Suddenly everyone is asking, Who lost Russia? . . .
Unfortunately, this important debate is being conducted like a kangaroo court. Not only have the accused— both Americans and, especially, Russians—been tried and found guilty in absentia, but, contrary to the Anglo-Saxon legal tradition, the discovery stage, when the underlying facts are established and each side presents its version of events, has been skipped entirely. Before the sentence is handed down, ought we not at least try to find out whether, in fact, a crime has taken place: Has Russia, indeed, been “lost” to the cause of the free market and democracy?
A hodgepodge of facts, half-truths, clichés, and distortions, the case for the prosecution comes down to a few simple postulates. First, free-market reforms have failed to make Russia a prosperous country with a growing GDP. “Reform” (a word rarely used without quotes these days) was nothing but the “entrenchment of a kleptocracy in which corrupt officials ally with a few business magnates to send wealth out of the country,” according to Fritz Ermarth in the New York Times of September 12 . “Reform” never enjoyed even a modicum of popular support but was forced on a defenseless country by “reformers around Yeltsin” and their Western, especially International Monetary Fund, advisers with the connivance of the White House. After eight years [since 1991], goes the indictment, Russia still does not have even an approximation of a market economy. Instead, “reform” resulted in universal impoverishment. Today’s Russia is a handful of thieving “oligarchs” feasting amidst the general penury.
In the political sphere, democratic institutions have not taken root. This “Weimar Russia” is an unstable, “failing state,” in the words of [foreign policy expert] Condoleezza Rice, . . . who has mentioned Russia in the same breath as the “failed states” of North Korea and Iraq. As House [of Representatives] majority leader Dick Armey so elegantly put it, “Russia has become a looted and bankrupt zone of nuclearized anarchy.”
In foreign policy, asserts the prosecution, [Russian president] Boris Yeltsin has not delivered where America’s core national interests are concerned, and the “investment” in him by the Clinton administration was wrong and a waste. All these failures have soured the Russians on capitalism, democracy, the West in general, and the United States in particular and made them ripe for Communist revanche, anti-Western nationalist dictatorship, or an even scarier combination of the two.
Amnesia About Russia’s Past
One of the most puzzling features of the argument that Russia has been “lost” is its ahistoricism. Post-Communist Russia is discussed as if it had no past. There seems to be total amnesia about the conditions that were so memorably exposed by glasnost in the waning years of the Soviet Union. For instance, in 1989, the last year of relative stability before the crisis became uncontrollable, the average salary in the Soviet Union was 200 rubles a month: $33 at the official exchange rate, $13 on the—still illegal—free currency market. (The average salary in Russia today [in 1999] is $75.) The Soviet Union was in 77th place in the world in personal consumption. Of 211 essential food products, only 23 were regularly available in state stores. Russians spent between 40 and 68 hours a month in queues. . . .
According to the minister of health, a total of 1,200,000 hospital beds (35 percent of the total) were in facilities with no hot water; every sixth hospital bed was in a facility with no running water at all; 30 percent of Soviet hospitals did not have indoor toilets. The Soviet Union had a higher rate of infant mortality than 49 nations, behind Barbados and the United Arab Emirates. Half of Soviet schools had no central heating, running water, or indoor toilets.
By the time Boris Yeltsin took over Russia in the fall of 1991, the country’s economy was collapsing. Domestic production declined by 13 percent that year, the budget deficit soared to 30 percent of GDP, the annual inflation rate was 93 percent, hard currency and gold reserves were nearly exhausted, and the USSR defaulted on its international loans. No one who was in Moscow in the fall of 1991 will ever forget the absolutely bare shelves of the stores, the ration coupons for sugar, tobacco, and soap, and the sacks of potatoes stored on the balconies of apartment buildings in the center of Moscow, as their inhabitants prepared for famine.
Brief as it is, this sketch belies the postulate of a Russia “ruined” by reform. The picture we are offered of a handful of oligarchs presiding over a sea of starving millions is an equally crude caricature. Today the queues in stores—bane of four generations of Russians—have disappeared, and Russian shops, for the first time since the mid-1920s offer a cornucopia of quality food and goods. In 1997, for the first time in 40 years, Russia was self-sufficient in grain. In fact, it exported millions of tons of grain in 1998, even as agrobureaucrats in the Kremlin and the U.S. Department of Agriculture were arranging shipments from the United States to meet a nonexistent emergency.
While it is true that millions of people—especially retirees, collective farmers, and workers in the mammoth military-industrial complex—were impoverished by galloping inflation and cuts in state spending, millions more—urban, younger, and better educated (who voted for Yeltsin in overwhelming numbers in the 1996 presidential election)—saw a dramatic improvement in their professional and personal lives. For the first time in Russian history, there is a sizable middle class and intelligentsia outside state employ. . . .
The new Russian middle class suffered greatly in the [monetary] crisis of 1998, and it may take a few years for the standard of living to return to pre-crash levels. Yet there is no reason to doubt that this will happen. It may currently be all the rage in Washington to speak of Russia’s “virtual economy,” but we are suddenly discovering that a Russian market economy does exist after all and, despite its deep distortions, responds to economic stimuli much as any market economy would. In full accordance with supply-side theory, the continuing absence of price controls, a cheaper but stable national currency, and a drastic reduction of imports have unleashed domestic production. Russian-made food and goods fill the stores. Industrial production (or rather its registered and taxable part) was 4.5 percent higher in the first six months of 1999 than in the first six months of 1998, and it grew even faster after that. Contrary to many a forecast, there is no starvation. . . .