Briefing: Russian political and economic performance focusing on the period of Gorbachev, last Premier of the USSR.
Breakup of the Union
Two developments dominated the decade that followed: the increasingly apparent crumbling of the Soviet Union's economic and political structures, and the patchwork attempts at reforms to reverse that process. After the rapid succession of former KGB Chief Yuri Andropov and Konstantin Chernenko, transitional figures with deep roots in Brezhnevite tradition, Mikhail Gorbachev announced perestroika in an attempt to modernize Soviet communism, and made significant changes in the party leadership. However, Gorbachev's social reforms led to unintended consequences. Because of his policy of glasnost, which facilitated public access to information after decades of government repression, social problems received wider public attention, undermining the Communist Party's authority. In the revolutions of 1989 the USSR lost its allies in Eastern Europe. Glasnost allowed ethnic and nationalist disaffection to reach the surface. Many constituent republics, especially the Baltic republics, Georgian SSR and Moldavian SSR, sought greater autonomy, which Moscow was unwilling to provide. Gorbachev's attempts at economic reform were not sufficient, and the Soviet government left intact most of the fundamental elements of communist economy. Suffering from low pricing of petroleum and natural gas, ongoing war in Afghanistan, outdated industry and pervasive corruption, the Soviet planned economy proved to be ineffective, and by 1990 the Soviet government had lost control over economic conditions. Due to price control, there were shortages of almost all products, reaching their peak in the end of 1991, when people had to stand in long lines and to be lucky enough to buy even the essentials. Control over the constituent republics was also relaxed, and they began to assert their national sovereignty over Moscow.
The tension between Soviet Union and Russian SFSR authorities came to be personified in the bitter power struggle between Gorbachev and Boris Yeltsin. Squeezed out of Union politics by Gorbachev in 1987, Yeltsin, who represented himself as a committed democrat, presented a significant opposition to Gorbachev authority. In a remarkable reversal of fortunes, he gained election as chairman of the Russian republic's new Supreme Soviet in May 1990. The following month, he secured legislation giving Russian laws priority over Soviet laws and withholding two-thirds of the budget. In the first Russian presidential election in 1991 Yeltsin became president of the Russian SFSR. At last Gorbachev attempted to restructure the Soviet Union into a less centralized state. However, on 19 August 1991, a coup against Gorbachev, conspired by senior Soviet officials, was attempted. The coup faced wide popular opposition and collapsed in three days, but disintegration of the Union became imminent. The Russian government took over most of the Soviet Union government institutions on its territory. Because of the dominant position of Russians in the Soviet Union, most gave little thought to any distinction between Russia and the Soviet Union before the late 1980s. In the Soviet Union, only Russian SFSR lacked even the paltry instruments of statehood that the other republics possessed, such as its own republic-level Communist Party branch, trade union councils, Academy of Sciences, and the like. The Communist Party of the Soviet Union was banned in Russia in 1991–1992, although no lustration has ever taken place, and many of its members became top Russian officials. However, as the Soviet government was still opposed to market reforms, the economic situation continued to deteriorate. By December 1991, the shortages had resulted in the introduction of food rationing in Moscow and Saint Petersburg for the first time since World War II. Russia received humanitarian food aid from abroad. After the Belavezha Accords, the Supreme Soviet of Russia withdrew Russia from the Soviet Union on 12 December. The Soviet Union officially ended on 25 December 1991, and the Russian Federation (formerly the Russian Soviet Federative Socialist Republic) took power on 26 December. The Russian government lifted price control on January 1992. Prices rose dramatically, but shortages disappeared.
Excerpt Wikipedia: Russian Federation (1991–present)
Main article: History of Russia (1992–present)
Although Yeltsin came to power on a wave of optimism, he never recovered his popularity after endorsing Yegor Gaidar's "shock therapy" of ending Soviet-era price controls, drastic cuts in state spending, and an open foreign trade regime in early 1992 (see Russian economic reform in the 1990s). The reforms immediately devastated the living standards of much of the population. In the 1990s Russia suffered an economic downturn that was, in some ways, more severe than the United States or Germany had undergone six decades earlier in the Great Depression. Hyperinflation hit the ruble, due to monetary overhang from the days of the planned economy.
Meanwhile, the profusion of small parties and their aversion to coherent alliances left the legislature chaotic. During 1993, Yeltsin's rift with the parliamentary leadership led to the September–October 1993 constitutional crisis. The crisis climaxed on 3 October, when Yeltsin chose a radical solution to settle his dispute with parliament: he called up tanks to shell the Russian White House, blasting out his opponents. As Yeltsin was taking the unconstitutional step of dissolving the legislature, Russia came close to a serious civil conflict. Yeltsin was then free to impose the current Russian constitution with strong presidential powers, which was approved by referendum in December 1993. The cohesion of the Russian Federation was also threatened when the republic of Chechnya attempted to break away, leading to the First and Second Chechen Wars.
Boris Nemtsov was killed on 27 February 2015 on a bridge near the Kremlin
Economic reforms also consolidated a semi-criminal oligarchy with roots in the old Soviet system. Advised by Western governments, the World Bank, and the International Monetary Fund, Russia embarked on the largest and fastest privatization that the world had ever seen in order to reform the fully nationalized Soviet economy. By mid-decade, retail, trade, services, and small industry was in private hands. Most big enterprises were acquired by their old managers, engendering a new rich (Russian tycoons) in league with criminal mafias or Western investors. That being said, there were corporate raiders such as Andrei Volgin engaged in hostile takeovers of corrupt corporations by the mid-1990s. By the mid-1990s Russia had a system of multiparty electoral politics. But it was harder to establish a representative government because of two structural problems—the struggle between president and parliament and the anarchic party system.
Meanwhile, the central government had lost control of the localities, bureaucracy, and economic fiefdoms; tax revenues had collapsed. Still in deep depression by the mid-1990s, Russia's economy was hit further by the financial crash of 1998. After the 1998 financial crisis, Yeltsin was at the end of his political career. Just hours before the first day of 2000, Yeltsin made a surprise announcement of his resignation, leaving the government in the hands of the little-known Prime Minister Vladimir Putin, a former KGB official and head of the FSB, the KGB's post-Soviet successor agency. In 2000, the new acting president defeated his opponents in the presidential election on 26 March, and won a landslide 4 years later. International observers were alarmed by late 2004 moves to further tighten the presidency's control over parliament, civil society, and regional officeholders. In 2008 Dmitri Medvedev, a former Gazprom chairman and Putin's head of staff, was elected new President of Russia. In 2012, Putin was once again elected as President.
Anti-war demonstrations took place in Moscow opposing the war in Eastern Ukraine
Russia has had difficulty attracting foreign direct investment and has experienced large capital outflows in the past several years. Russia's long-term problems also include a shrinking workforce, rampant corruption, and underinvestment in infrastructure. Nevertheless, reversion to a socialist command economy seemed almost impossible. Russia ended 2006 with its eighth straight year of growth, averaging 6.7% annually since the financial crisis of 1998. Although high oil prices and a relatively cheap ruble initially drove this growth, since 2003 consumer demand and, more recently, investment have played a significant role. Russia is well ahead of most other resource-rich countries in its economic development, with a long tradition of education, science, and industry.
Description of life in Tsarist Russia, the USSR and post Soviet Russia.
The periods of prosperity for the mass of the population from what I understand was from the 1950s as the reciovery from the second
New Economic Policy (1921–1929)
Source: Wikipedia Main article: New Economic Policy
One of the several photographs (, ) intended to show the two major economic policy makers of the USSR together, Lenin (left) who created the NEP and Stalin (right) who created the planned economy.
By early 1921 it became apparent to the Bolsheviks that forced requisitioning of grain had resulted in low agricultural production and widespread opposition. As a result, the decision was made by Lenin and the Politburo to try an alternative approach. The so-called New Economic Policy (NEP) was approved at the 10th Congress of the Russian Communist Party (Bolsheviks)
Everything except "the commanding heights", as Lenin put it, of the economy would be privatized. "The commanding heights" included foreign trade, heavy industry, communication and transport among others. In practice this limited the private sector to artisan and agricultural production/trade. The NEP encountered strong resistance within the Bolshevik party. Lenin had to persuade communist skeptics that "state capitalism" was a necessary step in achieving communism, while he himself harbored suspicions that the policy could be abused by private businessmen ("NEPmen").
As novelist Andrei Platonov, among others, noted, the improvements were immediate. Rationing cards and queues, which had become hallmarks of war communism, had disappeared. However, due to prolonged war, low harvests, and several natural disasters the Soviet economy was still in trouble, particularly its agricultural sector. In 1921 widespread famine broke out in the Volga-Ural region. The Soviet government changed its previous course and allowed international relief to come in from abroad, and established a special committee chaired by prominent communists and non-communists alike. Despite this, an estimated five million people died in the famine.
Starting in 1928, the five-year plans began building a heavy industrial base at once in an underdeveloped economy without waiting years for capital to accumulate through the expansion of light industry, and without reliance on external financing. The country now became industrialized at a hitherto unprecedented pace, surpassing Germany's pace of industrialization in the 19th century and Japan's earlier in the 20th century.
After the reconstruction of the economy (in the wake of the destruction caused by the Russian Civil War) was completed, and after the initial plans of further industrialisation were fulfilled, the explosive growth slowed down until the period of Brezhnev stagnation in the 1970s and 1980s.
Led by the creation of NAMI, and by the GAZ copy of the Ford Model A in 1929, industrialization came with the extension of medical services, which improved labor productivity. Campaigns were carried out against typhus, cholera, and malaria; the number of physicians increased as rapidly as facilities and training would permit; and death and infant mortality rates steadily decreased.
The State Quality Mark of the USSR, introduced in 1967, was used to certify that goods met quality standards, and to improve the efficiency of production
As weighed growth rates, economic planning performed very well during the early and mid-1930s, World War II-era mobilization, and for the first two decades of the postwar era. The Soviet Union became the world's leading producer of oil, coal, iron ore, and cement; manganese, gold, natural gas and other minerals were also of major importance. However, information about the Soviet famine of 1932–1933 was suppressed by the Soviet authorities until perestroika. In 1933 workers' real earnings sank to about one-tenth of the 1926 level. Common and political prisoners in labor camps were forced to do unpaid labor, and communists and Komsomol members were frequently "mobilized" for various construction projects.
The German invasion of World War II inflicted punishing blows to the economy of the Soviet Union, with Soviet GDP falling 34% between 1940 and 1942.Industrial output did not recover to its 1940 level for almost a decade.
In 1961, a new redenominated Soviet ruble was issued. It maintained exchange parity with the Pound Sterling until the dissolution of the USSR in 1991. After a new leadership, headed by Leonid Brezhnev, had come to power, attempts were made to revitalize the economy through economic reform. Starting in 1965, enterprises and organizations were made to rely on economic methods of profitable production, rather than follow orders from the state administration. By 1970, the Soviet economy had reached its zenith and was estimated at about 60 percent of the size of the USA in terms of the estimated commodities (like steel and coal). In 1989, the official GDP of the Soviet Union was $2,500 Billion while the GDP of the United States was $4,862 Billion with per capita income figures as $8,700 and $19,800 respectively.
There are two games for a leader – foreign policy – dealing with peers, financiers, opponents, customers, and domestic policies: Dealing with subordinates (an ideal president or prime minister would find a common strategy with the other branches so as in foreign policy they had his back.,
When Putin arrived in office, Russia was just emerging from the disastrous market reforms of the 1990s and the 1998 financial crisis. The new president had no grand economic vision: while he slashed taxes to benefit business, he also renationalised key sectors, starting with the breakup of political foe Mikhail Khodorkovsky’s Yukos oil company in 2003. Nonetheless, unused manufacturing capacity and rising prices for oil, Russia’s main export, helped usher in an era of unprecedented prosperity that Putin is still remembered for, with real disposable income doubling between 1999 and 2006.
The global financial crisis brought this growth crashing to a halt. While oil wealth had stimulated growth, little progress had been made in diversifying the economy or modernising Russia’s industries. Even before oil prices dropped and western sanctions over the Ukraine crisis came into effect in 2014, economists were predicting long-term stagnation.
Although Putin recently called his government’s response to the rouble crisis of late 2014 “optimal”, many blame the central bank’s sudden interest rate rises and a shady bond issue by state oil company Rosneft for sinking the national currency.
As former finance minister Alexei Kudrin reminded Putin during the president’s annual call-in show in April, the 7% annual GDP growth at the end of his first presidential term fell to just 0.6% in 2014, and the country’s economy is expected to enter recession this year. Not a great result for a man whose initials – VVP – stand for GDP in Russian.
Putin took over a country whose population was falling at an alarming rate. Russia – a population of about 150 million people at time of the fall of the Soviet Union – was losing people at a rate of almost a million a year, a combination of a reluctance to procreate and a proclivity, from men at least, to die young.
Vladimir Putin visits a maternity hospital in Lapino, near Moscow. Photograph: Sasha Mordovets/Getty Images
But the decline gradually bottomed out, and in 2010 the population started growing again. The secret to this reversal was largely economic: as their financial situation improved during Putin’s reign, Russians began having more children. According to the state statistics service, the country now has more than 146 million people, up from 142 million in 2008. Even if you don’t count the 2.2 million people it gained by annexing Crimea, it’s still a positive trend.
But now that the econom ic outlook is uncertain, that trend may be reversing, with births down by 4% in January.
Vladimir Putin visits a maternity hospital in Lapino, near Moscow. Photograph: Sasha Mordovets/Getty Images
But the decline gradual
From Newsweek: http://www.newsweek.com/putin-welcomes-return-russian-mafia-484083
Organized crime is certainly often close to the state, and in some areas it has clearly been used to the advantage of Russian elites. A classic example is the harnessing of Russian hackers, who are granted a degree of impunity in return for their willingness from time to time to target the Kremlin’s foes.
However, this is not a “mafia state”—policy is not wholly subordinated to criminal profit—nor is it one in which the whole of the underworld is an instrument.
Many of these groups are essentially divorced from Russia and have no reason to cooperate with Moscow. Rather, the groups that represent potential security challenges in Europe can be categorized together as Russian-based organized crime.
Whether run by Georgians living in Moscow or the offshoot of a Slavic gang from St. Petersburg, whatever ethnicity they are or language they speak, they operate abroad but have assets, family or other vulnerabilities in Russia that the Kremlin can threaten or support.
As ever with Russia, the truth is complex, nuanced and disputed. Organized crime is neither a simple pawn of the state nor wholly independent, but it often has to work within parameters set by the Kremlin.
In 1994, Russian President Boris Yeltsin warned that his country was becoming “a superpower of crime.” Today, Vladimir Putin appears to be courting that very same status, but in a profoundly different way, regarding Russian-based organized crime abroad not as a threat or an embarrassment but a potential opportunity.
As Russia’s geopolitical competition with the West continues, understanding the nature of this threat will be increasingly important for European security.
Mark Galeotti is a visiting fellow at the European Council of Foreign Relations and senior research fellow at the Institute of International Relations Prague. An earlier iteration of this column appeared with the wrong byline.
The so called oligarchs are a common topic in Russia since the fall of the Soviet Union. This distinct and very small group of people, which is sometimes even referred to as a social class, is often targeted by the Russian society through pop-culture, satirical jokes, and everyday conversations. The oligarchs are perceived very negatively, because, in the minds of Russian people, they symbolise corruption and social inequality. The biggest rise of this group of people happened during the Presidency of Boris Yeltsin. However, Yeltsin’s successor, Vladimir Putin, tried to change the role of oligarchs in Russia. The question to ask here is whether it worked or not.
Initially, the term “oligarch” can have many different meanings. Oligarchy was firstly defined and examined by Plato and Aristotle, who defined it as a rule of the few for the benefit of the few. Today in political science term “oligarchy” usually refers to a form of the government by a small group. Russia, however, was never really governed by a small group of oligarchs. Thus, calling these people in Russia “oligarchs” might be confusing, and the definition of the oligarch in the Russian context has to be further specified. At first, it was used in Russia to describe certain affluent and influential Russian businessmen who helped Yeltsin to be re-elected in 1996. Thus, influencing Russian politics through their immense wealth was an inherent part of being an oligarch in Russia. These definitions, however, refer more to the oligarchs under Yeltsin’s rule. After Putin’s struggle against this small group of people, its political influence diminished and today this term refers just to wealthy business tycoons, which do not influence Russian politics anymore.
One might ask, where did these oligarchs come from? How is it possible that this so called “class of oligarchs” emerged in Russia? The main reason for that is obviously Russia’s communist past and thus, development of oligarchic capitalism in Russia was a clear Soviet legacy. Firstly, the characteristics of the economy during the Soviet socialist regime, such as economic-centralisation and monopolism, are basically innate to Russian oligarchic capitalism as well. Secondly, some of today’s oligarchs are former communist bureaucrats due to the fact that they were already in charge of big companies during the Soviet era and when the privatisation happened, they just transformed their control into ownership rights. This leads to one of the main reasons for the emergence of the “class of oligarchs”, fast economic transition and corrupted privatisation. Moreover, it is important to emphasise that the Russian economy is dependent on natural resources which are nowadays embodied by large corporations. Consequently, a certain level of political power must somehow fall into their hands.
This period in Russia is sometimes referred to as a period of state captured by business. This was caused by the lack of a clear separation of business from government. Thus, the oligarchs could be very influential in terms of Russian politics due to the fact that they were always playing a main role when the regime needed any type of support, especially during elections. Basically, the unwritten deal existed between the ruling politicians and few businessmen to transfer huge state assets in exchange for an oligarchs’ financial support. Yeltsin’s presidential election in 1995 could serve as a glaring example of this reality. After his re-election, the class of oligarchs literally thrived. They controlled the media and so it was obvious that through media the oligarchs could influence people’s votes. Boris Yeltsin also had a very influential group of advisors, which were known as “The Family”. His daughter, Tatyana Dyachenko was part of it, the same as for instance, one of the most prominent oligarchs, Boris Berezovsky. In other words, under Yeltsin’s rule the oligarchs played an extremely important role not only in defining Russian economy, but also in defining and influencing Russian domestic and foreign policy.
Vladimir Putin, on the other hand, decided to change the role of oligarchs in Russia. Putin’s main priority was to make the presidential administration the dominant political institution. His presidential campaign in 2000 was very anti-oligarchical. He basically announced the end of the oligarchs. However, in reality he did not really want to get rid of the big business. What he intended to do was to take control over them and deprive the oligarchs of their political power. Putin’s main strategy was to create an equidistance in relations between the state and the business, which however, later became more reminiscent of subordination. He arranged a meeting with all the prominent Russian oligarchs and introduced the so called “new rules of the game”. These rules could be briefly described by one sentence: as long as the oligarchs paid taxes and did not use their political power (at least not against Putin), Putin would leave them be. Those, who accepted these rules were later very successful. Some of the oligarchs who have cooperated with Putin have even increased their wealth. The glaring example of these people were for instance Roman Abramovich and Oleg Deripaska, who created an empire that made 70 per cent of Russia’s aluminium industry ending up under their control and completely avoided scrutiny. Nevertheless, whilst these oligarchs were not even touched, others like Gussinsky, Berezovsky and Khodorkovsky experienced imprisonment and exile.
This leads to the fact that Putin’s struggle against oligarchs would be admirable if it was not so selective. These selective attacks apparently provoked suspicion that it was not directed against corruption but against Putin’s critics and especially his potential political rivals. For instance, Vladimir Gussinsky was the owner of the second largest television network, NTV, and a newspaper Segodnya. His media criticised Putin and especially his politics on Chechnya. Gussinsky was arrested although there were reports, which claimed, that charges against him were flawed. There is no need to say that Gussinsky apparently started focusing on the media business mainly to gain political influence. Berezovsky was also apparently always more interested in politics than business. He was also politically very influential and, what is more important, opposed Putin with his political party called Liberal Russia. He was exiled and spent the rest of his life in London until he was found dead in his bathroom, where he allegedly committed suicide. Khodorkovsky defied Putin too by loudly criticising corruption in Putin’s government and supporting opposition parties and independent media. Furthermore, as a Chairman and CEO of Yukos he intended to build his own pipeline, which would gravely affect Russia’s foreign policy. This issue obviously must have made him an enemy for Putin. He was also imprisoned and his stakes in Yukos were expropriated. Thus, it seems to be clear, that Putin got deliberately rid of only those oligarchs, who defied him and intended to influence Russian domestic and foreign policy.
So, the role of oligarchs under Putin’s rule did change. The oligarchs were mostly deprived of their political influence and the power they were enjoying under Yeltsin’s rule. Furthermore, not only their political influence diminished, but their overall influence in the Russian economy decreased as well. Nevertheless, the class of oligarchs never disappeared as Putin had promised in his presidential campaign. Politically uncomfortable people were removed, but those with no political aspirations or those who were for Putin as their leader, stayed untouched, although they could be accused of many crimes the as the same as Gussinsky, Berezovsky and Khodorkovsky were. Thus, the suspicion that this whole struggle against corruption and oligarchs was just an excuse to get rid of politically uncomfortable people who could undermine Putin’s authority is and should be present.
Figure 1 Election Results Pro Russian Yanukovitch vs Ukrainian ultra nationalist Timoshenko