Russia’s
Transition Crisis
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Yeltsin with Clinton at Camp David:
http://www.youtube.com/watch?v=vHfbp
L0NDmw
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Aug. 1991: the August Coup
Dec. 1991: Belovezhye Agreement abolishes USSR
Jan. 1992: Shock Therapy begins
Sept.-Oct. 1993: Yeltsin’s coup
Dec. 1993: Duma election and referendum of the new
constitution
1994-96: the first war in Chechnya
Mar. 1996: Yeltsin re-elected as President
Aug. 1998: Russia defaults on its loans
Aug. 1999: Putin appointed Prime Minister, start of the
second war in Chechnya, Yeltsin resigns, Putin becomes
Acting President
Mar. 2000: Putin is elected President
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1991-93
Open clash between pro-capitalist and pro-Soviet elites
Pro-Soviets lose because they resort to a coup
Democratic resistance empowers pro-capitalists
USSR is dissolved by pro-capitalist elites to remove
obstacles to capitalist transition
Transition to capitalism is effected
The cost and pain of transition generates opposition
Democracy becomes an obstacle to transition
Yeltsin turns to authoritarianism
How transition to capitalism affects society:
Accumulation of capital
Unemployment and poverty
Dismantling of the welfare state
Zero-sum struggles for survival
Political options for post-communist countries:
1.
--Liberal democracy (elections, rule of law, accountable
government)
--Reform authoritarianism
--Reliance on external forces (Western loans and
investments, joining NATO, EU)
--Alternative reform strategies based on democratic
principles
If society accepts capitalism as a normal way of life, such a
society is better prepared to cope with the transition crisis
If society is not familiar with capitalism, it tends to reject the
changes
In the first case, democracy aids in the transition
In the second case, it may prevent it
Which factors account for success in transition from state
socialism to capitalism?
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1. ACCEPTANCE OF CAPITALISM AS A NORMAL
SYSTEM
Historical experience with capitalism
Poland, Czech Republic, Hungary, Slovenia – elements of
capitalism in the economy were present to a higher degree
Russia, Ukraine, Belarus, Romania, Bulgaria, Central Asian
countries – market institutions were almost non-existent
So, it was a case of restoration of capitalism, rather than a
re-invention of capitalism
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2. SOCIETY’S POTENTIAL TO INFLUENCE THE
COURSE OF TRANSITION
The strength of civil society
The stronger the civil society, the more the reform
strategies have to take into account citizen reactions to the
transition
As a result, the transition process is relatively less costly
Since the transition costs fall most heavily on the majority of
society, the ability of citizens to defend their interests
presents challenges to the transition
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3. ETHNOPOLITICS
Multiethnic societies
 Patterns of and results of transition vary between
different ethnic groups
 Competition easily acquires ethnic connotations
 Ethnopolitical mobilization leads to conflict
Monoethnic societies
 Similarity of patterns
 Competition not ethnically coloured
 Ethnopolitical mobilization may shore up stability
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Success is most likely:
 In a country with:
embedded market institutions,
 a strong civil society,
 not significantly divided along cultural-ethnic lines
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Failure is most likely:
 In a country with:
embryonic market institutions,
 weak civil society,
 ethnically divided
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Most post-communist countries are somewhere between
these two extremes
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‘‘What emerged after the defeat of communism was the
ethos of competition, the ethos of getting wealthy…
Economic evolution pushed our countries toward…
heartless market economy… a rat race, and money became
the only measure of the value… of life’s success’’
Adam Michnik, leader of Poland’s Solidarity movement,
1999
Russia’s Great Depression
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1991-96:
 GDP - fell by 45%
 Industrial output – fell by 49%
 Agricultural output – fell by 32%
1991-1999:
Textile, leather and fur, and footwear industries:
 Output fell by nearly 10 times,
Garment industry - by 5 times,
Meat and dairy industries - by 3 times.
The share of high-tech products in GDP fell
 from 45.3 to 25 percent of the GDP.
In 2000, labour productivity in Russia was 5 times lower than in the
United States
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Dying for Growth: Global Inequality and the Health of the Poor: Jim Yong Kim,
Joyce V. Millen, Alec Irwin and John Gershman (Eds.), Common Courage
Press, Monroe, 2000
Facts and Figures: Raw Materials Exporter. - Ekonomika i zhizn, No. 43, 2000
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The social impact:
 A double blow to the livelihoods of most Russians:
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a decline in their incomes and savings
a drastic reduction of social services for which they depended
on the state.
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In 1999, the incomes of over 40% of the population (60
million people) were below the official subsistence level of
1,138 roubles a month, which was the equivalent of about
US$40.[i]
The official (government-determined) minimum wage in
2000 was 132 roubles (US$ 4,74) a month.[ii]
The average monthly salary was 2,403 roubles (US$86).[iii]
About half of all families with one child lived below the
subsistence level.
In 75% of families with three children, each family member
had less than a dollar a day to live on.[iv]
[i] Izvestia, 4.07.2000.
[ii] Moscow Times, 18.10.2000
[iii] AFP, 31.10.2000
[iv] Moscow Times, 18.10.2000
[v] VCIOM, Press-vypusk 3.03. 2000
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Countries compared by per capita income:
http://www.indexmundi.com/g/r.aspx?v=67
Social inequality
 In the last years of the Soviet Union, the gap between the
rich and poor was estimated to be 4:1.
 It is usually assumed that if the gap grows beyond 10:1,
society becomes unstable.
 In 1999, the gap in Russia was 15:1, according to official
statistics.
 According to the estimates of the Institute of Socioeconomic
Problems of the Population of the Russian Academy of
Sciences, the actual gap was much wider:
 Total income of the 10% richest households was 44 times
higher than that of the poorest 10%.[ii]
 [i] Izvestia, 4.07.2000
 [ii] Moscow Times, 18.10.2000.
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The world’s billionaires, 2011, Forbes Magazine:
http://www.forbes.com/billionaires/list/
Total – 1,210
US – 412
Russia – 101
China – 95
India – 55
Germany – 52
Brazil – 40
Turkey – 38
Hong Kong – 36
UK – 33
The Wealth Report, 2012:
http://www.thewealthreport.net/The-Wealth-Report2012.pdf
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Making them immortal:
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http://www.dailymail.co.uk/sciencetech/article-2175374/Russianresearch-project-offers-immortality-billionaires--transplanting-brainsrobot-bodies.html
Former Russian billionaire No.1 – Mikhail Khodorkovsky
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Khodorkovsky’ letter from jail, 2004:
“Russian liberalism has suffered a defeat because it
ignored two things: first, some key elements of Russia’s
historical experience, second, vital interests of the
overwhelming majority of the Russian people. And it was
mortally afraid of telling the truth.
I do not want to say that Russia’s liberal leaders set it as
their goal to deceive the people. Many of the liberals who
came to power with Yeltsin were convinced that liberalism
offered the only right solution for Russia, and that a “liberal
revolution” was needed in this exhausted country which had
historically tasted so little freedom. But they understood this
revolution in a very peculiar, elitist way. They cared about
the conditions of life and work of those 10% of Russians
who were ready to embrace decisive social change and to
abandon government paternalism. But they forgot about the
90%. And they covered up their failures with lies.
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…They deceived most Russians about privatization. They
gave everyone a privatization voucher, promising that at
some point, one would be able to buy two cars with it. Well,
if you were an enterprising financial dealer with access to
insider information and the brains to analyze it, you would
probably be able to buy ten cars with your voucher. But the
promise was given to everyone. They closed their eyes to
the social realities of Russia, as they carried out
privatization. Ignoring the social costs of it, they called it
painless, honest and fair. But we do know what the people
think of this privatization.
…No fundamental reformation of society is possible without
social stability and social peace. But the Russian liberals
chose to disregard it and created a chasm between
themselves and the people. And they used the informationbureaucratic pump of PR technologies to fill the chasm with
liberal myths…”
“Vedomosti”, March 29, 2004
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Death of a Nation
http://www.youtube.com/watch?v=J1OyI
Jtjdpo
Consequences for democratic development…
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Who needs democracy – and for what ends?
The Russian experiment with democracy, started in 1985,
was driven by elite perceptions of the efficiency of
democratic political systems compared to authoritarian
systems
It was expected to save and revive the Soviet system
When democratic practices began to threaten the Soviet
system, there was an attempt to suspend it – The August
1991 coup
After the attempt failed, democracy was used as the most
effective way of destroying that system
Democracy was a potent weapon against communist rule
and the Soviet state
Democracy did help accomplish the demolition mission
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What about the mission of construction?
How useful has democracy been as a tool to build a
capitalist political economy?
It did help accomplish:
 The shift to market economy and private ownership
 Partial legitimization of capitalism
 Partial integration with the West
Accomplishing even those tasks did considerable damage
to democratic governance
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Consolidation of capitalism?
 A capitalist political economy capable of reproducing
and sustaining itself in the context of globalization
 Productivity and competitiveness
 A functional state
 Improvement of socioeconomic conditions
 Social and political stability
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How does political democracy relate to these tasks?
In general, democratic capitalism works better than
authoritarian capitalism
In the long run:
A normative liberal democracy would probably suit Russia
best
But what about the short run?
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In the short run, there is a deep and acute conflict between
the requirements of democratic development and the tasks
of capitalist consolidation
Democracy became an obstacle to consolidation of
capitalism, a mortal threat to the preservation of Russia’s
post-communist regime
The only way that regime could survive the social upheaval
of the 1990s was through subverting and limiting
democratic practices in Russia