Public Expectations and Trust towards the Government: Post-Revolution Stabilization and its Discontents

YEGOR GAIDAR

www.IET.ru

 

Those who lived their lives in stable developed democratic societies would find it hard to envisage a collapse of an existing regime. In the fall of 2003 I was invited to Baghdad with a group of my colleagues to discuss the problem of the Iraq economic recovery. I did expect representatives of the transitional administration being experts in normal society functioning to turn naïve when it comes to a deinstitutionalized country. The level of their inability to comprehend the situation well exceeded my expectations.

Many countries of todays world have undergone revolutions. Some of them, like the United States, were formed in the process of revolution. One can easily understand that people who studied history reading books would romanticize revolution and take the word positively. To label any event as revolutionary means to value it positively.

I had an experience of being a head of the countrys government during a revolution. Im speaking of late 1980s early 1990s a period when one of worlds superpowers was being transformed, its borders changed, its economy, political system, ownership structure altered. There is nothing romantic about a revolution. It is a drastic experience for a society, a final judgment for the old system elite that proved unable to carry out reforms to prevent a disaster. I read Western professors who wrote that the crucial mistakes made by reformers on the post-Soviet territory were due to the new government leaders disability to realize that market and democracy can not function without an advanced system of institutions which takes decades to develop. You may find it quite entertaining, when you know that sometimes existing institutions collapse within three days.

I can easily imagine a professor trying to explain that institutions necessary for the sustained development of a new society are not yet ready and would take years to develop to the sansculotterie marching to seize the Bastille. I am afraid he would have to finish his speech real quick, since contradiction between the momentum of the secure system collapsing and long period needed to develop new intuitions is the key problem of all revolutions.

When re-reading liberal media published in Russia in spring 1918 one feels perplexed: how could czarist regime be succeeded by anarchy and mass looting replace while everybody placed their hopes on the rule of freedom that was meant to come after the regime had been overthrown.

Only three days (February 25 28) passed in 1917 between the moment when the czar Nicolas II being part of a 300-year tradition ordered his armed forces to put down disturbance in St.Petersburg and the time when the czarist regime ceased to be. The same three days passed between the day key members of the USSR leadership: its Vice-President, Prime-Minister, Minister of Defense and Head of the KGB made an attempt to regain control over political process in the Soviet Union by force and the day the system collapsed.

Neither of the two events could be foreseen by the majority of those taking part in them. We had an advantage: we knew what followed the collapse of the czarist regime in 1917 and could try to reduce rivers of blood that may come after a system is smashed down.

In the literature describing transition period the road taken by the Soviet Union Russia is often compared to that of China. Such comparison, however, is relevant only when we take comparable levels of development. Main indices that can be compared for this level would be for 1979 China and 1928-1929 Soviet Union when the country decided on the key issues of its economic policy (see Diagram 1).

 

Diagram 1.

Sources:1. Maddison A. Monitoring the World Economy 18201992. Paris: OECD, 1995; Maddison . The World Economy: Historical Statistics. Paris: OECD, 2003.

2. Bairoch P. Cities and Economic Development: from the Dawn of History to the Present. Chicago, 1988.

 

1928-1929 economic discourse if we translate it into modern language was an argument about the expediency of the strategy that decades later was labeled Chinese. According to N.Rykov and N.Bukharin private peasant farms, financial stability and market mechanisms were to be preserved under political control of the Communist party. The implication of this discussion was rather straightforward. N.Bukharin found it impossible to make a peasant army take away bread from the peasants in a country of peasants by force that would have led to a civil war. But Stalin said it was possible. He proved right in a short-term perspective. The outcome of such policy for the Soviet economy and society turned out to be rather grave.

Industrialization is normally preceded by an agricultural revolution: agriculture productivity growth is based not on the extensive use of machines but on a better crop rotation system and use of fertilizers. This ensures production growth of food supplies providing food for the expanding cities. In the Soviet Union peasants were robbed of their bread by force. Millions starved to death. Peasants were treated as inferiors with no rights for pension, their wages 10 times smaller than those in the city, they could not move house or change their job

In more developed countries peasant labour was valued more even under industrialization. The elder son who inherited the farm stayed in the village while younger sons had to make it in the city. Mass immigration from Europe to North America had a lot to do with an ambition for preserving a status of a farmer. This scenario did not rate those who left for the city as upper class, or villagers as inferiors. It was the Soviet leadership that created such division.

It is easy to see what stimuli would, in this situation, define behavior of young people from the village able to move up the social ladder. They were given a signal that read: the main thing you can do in your life is make it to the city at all costs. There were channels for them army, major construction projects of top priority. Pauperization of the country-side was made a fact. History of agriculture in larger countries does not provide any examples of such factor productivity drop in agriculture similar to the one that took place during 25 years following 1928-1929.

The choice made by the country resulted in ling-term economic problems. N.Khrushchev describes those in his letter to the Presidium of the CPSU. In essence, he states that urban population of the country is growing which implies higher demand for grain to feed it, while less and less grain has been harvested for the past 15 years. Just to give a few figures: in 1940 we had 2225 mln. poods (Russian unit of weight equal to about 36.11 pounds or 16.38 kilograms) of grain harvested compared to only 1850 mln. poods in 1953, which is 357 mln. poods less. At the same time bread consumption increases annually along with general advancement of national economy, considerable increase in urban population and constant pay rise[1], writes N.Khrushchev. Soviet leadership starts a discussion to choose whether to develop non-black soil areas or to reclaim virgin lands. An attempt to restore non-black soil farming with the system of collective farming (kolkhozes) preserved proved to be a risky business. In late 1960-s early 1970-s when the Soviet leadership tried to take this route the results were rather disappointing. To give this strategy a chance in the early 1950-s kolkhozes were to be dissolved. This was out of question. Thus reclaiming virgin and fallow lands seemed a reasonable alternative.

The idea had been discussed in the late 1920-s and supported by I.Stalin. It sat well with the logic of the socialist system: major investments, large-scale projects, concentration of resources, ability to use advantages that workers could get in the city to re-direct migration flow not from the village to the city but from one village to another village in virgin and fallow areas.

Opponents of this approach in the late 1920-s were concerned about harvests becoming more volatile than in the traditional agricultural areas. Stalin was not convinced by this objection. Khrushchev also did not find these arguments strong enough. From the socialist economy perspective the program proved quite successful during its first 10 years. Within these years stocks of grain were doubled, compared to the previous 15 years with no harvest growth. However new problems attended the success. The crops became more and more volatile, just as the opponents of reclaiming virgin lands had predicted. Moreover the resources available for virgin and fallow lands reclamation were scarce and exhausted within 10 years. The problem of food supply for cities kept escalating.

In 1963 the USSR bought large amounts of grain for the first time in its history. The country imported 12 mln. tons of grain and paid for it with the third of its gold reserve. At the Presidium of the Central Committee N.Krushchev says, Soviet power can not endure such shame any longer[2] But time will show: they will have to.

By mid 1960-s the USSR harvested 65 mln. tons of grain annually and the figure does not change during the next 25 years with yearly fluctuations (see diagram 2).

Diagram 2.

Source: FAOSTAT data, 2005.

At the same time the numbers for urban population grow by tens of millions of people (see Diagram 3).

Diagram 3.

Source: Statistics data The USSR National Economy from various years. M.: Financy I statistika.

 

With old system of economy remaining the only way out was to alter the structure for foreign economic relations. Russia, formerly (before WWI) worlds leading grain exporter, become worlds largest importer of grain. Russia buys more grain than Japan and China taken together. Total imports for agricultural products grow as well (see Diagram 4).

Diagram 4.

 

USSRs External Trade Balance for Grain and Agricultural Products, 1961 1990

Source: FAOSTAT data, 2005.

It would have been natural to ask: We have ruined our agricultural sector and invested in the industrialization why cant we do what other developed industrial countries like Japan do? It buys agricultural products and pays for it with manufactured goods? Unfortunately in the course of the socialist industrialization the USSR has worked out a system of national economy management that made it impossible to manufacture rival products for international markets. After Mikhail Gorbachev was appointed General Secretary of the Communist party he said at the August 23, 1986 meeting in the CPSU, We buy because we wont survive otherwise[3].

In this case we are bound to answer the key question: how do we pay for the things we can not live without? We export raw materials because nobody would pay hard currency to buy anything else from us, explains Gorbachevs Politburo colleague, Chairman of the Council of Ministers Nikolai Ryzhkov.[4]

After the Soviet Union had become worlds largest grain importer, its existence depended on oil fields in West Siberia. These fields were unique due to the shallow horizon and high flow rate. By 1970 Western Siberia became a big oil province according to the world standards. During 12 years crude oil output increased twelvefold, thus enabling Soviet leadership to provide at least adequate food supply for larger cities.

Meanwhile the authorities kept discussing the strategy for oil development in Western Siberia. Petroleum experts, including Minister of Oil and Gas Industry V.Shashin and Western-Siberian oil-production managers argued, What you want us to do is pure gamble. Sustainable extraction can not be combined with drastic output growth. Such policy will result in fast production decline. Their opponents in the State Planning Committee (Gosplan) insisted on keeping the rate just as high. A.Kosygin, USSR Chairman of the Council of Ministers would often ring V.Muravlenko CEO of GlavTyumenneftegas saying something like, Were short of bread give us another 3 million tons in excess of the plan[5]. This led to fast well production rate decrease (see Diagram5).

Diagram 5

Source: Toplivno-energetitchesky kompleks SSSR 1988. M.: VNIIKTEP, 1989. p.127; Toplivno-energetitchesky kompleks SSSR 1990. M.: VNIIKTEP, 1991. p.140-141.

 

The process demands larger capital investments and increases oil production costs. Facing vexed problems in oil production Soviet leaders were lucky enough in early 1970-s early 1980-s oil prices jumped to a very high level (see Diagram 6).

 

Diagram 6.

Source: estimated according to International Financial Statistics 2004, IMF; Energy Efficiency and Renewable Energy Website, US Department of Energy (http://www.eere.energy.gov).

 

Ascending arm stands for the peak of Brezhnev era, while the descending arm stands for the beginning of the USSR collapse.

One is familiar with the problems facing the countries that depend on resource revenue fluctuations. Demand and supply elasticity for the raw materials prices differs a lot in a long-term and short-term perspective. The prices fluctuate within a range which is wider than that for manufacturing sector. During the past 50 years trade conditions for the worlds largest economy (USA) showed the most violent deterioration in 1974 about 15%. When we speak of the economies dependant on the export of raw materials we have to multiply the percentage.

Economy of the countries dependant on unstable raw materials profits was described as early as 17th century. The country in question was Spain: after the discovery of America its profits depended on the import of gold and silver from America. Diagram 7 shows revenues the Spanish Crown received from importing American silver and gold and USSR oil revenues. Similarity is obvious.

Diagram 7.

 

Source: Flynn D.O. Estimations based on: Fiscal crisis and the decline of Spain (Castile). // The Journal of Economic History. 1982. Vol. 42. P. 142; Vneshnyaya torgovlya SSSR. Statistitchesky sbornik: 1971, 1973, 1975, 1977, 1979, 1981, 1983, 1985, 1987, 1989. .: Finansy i statistika; International Financial Statistics 2005, IMF

 

In the end of the histogram one may notice the years when Spain, with an army that had suffered no serious defeat on land for half a century, had to forsake its territories beyond Iberian Peninsula, renounce control over Portugal and was on the edge of loosing control over Aragon and Catalonia. With oil revenues dropping the Soviet Union which army had also suffered no defeats for decades had to relinquish control over Eastern Europe. Like in Spanish case this was a result of economic problems and bankruptcy.

I would not suspect Soviet leadership of studying works of professors from the University of Salamanca analyzing the impact American silver and gold import had on Spanish economy. The intellectual level of the Soviet political elite is well described in the quotation from the protocols of the Presidium of the Partys Central Committee, About Zasyadko: they say he stopped drinking heavily. Which means he can be sent to Ukraine as a minister.[6] One would be too bold to assume that Communist party leaders could learn anything from the Spanish experience,

Soviet leaders, however, could have understood that oil was no ordinary market. I quote from a information note made by Yuri Andropov, Head of the KGB for Brezhnev, General Secretary of the CPSU, Since 1960 National Defense Committee has maintained business and secret contact with a member of the political bureau of The Popular Front for the Liberation of Palestine (PFLP). Priority areas of sabotage and terrorist activity are: using special tools to continue the oil war led by Arab countries against imperialist forces that support Israel PFLP is preparing a number of special operations including attacks on large oil terminals in various parts of the world (Saudi Arabia, Persian Gulf, Hong Kong etc.) [] Wadi Haddad has tur ned to us with a request to aid his organization in obtaining certain types of specialized hardware to perform sabotage operations. [] All the above considered we find it reasonable to react positively to Wadi Haddads request for providing specialized hardware for PFLP needs at the nearest meeting.[7]

One has to realize he is not a single player at such market. Soviet leadership had to pay a high price for assuming that nobody else would understand how political developments could influence oil market.

With oil sold at abnormally high priced Soviet leaders decide to send troops to Afghanistan. In 1973-1974 Saudi Arabian leaders introduced oil embargo against the USA, promised to reduce oil extraction by 80%, if needed, and in case force was used to blow up the oilfields. When Soviet troops entered Afghanistan, Saudi Arabia interpreted it as a first attempt to gain control over its oilfields and turned to the Big Brother for military defense.

Relations with the USA underwent radical changes. Big Brother needed oil prices that were lower and predictable. Newly appointed CIA Director William Casey paid one his first official visits to Riyadh. He had previously gained experience in economy and security areas. During WWII he served in the department that studied ways to cripple German and Japanese economy. Casey was already familiar with the idea of linking economy and politics.

Oil prices collapse in mid 1980-s had to do with fundamental market factors that made it impossible to maintain the prices formed in the early 1980-s. But the scope and timeframe of the collapse can be comprehended in the political context only.

We are certain about the date the Soviet Union started to collapse. It was not August of 1991 or December of the same year. The process began September 13, 1985 when Saudi Arabias Minister of Oil Industry Sheikh Yamani declared that his country changed its oil policy, stopped curbing down oil extraction and restored its share in the oil market. In the next 6 months oil production in Saudi Arabia increased dramatically. Oil prices dropped and were now reduced by one fourth approximately. The Soviet Union lost 20 billion dollars in fuel and utilities export. No means were left to maintain export of something the country, according to M.Gorbachev could not do without, at the usual scale.

Soviet leadership had three scenarios to introduce responsible economic policy.

The first one was to dismiss Easter-European empire, stop supporting Eastern Europe with barter supply of oil and gas without being paid in hard currency. In 1985-1986 it still seemed unthinkable. If a General Secretary of the CPSU had proposed to renounce WWII gains at a Plenum of the Central Committee, he would never have left the Plenum in the same capacity.

The second scenario implied that countrys leadership gave up on food import. This enabled the country to do without 20 billions of lost revenues. In reality it meant that cities had to be put on rationing with rations lower than those during WWII. After Communist leaders had been making promises of bright future for 70 years this alternative left no chances for the regime to survive.

Third scenario: cut back defense production, stop investments and minimize production in the areas dependant on imported parts. This leads to a conflict with the elite, problems in the cities that depended on plants using imported component parts for production. This topic had not been considered seriously.

The Soviet leadership takes a decision to close their eyes, pretend nothing is going on and hope for the best. Such policy is carried on in 1985-1986. But since there is no way to avoid the problem of getting money to buy 40 million tons of grain, the USSR starts to attract credit resources on a large scale. The countrys financial reputation allows it to borrow as much money as needed. Favorable weather conditions help to pursue this policy. In 1988 weather conditions were bad and since then the collapse of the Soviet economy bears irreversible character. In 1989 the Soviet leadership is informed that nobody will accommodate it with non-concessional loan.

In 1985 the idea that Soviet leaders would address governments of potential enemy-countries and ask them for loans offering political concession in return could not be foreseen in the worst nightmare. By 1989 it had become their primary concern, as the documents show.

Complications in the countrys economic situation develop in two key areas: oil and food. Oil industry depends on imported equipment. A quotation from the record taken at the USSR Council of Ministers meeting devoted to situation with oil production in 1990-1991:

We realize that oil is the only possible hard currency source weve got If we do not take all the necessary decisions now we might have to spend our next year in the most miserable way. [] We might have the worst possible outcome with the countries of the socialist block. This will bring us and the system itself to a real failure [8]

Ministry of Foreign Economic Relations reports on a disastrous situation with oil and oil derivates export schedules for the IV calendar quarter of 1990[9].

Bread supply in Moscow, St.Petersburg, Nizhniy Novgorod, Perm and Yekaterinburg depends mostly on import. Those responsible for countrys grain supplies access the situation as follows, In view of the drastic situation with forage crops we present an estimate for these crops using 1989 harvest figures. Estimates show that we are running short of 30,7 million tons of grain in this years forage crops [] Considering this we need to hasten a process of finding ways to buy forage crops abroad.[10]

Crisis in oil production, problems with grain and inability to attract commercial loans the country is pressed for political credits. Those responsible for international trade and foreign economic relations inform the Soviet leadership of the situation, In relation to the assignment connected with the telegram from Bonn comrades Katushev, Geraschenko, Moskovskyi, Khomenko, Sitnin have studied possible steps to be taken by our side to receive financial loans from EU countries, primarily from Federal Republic of Germany, France, Italy and, probably, the UK. According to the information received from Germany, Deutsche Bank recommended to address directly governments of the countries mentioned with an application for loan [11].

From the report prepared for Eduard Shevarnadze, In the course of April 27 meeting between Vnesheconombank and Deutsche Bank representatives the latter suggests Soviet government should start immediate negotiations with governments of the EU countries, primarily with Federal Republic of Germany, France, Italy and, probably, the UK about receiving state guarantees that would enable banks of the countries in question to offer financial loans to cover USSR balance of payments deficit and to finance measures meant to re-construct USSR national economy[12]

Soviet leaders hope that low oil prices will soon be forgotten and become a fact of history. It would take another 17 years until oil prices jump again.

To get politically motivated loans proves to be no easy task. The USSR builds up arrears for imported goods (see Diagram 8).

Diagram 8.

Arrears for goods imported by the Soviet government,
mln. roubles.

Source: V.N. Vorontsov (Deputy Minister of Foreign Economic Relations) to S.A.Sitaryan (Deputy Chairman of the USSR Council of Ministers). On MFER's arrears. 14.09.1990. State Archives of the Russian Federation (GA RF). F. 5446. Op. 162. D. 1464. L. 110;

V.V.Gerashchenko, Yu.S.Moskovsky to the Chairman of the USSR Council of Ministers comrade N.Ryzhkov. On Vneshekonombanks issue of guarantees to cover the import purchases. 01.10.1990. State Archives of the Russian Federation (GA RF). F. 5446. Op. 162. D. 1457. L.133

 

Western companies stop their shipments. As things now stand number of foreign companies (Louis Dreyfus, Friesacher, Bunge and others) have stopped their shipments to the USSR and the vessels charter for grain and forage crops are at present staying in the ports waiting for the problem to be solved.[13]

The population realizes the threats of the situation. From the report made by VCIOM (Russian Public Opinion Research Center) for the USSR Council of Ministers, May 1990, Answering the question What awaits the Soviet Union in the nearest months? 70% of the respondents said they expected the situation to deteriorate. More than half of the population (54%) thought economic disaster in 1991 was quite possible, 49% expected mass unemployment, 42% - hunger, 51% - shortages in water and energy supply.[14] This referred to May 1990. The climax of the crisis is yet to come.

Countrys leaders begin to realize the threat. Leader of Leningrad communists is warning, Somebody might break a shop-window and well see a counter-revolution breaking out in Leningrad. And we wont be able to save the country.[15] Soviet leaders were no intellectuals but they did remember that they had come to power as a result of a revolutionary process that started as food riots in Petrograd. The idea that history could repeat itself always seemed a nightmare to them.

Leader of Russian communists and Gorbachevs opponent I.Polozkov saw the situation with food supply in the Russian Federation as follows: The situation in 27 regions is critical, in a week mills would stop as well as bread-baking, large animal production units and poultry plants will not be supplied with compound animal feed.[16] This is how Tchernyayev, the Presidents Assistant sees the situation: Yesterday we had a Security Council meeting. Problem of food supply Now it is more particular bread supply. We are short of 6 mln. tons. People in Moscow and in other cities are queuing for bread just like they did for sausage two years ago. If we do not find it anywhere we might face hunger by June[17]

We see a similar access of the situation in the letters those responsible for bread supply had exchanged. In the nearest future the country might face state of emergency as regards to supplying population with bread and animal farming with compound animal feed.[18]

Mikhail Gorbachev can not dissolve the empire and keep his power at the same time. Soviet elite is against this scenario. He can not keep the empire together without taking up mass violence. Neither can he hope to get 100 billion dollars he had discussed with the world leaders, in case he starts oppress those who oppose the regime. He can not remain in power unless he gets 100 billion dollars as a politically motivated loan. And the vicious circle offers no way out.

Politically motivated loans mean Western tax-payers money. Allocation of these loans depends on the public opinion and balance of power in the national parliaments. The ideas Western society has about norms of behavior and acceptable violence limits differ significantly from the norms that served as a basis for the Soviet regime. Sustainability of the Eastern-European empire was founded on the idea that Soviet leadership was ready to shed as much blood as needed to support its satellite regimes. It had been previously proved in the German Democratic Republic, in Hungary and in Czechoslovakia.

In the early 1989 Polish society realized that the USSR leadership could not send tanks to Poland when it needed Western money. From this moment on we are only considering time and form of capitulation. With a new government in Poland that did not support the USSR it was impossible to keep Western army group in the GDR. The Soviet government is bound to discuss the terms of its withdrawal. During presidents summit in Malta Gorbachev did not have to tell Bush he was not going to use force in Western Europe to support satellite regimes. It was already obvious.

Western ideas of the norms of behavior stretched further than Eastern Europe. In 1990 Landsbergis, Chairman of the Lithuanian Supreme Council came to the residence of the US Ambassador in the USSR with two questions: Will you recognize us if we declare independence? Will you provide security support? The answer, translated from the diplomatic language, read: No, we will not recognize you. This is against our principles. You will not be able to control your own territory. We do not intend to be involved in military conflicts because of you. However when the USSR tries to use military force to regain control over Lithuania, Soviet leaders receive an unambiguous signal: Do what you will. Please do not bother asking for hundred billion politically motivated loans.[19]

Some people thought it necessary to show who was the master in the house. Those were leaders of GKChP (State Emergency Committee). But on the evening before August 18 day when state of emergency was announced the best-informed member of the GKChP, Head of the Cabinet V.Pavlov got heavily drunk. He understood, better than anyone else, that the risky undertaking leads nowhere. Supposedly they found loyal troops and manage to break the resistance by force. Will the get politically motivated loans afterwards? Where will food for the cities come from? And if this question had no answer food riots like in 1917 were inevitable. Sooner or later there would have been not forces to stop the riots.

Collapse of the GKChP marks the end of the Soviet Union history. Republics proclaim their independence; Soviet authorities no longer receive tax revenues and have no control over monetary policy. Central banks of the republics offer loans to their governments without asking for the USSR Central Bank approval. The USSR no longer controls its borders. There are no proper borders between Russia and independent Baltic States or Russia and Ukraine. Nobody knows whose orders an army division stationed in Ukraine will obey. Ukrainian authorities claim it obeys their orders, the Soviet authorities think it is still part of the USSR military forces. In fact it will obey no orders to use force. Such countries can not exist. The key question of the moment is: will it be possible to escape the disaster caused by the collapse of a contiguous empire?

One can leave ones overseas colonies, repatriate a million migrants and try to forget about being a transoceanic empire. Thing are different when the empires territory is constituted of contiguous lands. People who had lived there for generations are left behind the borders of new states. They face either emigration or becoming second-class citizens. The case of Sudeten Germans is one of the tragic examples. So far the empires with contiguous territories would fall apart either in flames of bloody civil wars like the Ottoman Empire, or would be saved from civil war by a foreign occupation like Austria-Hungary. The Soviet Union and Russia are a unique example of this kind of empire which managed to disintegrate without any full-scale civil war or foreign invasion.

Boris Yeltsin was the most popular political figure of the last decades of the Soviet Union. In 1989 he received 90% of votes in the capital of one of the worlds leading superpowers in spite of being actively confronted by its authorities and mass media. He got the same result a year later in Yekaterinburg, one of the largest Russian cities. He won the presidential election in 1991 receiving several times as many votes as the authorities candidate, Nikolay Ryzhkov.

The first documents laid on Yeltsins desk were the description of the catastrophic state of the oil industry, one of the most important for the country. The oil production was supposed to drop by 54 million tons in 1991, and even more in the following year according to inertial predictions.

The gravity of the situation in grain supply of the major cities can be seen from the following letter by V.Akulinin to Valentin Pavlov, dated March 18, 1991: The situation with the flour supplies is extremely distressing even now. [] The city of Moscow, as well as Ivanovo, Tula, Nizhny Novgorod, Tumen, Sverdlovsk, Chita, Kamtchatka and some other regions disposes flour supply for less than 10 days. Imported grain does not solve the bread problem. From January till March only 3.7 million tons were imported while it was planned to import 12.4 million tons. The governments repeatedly issued loading orders to increase and expedite the shipment of commercial grain from Kazakh SSR have so far failed to influence the current situation.

A note from A. Nosko to the Committee on Operative Management of the National Economy of the USSR, dated November 26, 1991, reports the full depletion of foreign reserves: As it has been already reported to the Interstate Economic Committee, the liquid external reserves are completely exhausted and the operating currency proceedings from export do not cover the foreign debt obligations repayment.[20]

Yeltsin is popular. He invests this support in the efforts to avoid the Yugoslav scenario and avert the civil war and hunger that the country has already seen in 1917-1918. This is the true reason of his main decisions made in late 1991 early 1992: The Belavezha Accords and price liberalization.

The easies way to go for Yeltsin, a popular politician, used to the people support, was the way similar to the one that took Slobodan Milosevic in Serbia in late 1980s. He could have made a speech on how unjust the boundaries of Russia are as established by the Soviet government, how indignant Russian people are about Nikita Khrushchevs decision to give the Crimea over to Ukraine, how arbitrary the border with Kazakhstan is and how much determined we are to allow no violation of rights of Russians outside Russia. This would have been a bad adaptation of Milosevics works to the Russian reality. This would have meant bloodshed all over the post-Soviet territory. But instead Yeltsin signed the Belavezha Accords. Its meaning is quite simple: we refuse to revision the present boundaries. In exchange you agree to place under Russian control and relocate to Russia all nuclear assets on your territory.

I dont know a single adventurer in Russian politics who wouldnt make a career telling how Yeltsin betrayed Russias interests having signed the Belavezha Accords.

Yeltsins second key decision made in late 1991 was aimed at resolving the problem of food supplies of major cities. A similar crisis was faced by the Tsars government at the turn of 1917. It was then faced by the Provisional Government and then by the Bolsheviks government.

The Prodrazvyorstka, or food apportionment, i.e. confiscation of grain from the peasantry at fixed prices, was not a Bolsheviks invention; their way of treating this issue was just a repetition of the previous governments steps. Vladimir Lenin was sure that his predecessors had failed fulfill the policy because they had been bound by moral constraint and not ready to use violence unrestrictedly.

He was wrong. In the spring of 1918 the authorities in Petrograd were forced to cut the bread ration to 100g per day. In July 1918 there were only two wagon-loads of grain shipped to Petrograd. The notes made by V. Lenin at that period show that he was desperately trying to understand why his government, ready to use violence unrestrictedly to provide the major cities with bread, was unable to achieve this objective. He could have understood it, had he been given a chance to read the memoirs of food supply professionals of that time published years later.

He would have learned that the most efficient way to raise supplies in the towns situated on main roads leading to Moscow and St.Petersburg was to set up machine-guns at the stations and intercept the wagons of corn meant to supply the capitals.

We knew this history too well. We knew the Soviet leadership had been informed that the country with a huge army and powerful secret service the KGB had no hopes to take grain from the peasantry by force.

Given the fact, the only way was to buy agricultural products at the price acceptable to farmers. This meant continuing price liberalization.

In mid-September 1991 Boris Yeltsin gathered leaders of Russia, described the situation and said that he thought price liberalization had been the only way out available and asked if there were other opinions. All the politicians present understood: to take responsibility for price liberalization meant political suicide. Nobody spoke against the proposal.

After the decision had been taken many close allies came up to Yeltsin with a piece of advice that was practical and politically wise if the government took the decision he should distance himself from it and sack the government. Instead of adhering to this decision Boris Yeltsin tours key Russian cities explaining the people the choice had been made right. This is a rare example of a politician ready to invest his popularity into averting a catastrophe in his own country. One has to pay for making such decisions. Boris Yeltsin handed a country over to his successor in a much better state than he received it.

Diagram 9.

Real GDP Growth Rates in Russia, 1991 2006

Source: Russian Federal State Statistics Service


Diagram 10.

 

Oil Production Annual Growth Rates in Russia from 1991 to 2006, %

 

 

*1st semester, in relation to the 1st semester of 2005

Source: Russian Federal State Statistics Service

 

 

At the same time, in the late 1980-s early 1990-s he became one of the countrys most abhorred politicians. The choice was his.

A period of revolution, and Yeltsins time had obviously been one, does not come easy for any society. This is the time when old institutions have already collapsed and the new ones got no tradition to rely on. It is a period of weak power. Robespierre, Cromwell, Lenin were no weak politicians. Revolution is a time of property unsecured, contracts not fulfilled, wages not paid, and police not being efficient. Institutions of the new regime take up very slowly. In such circumstances a society starts yearning for order at all costs. It is ready to forget about freedoms, to support a leader who will provide a plan to re-establish order. This is the key to restoration regimes being so popular

Todays Russia has lived through radical changes of the late 1980-s- early 1990-s and formed new institutions. Its economy enjoys a sustainable and dynamic growth. Many people are happy to part with the nightmare that had been connected with the collapse of the previous regime. There is no wonder the society feels trust towards the present authorities and demonstrates low demand for political freedoms. This is not a result of Russias specific features and lack of democratic traditions. One needs to re-read newspaper articles, pamphlets and documents of the French government of the Bonaparte period to understand: we are not the first ones to get there.

There is one lesson that political, social and economic history can teach: a post-revolution stabilization in the long run can never be a secure basis for free sustainable regimes. A society exhausted by tumults is ready to refuse freedoms for a while and be grateful to the authorities for at least some order restored. But historical memory is never too long. The society soon begins to think of restoring order as of something quite natural.

Russia is an urbanized and literate society with a level of GDP per capita that makes people demand not only sausage and shoes but freedom as well. Statements that creation of a stable democratic regime in Russia contradicts its national traditions could be acceptable unless there were the example of Taiwan.

The Kuomintang regime was a tough institution copied after the Communist Party of the Soviet Union. Nevertheless, when Taiwan turned into a developed and educated society, it turned out to be impossible to rule the island without establishing any mechanisms of democracy. I am certain that the same will happen in Russia when the country recovers from the trauma inflicted by the collapse of the communist regime. Id like to hope that this time we shall manage without revolutions. They were much too many in Russia in the 20th century.

 



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