As a chess player, I read with extra interest the article “What is Garry Kasparov’s Next Move? The great chess champion brings his knowledge to the games of Sochi, global politics and computer intelligence” by Ron Rosenbaum, Smithsonian Magazine, March 2014.
Kasparov, as you may recall, was world chess champion from 1985 to 2000, became active in Russian politics, and ran (till he was eliminated on a technicality) against Vladimir Putin in 2007.
The Smithsonian article summarize–probably reflecting Kasparov’s view–the transition from communism to democracy to oligarchy as follows:
After a coterie of Harvard-based economic advisers helped engineer the privatizing of Russian state assets in the 1990s to the profit of corrupt oligarchs, the consequent immiseration of the Russian people led to Putin’s rise to power. And that led to Putin’s ongoing attempt to recoup what had been lost—seeking to recapture the states that had separated themselves from the Soviet empire, and to crush democracy within Russia.
The dates are easy to remember: after the Soviet Union collapsed, Boris Yeltsin became the Russian leader in 1990 and Putin in 2000.
Yeltsin’s guiding principle was to turn a communist country into a capitalist one as fast as possible. As is usually the case with sudden social change imposed from above and outside (that’s for Yeltsin’s Western advisers), disaster ensued. As described in the Wikipedia article on Boris Yeltsin:
In early 1992, prices skyrocketed throughout Russia, and a deep credit crunch shut down many industries and brought about a protracted depression. The reforms devastated the living standards of much of the population, especially the groups dependent on Soviet-era state subsidies and welfare entitlement programs. Through the 1990s, Russia’s GDP fell by 50 percent, vast sectors of the economy were wiped out, inequality and unemployment grew dramatically, while incomes fell. Hyperinflation, caused by the Central Bank of Russia’s loose monetary policy, wiped out a lot of personal savings, and tens of millions of Russians were plunged into poverty.
Might there be some lessons there for the rest of us, concerning “austerity,” the abolition of social programs, and the privatization of public resources (think: gas drilling in public parks, charterization and voucherization of public schools, and outsourcing of government functions–as in the Obamacare websites)?
Following the dissolution of the Soviet Union, Yeltsin promoted privatization as a way of spreading ownership of shares in former state enterprises as widely as possible to create political support for his economic reforms. In the West, privatization was viewed as the key to the transition from Communism in Eastern Europe, ensuring a quick dismantling of the Soviet-era command economy to make way for ‘free market reforms.’ In the early 1990s, Anatoly Chubais, Yeltsin’s deputy for economic policy, emerged as a leading advocate of privatization in Russia.
In late 1992, Yeltsin launched a program of free vouchers as a way to give mass privatization a jump-start. Under the program, all Russian citizens were issued vouchers, each with a nominal value of around 10,000 rubles, for purchase of shares of select state enterprises. Although each citizen initially received a voucher of equal face value, within months most of them converged in the hands of intermediaries who were ready to buy them for cash right away.
In 1995, as Yeltsin struggled to finance Russia’s growing foreign debt and gain support from the Russian business elite for his bid in the early-1996 presidential elections, the Russian president prepared for a new wave of privatization offering stock shares in some of Russia’s most valuable state enterprises in exchange for bank loans. The program was promoted as a way of simultaneously speeding up privatization and ensuring the government a much-needed infusion of cash for its operating needs.
However, the deals were effectively giveaways of valuable state assets to a small group of tycoons in finance, industry, energy, telecommunications, and the media who came to be known as “oligarchs” in the mid-1990s. This was due to the fact that ordinary people sold their vouchers for cash. The vouchers were bought out by a small group of investors. By mid-1996, substantial ownership shares over major firms were acquired at very low prices by a handful of people.
In the absence of strong supervision and controls, that’s the tendency of capitalism: concentration of resources. We’ve seen it before in this country in the late-19th-century Robber Barons, and we’re seeing it again in their early-21st-century descendants.
And the next step? No, it doesn’t seem to be, despite Karl Marx, increasing class consciousness, international solidarity, the revolution of the people, the dictatorship of the proletariat, and an eventual workers’ utopia.
Let Putin and the Russian oligarchs be a warning to us! When whole groups of people are left out, social unrest ensues. See “Yeltsin’s economic legacy” by Alexander Koliandre, BBC News, Moscow, 24 April 2007:
Those who were unable to adapt quickly suffered. In particular, those employed by the state – including teachers, doctors, professors and policemen – learned to hate the “new Russians” who were flocking to the newly-opened restaurants, night clubs and casinos.
And how about that “coterie of Harvard-based economic advisers” whose advice brought about the collapse of the Russian economy and the consequent rise of Putin? You guessed it, that would be the work of Lawrence Summers, when he worked at the US Treasury Department (he didn’t become Secretary of the Treasury until 1999). Per Wikipedia:
Summers set up a project through which the Harvard Institute for International Development provided advice to the Russian government between 1992 and 1997. Later there was a scandal when it emerged that some of the Harvard project members had invested in Russia, and were therefore not impartial advisors. Summers encouraged then-Russian leader Boris Yeltsin to use the same “three-‘ations'” of policy he advocated in the Clinton Administration– “privatization, stabilization, and liberalization.”
Well, at least we can be thankful that Summers did not get another chance to implement his philosophy in our country, since he had to give up his bid to become Federal Reserve chairman in 2013.