Yeltsin’s words and his taking on of the premiership left no doubt about who had willed the turnabout in policy. But he held open an escape route. In mid-1992 he was to raise Gaidar in rank to acting prime minister. By the end of 1992, Gaidar and his benefactor from 1991, Burbulis, were both out of government. Yeltsin professed that he always saw the Gaidar-Burbulis grouping as “a kamikaze crew that would step into the line of fire and forge ahead… that would go up in flames but remain in history.”69 Did the warriors know they were taking to the sky on a suicide mission? Yeltsin says he never discussed it with them; the head kamikaze says he did. In their getacquainted meeting, asserts Gaidar in his memoir of the 1990s, he warned Yeltsin that once the most unsavory decisions were behind them the president might have to dismiss the government. Yeltsin “gave me a skeptical smile and waved his arm, as if to say it would not come to that.”70 Either the president was holding his cards close to his vest or, more likely, he was not yet certain how it would all play out.
The decisive break in Yeltsin’s October manifesto on reforming the economy, as announced to the Congress of Deputies, was in the realm of prices. Ninety percent of retail prices in Russia, and 80 percent of wholesale prices, were to be freed from state dictate and left to the impersonal forces of supply and demand. Yeltsin dressed down aides when the draft of the speech, in a typing screw-up, omitted the section on price deregulation.71 Another priority was macroeconomic stabilization through slashing the budget deficit and cutting back on the emission of money and credit. Still another was privatization of state property, to forge “a healthy mixed economy with a strong private sector.” Half of all small and medium-sized firms were to be turned over to nonstate owners within six months; large enterprises were going to be refashioned as joint stock corporations, shares in which would later be distributed and sold at supply-and-demand prices. Yeltsin described these actions as proactive and equally as reactive to developments. Members of the nomenklatura had already been sidestepping price controls, trafficking on the black market, and speculating in currency. And they were furtively amassing money and unofficial rights over, and rents from, state property: “Privatization has been going on in Russia for some time, but in a wild… and often criminal fashion. Today we need to seize the initiative, and we are intent on doing so.”
Yeltsin tended most meticulously in the speech to the politics of the breakthrough. “The experience of global civilization” showed that Russia’s plight was “difficult but not hopeless.” The nation that overcame Napoleon and Hitler had special reserves that would see it through: “Russia has more than once in its rich history shown that a crucible period is when it is able to mobilize its will and its many powers, talents, and resources in order to lift up and strengthen itself.” All could pull together, he said, in the knowledge that relief was in sight. “The uncertainty will be gone and the prognosis will be clear.”
When Yeltsin got around to owning up to and distributing the costs of his changes, he was on thin ice. He had been claiming since the 1990 election campaign that he could move Russia toward the market—he did not apply the word kapitalizm, so unmusical to Soviet ears, until his second term—without people of ordinary means losing out. In the 1991 presidential campaign, he flailed at Gorbachev for the administered increases in consumer and food prices that Apriclass="underline" “They ought not to have begun economic reform by unscrupulously laying all the hardships on the population.”72 Now that he answered for policy, he had to sell belt-tightening. “It will be worse for everyone for approximately a half-year. Then prices will go down, the consumer market will fill with goods, and by the autumn of 1992… the economy will stabilize and living standards will slowly improve.”73 The one round year seems to have been mostly a figment of his imagination, and was more optimistic than Five Hundred Days, which had posited a two-year stabilization period. Gaidar maintains that two or three years were the minimum needed for growth to return and denies that he misled Yeltsin as to the time needed.74
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.