RUSSIA'S “GREAT REFORMS”

Russia's “Great Reforms” created new fault lines while not healing the old'.

Russia's “Great Reforms” created new fault lines while not healing the old'.

A decade ago, the Russian economy was practically flat on its back. Today, the Russian ruling class wields growing economic power in the world and is pursuing a strategic agenda that is coming into sharper conflict with U.S. imperialism. In Russia, a new regime, led by Boris Yeltsin and backed by the U.S., sought to restructure the Russian economy along lines similar to the institutions and practices of the Western capitalist countries. It threw the doors wide to Western investors. A new Russia was emerging within a framework of U.S. global dominance. (Kees, 2006)

The rapid restructuring of the Russian economy did not lead to economic recovery and growth. Foreign loans and foreign direct investment did not materialize on the scale anticipated by Russia's rulers. Corruption and short-term profit grabbing mushroomed. Infighting within the Russian capitalist class escalated. Industrial investment dropped off sharply. Russia entered into crisis.

The statistics are staggering: between 1991 and 1997, Russia's economic output plummeted by more than 40 percent (a decline greater than that in the U.S. during the Great Depression of the 1930s). Unemployment averaged 13 to 15 percent.

This was the dynamic in play: Russia's inefficient and chaotic economy could not competitively and profitably “plug in” to the international economy; at the same time, instability in the world capitalist economy was reacting back on Russia. (Lieven, 1989)

In the summer of 1997, East Asia was rocked by a major financial crisis. Investors had pulled out of real estate, stock, and currency markets. Now pressure was mounting on Russia. Loans from foreign banks and governments were coming due, but there were few signs of economic growth.

Russia could not meet its loan payments. Investor confidence eroded quickly. And on August 13, 1998, the Russian stock, bond, and currency markets collapsed. Russia's currency, the ruble, lost 60 percent of its value just over several months. Five of the ten largest banks went under. Real wages plummeted by two-thirds. Yeltsin had lost just about all credibility.

Russian monopoly capitalism integrated into this more globalized world economy but suffered two disadvantages. First, it was integrating from a position of internal weakness. The Russian economy was plagued by industrial inefficiencies that carried over from the 1970s and 1980s. And the privatization and price deregulation reforms of the Yeltsin era had initially destabilizing effects. (Saunders, 1992)

Second, the external international context was unfavorable for Russian capital. Turmoil in international financial markets made it difficult to stabilize the ruble and to attract foreign investment. World prices for commodities like oil, natural gas, and other raw materials that are plentiful in Russia were low. This put a crimp on Russia's ability to boost export earnings. (Pipes, 1974)

The period of the 1990s was also one in which U.S. imperialism under then-President Clinton was aggressively seeking to restrict Russian imperialism's maneuvering room. In particular, Clinton was pushing NATO, the ...