between the rich and the poor is also a very serious problem. Up to 60% of the population have either gained nothing or lost from the reforms. We must resolve this problem while bearing in mind that it is very important to increase the incomes of the less well-off, especially public sector employees.
Vladislav Inozemtsev, director of the Center for Post-Industrial Studies and editor-in-chief of the magazine Svobodnaya Mysl (Free Thought)
The Soviet Union’s planned economy was so clunky, so incapable of self-sustained development and overburdened with military spending that it was practically impossible to maintain. However, during the Soviet stage of reforms, in 1987 and 1988, the leadership made the absolutely wrong decision to divide the economy into commercial and non-profit sectors. China, for one, has chosen a different road – instead of dividing up the economy, it encouraged the formation of new enterprises and production capacity in agriculture and industry, and this is what promoted economic growth.
Our development was also impeded by a number of mistakes, privatization being the biggest. New owners received valuable industrial assets for next to nothing. As a result, large investment became unprofitable. It became pointless to create anything new, build new enterprises, buy new technology abroad, etc. Why invest billions of dollars into production when it is possible to use free assets and earn profits from an oil refinery purchased at a loans-for-shares auction?
You don’t have any motivation to modernize production and potential competitors do not want to enter the market because they will be less competitive than you.
China’s policy was more logical – they left large enterprises in government hands and created as many opportunities as possible for investment in new production. This is why China’s economic growth was undergirded not by the steel or automobile industries but by light industry – textiles, toys, telecommunication equipment, cellphones, and other new industries.
It goes without saying that we have produced a very lop-sided economy, but it is no longer Soviet and is largely based on market principles. It will be much easier to reform it now and the impact of the reforms may be much greater than anything that might have been done in the late 1980s and early 1990s.
The views expressed in this article are the author’s and may not necessarily represent those of RIA Novosti.