The price reform, postponed two weeks at the request of the Ukrainians and Belarusians, clicked in on January 2, 1992. Budgetary restraint took effect forthwith. On January 29 Yeltsin’s Decree No. 65, “On Freedom of Trade,” pulled the plug on a state monopoly dating back to the late 1920s. Outside of a few interdicted items like firearms and narcotics, Russians were at liberty to buy and sell anything without asking permission; in effect, exchange had been decriminalized. One of Gaidar’s first decisions as deputy premier was to select another youthful economist, Anatolii Chubais from St. Petersburg, as chairman of the State Property Committee and ask him to work out a design for denationalization. Chubais confected a white paper in December 1991, with the preferred formula to transfer assets to “work collectives” (employees and managers) and to call off government output quotas and subsidies. In the first half of 1992, Gosplan, Gosstroi, Goskomtsen (the State Prices Committee), Gossnab (the State Supplies Committee), Gosagroprom (the State Committee for the Agroindustrial Complex), and their ilk were disestablished, while all except for a few of the Soviet industrial ministries were stripped of their command rights and reorganized as holding companies. On August 20, 1992, a year after the 1991 coup d’état, Yeltsin trumpeted a program to call forth “millions of owners rather than a few millionaires” by distributing vouchers citizens could use to purchase equity in 15,000 government-owned companies.
The immediate aftershock of these measures, as is well known, was fearsome. Counter to Yeltsin’s rubicund forecast, conditions did not meliorate in the autumn of 1992, or the next year, or the year after that. Consumer prices rose 296 percent in January 1992; inflation hit 2520 percent for the year 1992 and thereby shredded the ruble savings of millions—most of them in Soviet paper printed in the Gorbachev years and stowed under the mattress or in bank accounts because there was nothing in the shops to buy with it. Real national output fell off every single year through 1996 (by 14.5 percent in 1992, 8.7 percent in 1993, 12.7 percent in 1994, 4.1 percent in 1995, and 3.5 percent in 1996), ticked up (by 0.8 percent) in 1997, and fell again (by 4.6 percent) in 1998 to a low point of 40 percent less than it had been in 1989 and 35 percent less than in 1991, the year Yeltsin took office. Fear of layoffs was pervasive in the workforce, as factories were weaned off of state subsidies and contracts and the government budget was squeezed. In 1993 and 1994, the withholding of wage payments and government pensions and allowances became common practice, with the arrears for some extending months and even years.75 As downturns go, Russia’s in the 1990s ranks with the Great Depression of 1929–33 in the United States.
The statistics on gross domestic product and consumer welfare provoked a political firestorm then and cast a pall over later evaluations of the Yeltsin era. They are why no defender of him and his reforms fails to leaven bravos with caveats.76 Recall that it was Yeltsin, as he went on pension in 1999, who vented remorse at having let down the buoyant hopes that Russia could coast from its despotic past to a bountiful future.
Yeltsin’s critics in the West, who are legion, rely on the economic and socioeconomic distress of the time to fuel their indictments. One oft-voiced criticism rivets a Burkean animus against social engineering to left-of-center political values. Historian Stephen F. Cohen, for example, argues that Gorbachev had shown Soviet communism to be reformable and that piecemeal adaptation of the old system, statist and respectful of Russian custom, was preferable to throwing caution to the winds. The drive to rebuild Russia from the ground up, abetted by an evangelizing America, was guilty of the “de-modernization” of a great industrial nation: “Never . . . have so many fallen so far.”77 Political scientist Peter Reddaway and Russian coauthor, Dmitri Glinski, agree with Cohen on the noxiousness of the changes of the 1990s (Russia was “slowly succumbing to shock therapy’s sequelae while the world watches”), but save their sharpest harpoons for the “market Bolshevik” techniques used to bring them about. Yeltsin and company, in the service of anti-Marxist objectives, were like the Marxist revolutionaries of old in exemplifying “the self-confident, almost messianic vanguard mentality of a self-anointed elite that sees itself entitled to impose ‘progress’ and ‘development’ . . . on the ‘backward’ majority.” Shock therapy, they say, was an “administrative revolution from above” comparable to Stalin’s collectivization of Soviet agriculture.78 The titles of the two books—Failed Crusade: America and the Tragedy of Post-Communist Russia, by Cohen, and The Tragedy of Russia’s Reforms: Market Bolshevism against Democracy, by Reddaway and Glinski—give away their contents.
The changes Yeltsin set in train in 1991–92 deserve more nuanced analysis than this. There are several perspectives from which this is true. One pertains to the circumstances of the reforms. The slump of the 1990s was to be bad but not as bad as frequently depicted, and the government data that track it exclude the illegal and informal sector. Economic shrinkage was ubiquitous in the post-communist space in Eastern Europe and Eurasia. In that the coming apart of the Soviet Union wreaked havoc on supply networks and trade flows among the CIS nations, they were all at a disadvantage compared to their neighbors west of the pre-1991 Soviet border. On output loss, Russia fared perceptibly better than the CIS average, and was not in a league of its own.79 It did so despite unique handicaps going into the reform maelstrom. Russia was saddled with 80 to 90 percent of the bloated military-industrial complex of the Soviet Union, demand for whose wares tumbled after the Cold War. It would have had an easier time of it had it not agreed to bear all of the USSR’s debt, the bulk of it incurred by Gorbachev, and if it had controlled its money supply out of the starting gate and not waited until 1993 or 1994 for the ex-republics to jettison the ruble. Russia would have been much better off if world prices for oil, its most precious natural resource, had not dipped below $20 a barrel for most of the post-Soviet decade. The petrodollars that producers were to be flooded with in the 2000s would have limited the sag in Russian GDP and kept the Yeltsin government out of the red.80
Another corrective comes from pondering the Yeltsin revolution in time. The troubles that stimulated his attack on communism did not come out of thin air. Derived from defects hardwired into it by Lenin and Stalin, they heaped up over decades. Well before Yeltsin moved from Sverdlovsk to Moscow in 1985, system decay was manifesting itself in economic decline, social division, and anomie. Once the myopia about these problems was dispelled, large segments of the elite and the population chafed, as they were bound to, at what they took as half-solutions to them. Panglossian assessments of the reformability of the Soviet regime elide this impatience and the rudderless changes and mismanaged mini-reforms that made the everyday life of most Russians bedlam in the perestroika years. Reforming the system from within, as Gorbachev meant to do, was a respectable choice. Heading for the exits was a cleaner and better one.81