Russia's capitalist revolution: why market reform succeeded and democracy failed

389 Pages·2007·2.82 MB·english

by  Anders Aslund

A N D E R S Å S L U N D
’
R U S S I A S
C A P I T A L I S T
R E V O L U T I O N
W H Y M A R K E T R E F O R M
S U C C E E D E D A N D
D E M O C R A C Y F A I L E D
P E T E R S O N I N S T I T U T E F O R I N T E R N A T I O N A L E C O N O M I C S
RUSSIA’S
C A P I T A L I S T
REVOLUTION
WHY MARKET REFORM
SUCCEEDED AND
DEMOCRACY FAILED
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ANDERS ÅSLUND
RUSSIA’S
C A P I T A L I S T
R EVO LU T I O N
WHY MARKET REFORM
SUCCEEDED AND
DEMOCRACY FAILED
PETERSON INSTITUTE FOR INTERNATIONAL ECONOMICS
Washington, DC
October 2007
00--FM--iv-xxiv 9/27/07 2:39 PM Page iv
Anders Åslund, known to repeatedly chal- Copyright © 2007 by the Peter G. Peterson
lenge conventional wisdom on “transition Institute for International Economics. All
economies,” is a leading specialist on post- rights reserved. No part of this book may
communist economic transformation with be reproduced or utilized in any form or
more than 30 years of experience in the by any means, electronic or mechanical,
field. He boldly predicted the fall of the including photocopying, recording, or by
Soviet Union in his Gorbachev’s Struggle information storage or retrieval system,
for Economic Reform(1989). In Building without permission from the Institute.
Capitalism: The Transformation of the Former
Soviet Bloc(2002) he firmly stated that For reprints/permission to photocopy
the only choice Russia had was market please contact the APS customer service
reform. In his new book, Russia’s Capitalist department at Copyright Clearance Center,
Revolution, he explains why Russia’s mar- Inc., 222 Rosewood Drive, Danvers, MA
ket reform succeeded and democracy 01923; or email requests to:
building failed. [email protected]
Dr Åslund joined the Peterson Institute
for International Economics as senior fel-
low in January 2006. He has worked as an Printed in the United States of America
economic adviser to the Russian govern- 10 09 08 5 4 3 2 1
ment (1991–94), to the Ukrainian govern-
ment, and to the president of the Kyrgyz Library of Congress Cataloging-in-
Republic. Publication Data
Before joining the Peterson Institute
he was the director of the Russian and Åslund, Anders, 1952–
Eurasian Program at the Carnegie Russia's capitalist revolution :
Endowment for International Peace. He why market reform succeeded and
was founding director of the Stockholm democracy failed? / Anders Åslund.
Institute of Transition Economics and p. cm.
professor at the Stockholm School of Includes bibliographical references and
Economics (1989–94). He earned his doc- index.
torate from the University of Oxford. ISBN-13: 978-0-88132-409-9 (alk. paper)
1. Russia (Federation)—Economic
conditions—1991– 2. Capitalism—Russia
PETER G. PETERSON INSTITUTE (Federation) I. Title.
FOR INTERNATIONALECONOMICS
1750 Massachusetts Avenue, NW HC340.12.A844 2007
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Cover photos: Getty Images
The views expressed in this publication are those of the author. This publication is part
of the overall program of the Institute, as endorsed by its Board of Directors, but does
not necessarily reflect the views of individual members of the Board or the Advisory
Committee.
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For
Anna, Carl, and Marianna
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Contents
Preface xiii
Acknowledgments xvii
Abbreviations xxi
Introduction 1
Definitions of Democracy and Market Economy 2
Theses of This Book 3
The Structure of This Book 9
1 Perestroika—The Great Awakening: 1985–87 11
Why Perestroika Started 13
Mikhail Gorbachev and the Outstanding Provincials 18
Early Perestroika: Cautious Economic Reforms to Boost Growth 21
Glasnost: Shattering All Illusions 30
New Thinking on Foreign Policy 33
Why Gorbachev’s Attempt at Chinese Reforms Failed 38
An Untenable Mix of Changes 41
2 The Collapse: 1988–91 43
Elite Division: Yeltsin, Ligachev, and Gorbachev Part Company 44
Democratization 46
National Revival and Disputes 49
The Demise of the Plan and the Rise of Rent Seeking 52
AParade of Reform Programs 59
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Collapse of the Outer Empire 63
Economic Collapse 67
Political Collapse: Yeltsin at His Peak 73
An Overdetermined Collapse 81
3 Revolution: 1991–93 85
Yeltsin’s Assumption of Power 86
Dissolution of the Soviet Union 88
Attempt at Radical Market Reform 90
Parliamentary Revolt Against the President 99
Ambitious Mass Privatization 107
Abortive Financial Stabilization 111
Failure of the West to Act 114
Dissolution of the Parliament and Shootout at the White House 119
Great Achievements but Mixed Results 123
4 The Rise and Fall of State Enterprise Managers: 1994–95 129
The New Constitution 130
The December 1993 Elections and the End of the Reform
Government 134
The State Enterprise Managers 137
The Making of Gazprom 140
Precarious Financial Stabilization 142
The Rise of Organized Crime 146
The First Chechnya War 151
Halt of Reform Exacerbated Social Costs 153
5 The Oligarchy: 1996–98 157
Who Were the Oligarchs? 158
The Loans-for-Shares Privatization 161
The 1996 Presidential Elections: Oligarchs and
Reformers United 164
False Dawn of Reform: The Bankers’ War, 1997 169
The Financial Crash of August 1998 173
NATO and G-7 Enlargement 180
Assessing the Oligarchs 181
6 Postrevolutionary Stabilization: 1999–2003 189
Finally Financial Stabilization 190
President Yeltsin’s Final Days 197
Vladimir Putin: KGB Lieutenant-Colonel 199
The Second Chechnya War 202
Putin’s Assumption of Power: Elections of 1999 and 2000 205
Muzzling of the Media 208
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Centralization of Federal Power 211
The Gref Program: Second Generation of Economic Reform 214
Dictatorship of Law 221
Serious Efforts to Join the WTO 222
Siloviki, Oligarchs, and Reformers: Who Is Mr. Putin? 225
7 Authoritarianism and Recentralization: 2004–07 233
The Yukos Affair: The End of the Oligarchy 234
Elections of 2003 and 2004 241
Inauspicious Start of Putin’s Second Term 244
Consolidating Authoritarian Rule: Deinstitutionalization 247
Renationalization: The Creation of Kremlin, Inc. 250
Toward State Capitalism? 257
Corruption: Rationalized but Pervasive 259
Colored Revolutions 264
ANew Distance from the West 268
Does Russia Suffer from an Energy Curse? 270
Putin’s Model: Back to Nicholas I 272
8 Conclusions: Why Market Reform Succeeded
and Democracy Failed 277
Market Economy but No Democracy 277
Russia’s Capitalist Revolution 281
Russia’s History Is That of Its Leaders and Their Ideas 285
Early, Radical, and Comprehensive Reforms Most Effective 288
Essence of Privatization: Legitimate Property Rights 292
Policymaking in the Midst of a Revolution 294
Foreign Aid: Limited but Important 297
Russia’s Future: Contradiction Between Economic Miracle 300
and Reactionary Politics
References 309
Chronology 327
Index 337
Tables
Table 2.1 USSR budget revenues, expenditures, and balance,
1985–91 68
Table 2.2 Results of presidential election, June 12, 1991 78
Table 4.1 Results of election to the State Duma,
December 12, 1993 135
Table 5.1 Results of election to the State Duma,
December 17, 1995 165
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