With the recent disappearance of Mikhail Gorbachev, the world press has lingered to reflect on the role of the last leader of the Soviet Union in particular in relation to today's Russia which was born under the pressure and from the ashes of his admirable and convinced attempt at reform, the combination, perhaps naive, perestroika -glasnost'.
We have often read of the confrontation, actually quite merciless, between the last Soviet leader and the current tenant of the Kremlin.
The illusion of the “Reconquista”
Many have observed that Putin is just doing what Gorbachev had miraculously and with unspeakable courage avoided, namely a dissolution of the Soviet empire in a bloodbath with immense destruction such as we see today in Ukrainian cities. Not even the British had managed to do better with their empire: there had been some "killing", especially in India.
In recent months, Putin and his nomenklatura are experiencing how heinous and perhaps downright impossible a sort of "Reconquista" is, a preposterous idea that is equivalent, no more, no less, to turning back the clock of history. They should ask Christopher Nolan how to do it, since it often happens in his latest film, Tenet. But that is fiction, albeit a first-rate one.
With this, even the great world leader Gorbachev failed and his failure has reverberated over the years not only within the confines of the former Iron Curtain but throughout the geopolitical chessboard of the world.
The failure of Gorbachev's economic reforms
A historian like Giuliano Procacci, who has extensively studied Soviet power, effectively describes the puzzle of the economy during the Gorbachev years in his History of the XNUMXth Century. He writes: «Neither Gorbachev, who had studied law, nor most of his closest collaborators, except Nikolai Rizhov, possessed specific skills in economic matters and were therefore up to tackling such a demanding task. In fact, it was a question of reconciling the criteria of efficiency with the demands of participation and this has never been an easy thing. The main reforms they launched between 1987 and the beginning of 1988 were three… None of the three produced the results they expected or hoped for. The ruble began to lose value ei taxi drivers of Moscow were demanding to be paid in foreign currency and, I suppose, so were the growing number of prostitutes».
It was now at economic collapse. Procacci writes again: «In March 1991 the miners went on strike again and the economic situation entered a phase of progressive deterioration to the point that at the end of the year industrial production was down by 18% and agricultural production by 17%».
Gorbachev's reform attempt, therefore, definitively cracked on the not a little neglected and badly approached reform of the Russian economy. This «spectacular failure on the economic terrain – he writes for example Paul Krugman in an editorial in the “New York Times” – influenced the birth and development of the Russian Federation and paved the way for Putinism».
The decline of an economic power
But how is it that we get to Putin Krugman comes to ask? First of all, a little history, writes the Nobel Prize-winning economist: «Today everyone considers the old woman Soviet Union, with its centrally planned economy, as a humiliating failure. But it wasn't always looked upon that way. In the 50s, and even the 60s, many people around the world viewed the development of the Soviet economy as a success story; a backward nation had transformed itself into a major world power (at the sacrifice of millions of people, but who counts them?) In the late 70s, the Soviet Union's attempt to reach Western levels of wealth seemed second only to the Japan".
Bottom Stalin and its "economy in one country" there had really been an incredible industrial growth of the USSR as we will later see from the striking successes of the Red Army in the Second World War. Those astonishing performances could only be explained by the existence of a massive economic-industrial complex behind it.
The crisis of the planned economy
In the 70s, however, this growth stopped and the advancement of technology, which had been such a driving force in the country that it overtook the Americans in the early XNUMXs, came to a standstill.
According to Krugman it is right there economic stagnation of the last phase of the Brezhnevian era which explains the rise of Gorbachev. In reality it was much more of a stagnation or a cyclical phenomenon. What had come to a standstill was precisely the foundation of the Soviet economic system, namely the concept and practice of the centrally planned economy.
A condition, as Procacci also points out, which Gorbachev failed to remedy with the same abnegation that he lavished on political and institutional reform. Krugman writes: “As the Soviet Union crumbled, Russia moved away from socialism and moved towards a market economy. And the results were disastrous."
The disastrous transition to a market economy
And in this regard, the data is truly merciless. The gross domestic product Russia's real per capita fell by more than 40%, worse than America's during the Great Depression. To return to the value of per capita GDP in 1990, the Russians will have to wait 15 years, only in 2005 will that level be reached and then definitely improved.
Now these data must be taken Cum grain salis, since the statistics of the communist era do not reflect the actual economic trend both because they included goods that no one actually consumed, and because the authorities used to inflate the actual level of the economy's values.
There are, however, other important indicators of the real collapse of the living conditions of the Russian population. Among other things, the drop in life expectancy. Again, it took something like 25 years to return to the 65-year life expectancy in 1985.
Furthermore, from 1991 to 1993, Russia went through a period of very high inflation, which peaked at 2500 percent. Krugman, in writing this figure, warns: "And no, I didn't add any zero by mistake."
In short, the transition from socialism to capitalism, from the centralized to the market economy took place in Russia in a very messy and botched way compared to the transition processes of centralized economies such as the Polish or Chinese ones, as shown in the graph below.
What went wrong?
There is intense discussion about what happened during the XNUMXs and in the first decade of the XNUMXs, that is, in the chaotic period of Boris Yeltsin and in the more stable period of Vladimir Putin. There is still no unanimous conclusion, but Krugman identifies some important points in the process of liberalization of the Russian economy.
- The privatizations took place in a partial way and were not systematic. This led to a detrimental combination of the state-owned economy and the private sector resulting in the development of the worst of both systems: corruption e inefficiency on the one hand, predatory spirit on the other.
- The privatizations took place within a institutional void, when institutions are an essential component of the market economy that needs them to function profitably. The market economy cannot be separated from the rule of law and economic law, i.e. from regulations, certainty of investment and rules to avoid and punish incorrect and predatory individualistic behaviour.
- Such unregulated privatizations created monstrous profits monopolies and powerful monopolists, the modern day equivalent of robber barons – the oligarchs of the Gilded Age.
Krugman writes: «“Property is theft!” proclaimed the anarchist Pierre-Joseph Proudhon. Well, in Yeltsin's Russia much of it was. And the power of the oligarchs undoubtedly upset the economic policy of post-Soviet Russia."
An example to put in the dump of history
Russia in the 90s offers a concrete lesson on how a transition to a market economy should NOT happen.
The troubles of the 90s led to the financial crisis in 1998. After the crisis, the Russian economy stabilized and started to grow again.
«Unfortunately, says Krugman – he did it under the guidance of a person named Vladimir Putin. It can be debated whether the economic recovery required the renunciation of democracy, but this is what really happened".
The depressing historical truth is that Gorbachev's political legacy, to an important extent, is today undermined by his failed attempt to reform Soviet Russia's economy. It was not an easy task and perhaps it simply could not be done within the system born in October 1917.
. . .
Sources:
Giuliano Procacci, History of the XNUMXth century, Milan, Bruno Mondadori, 2000
Paul Krugman, Wonking Out: The Nightmare After Gorbachev, "The New York Times," September 2, 2022
James A. Baker, III, Why Gorbachev Matted, "The New York Times," September 2, 2022
Maureen Dowd, The Day Gorbachev Made DC Stand Still, “The New York Times,” September 1, 2022
Gideon Rachman, Putin, Gorbachev and two visions of Russian greatness, “The Financial Times”, 2 September 2022
The editorial board, Gorbachev's legacy lives on despite Putin's repression, “The Financial Times”, 1 September 2022
Polina Ivanova and Max Seddon, Putin dismantles 'naive' Gorbachev's legacy of freedom, “The Financial Times”, 2 September 2022
