Volume 43, Number 171,
October-December 2012
Russia: Strengths and Weaknesses
Arturo Bonilla
The Arrival of Capitalism in Russia

The sudden and disorderly incorporation of the Soviet Union to capitalism or the transition to a market economy was done in deplorable conditions, in the middle of social and political disjointedness in previously existing economic relationships between Russia and the rest of the Soviet republics, as well as within each of these Soviet republics.

Russia and the rest of the now ex-Soviet republics8 majorly took apart their ministries, and the new governments drove an accelerated wave of privatizations of numerous public enterprises, in the middle of losing control of the previous mercantile distribution networks, both for inputs as well as distribution of consumer products.

So it was that in 1991, Russia entered the phase of capitalism, which set off the following consequences:

Private appropriation of a large part of the public assets, done by high-ranking members of the Communist Party and by well-known public officials. This may be the largest privatization in the history of the world. It would be difficult to find a privatization of the scale carried out in the old Soviet Union in any other country.

Accelerated impoverishment of many salaried workers, with large salary reductions and sudden losses of benefits, with frequent non-payment of salaries, but also with massive firings and a worsening of the scarcity of consumer goods and inflation.

There is a series of collateral phenomena resulting from these two dominant aspects in capitalist Russia, such as the gradual inflow of foreign capital from Western multi-national companies, the lack of education at all levels, the numerous appearance of beggars, the desertion of soldiers due to the lack of salary payment, accompanied by the proliferation of clearance prices for many weapons, including Scuds (tactical ballistic missiles), for example. These sales were seriously worrisome to the Pentagon, among other high commands of the armed forces of Western countries, with the risk that these weapons could fall into the hands of terrorist groups. Likewise, more scientists immigrated to Western countries. Alcoholism was already a serious problem in the Soviet period, but with the economic, social and political debacle, it grew to impressively high levels. The number of drug addicts also increased. All of this had an influence on reducing the birth rate and increasing the death rate due to lack of medical attention, which resulted in a smaller Russian population.9

It would not be an exaggeration to say that symptoms of social breakdown began to appear, like skinheads and Nazis, and that there was ethnic discrimination against citizens of the ex-Soviet republics who were looking for work in Russian cities, due to lack of employment in their own countries.

Of course, this wave of tragic occurrences was also present in the rest of the ex-Soviet republics, with even more disastrous effects. For example, in the republics of Lithonia, Estonia and Lithuania, there were citizens of Russian origin who frequently faced discrimination from nationals of those countries.

Western propaganda sang the praises of capitalism and had an effect on Russia. Essentially, numerous segments of the Russian population and the rest of the public had fed the illusion that a return to capitalism — as proclaimed by Western media — would mean a great advance in their income levels, and as such would improve their standards of living and well-being, all in the framework of full freedom.

For that reason, at the beginning of the debate they surely supported changing Russian society and economy. These illusions rapidly faded away in the face of the sad and harsh reality of the environment they were confronting. Then they began to long and wish for a return to the previous situation. However, these desires fell flat in the face of political reality, which kept driving towards full installation of capitalism. Powerful internal interests pushed in that direction. The change was, as such, irreversible. There was no going back. That is how capitalism arrived in Russia.

By then, its fate was marked by the urgent need to compete with other countries, and to try to create a space in international trade. There were three routes by which Russia managed to find a place in the global market, which were already used during the Soviet period: selling crude oil in the international petroleum market,10 selling weapons11 and selling minerals.12 That was how Russia received currency to pay for imports, mainly necessary imports to complement demands for food, machinery and technological equipment to modernize some industry sectors.

Regarding the Yeltsin period, analysts like Jesús de Andrés and Rubén Ruiz conclude the following: “it was characterized by the dissolution of the Soviet Union, the formation of a new political and economic system, the fight for power and the consolidation of his position for the country.” They question his administration, indicating the following: “The result of his term, in both political and economic terms, cannot really be considered positive, unless an interested valuation of the Soviet implosion and transition to capitalism, without nuances, is done. His erratic policies, poor image, health problems, economic crisis and the absence of a governmental program undermined the popularity he had won while opposing Gorbachev.”13 There were dramatic drops in economic growth during his presidential term, with the most severe drop in 1992 at -14.5%.

8 The ussr was divided into 15 republics: Armenia, Azerbaijan, Belarus, Estonia, Georgia, Kazakhstan, Kirghizstan, Lithonia, Lithuania, Moldavia, Russia, Tajikistan, Turkmenistan, Ukraine and Uzbekistan.

9 The Russian population went from 146.3 to 141.9 million people between 2000-2010. See http://datos.bancomundial.org/indicador/sp.pop.totl

10 The strategic importance of hydrocarbons in Russia lies in the fact that in 2010 it occupied the second place worldwide in proven petroleum reserves with 60 billion barrels, the first place in natural gas, with 1.680 trillion cubic feet, first place in crude oil production, with 10,200,000 daily barrels, above Saudi Arabia and second place in gas production, with 60.438 billion cubic feet, just below the United States. Data taken from pemex, Anuario Estadístico 2011, International Comparisons.

11 Regarding global export of large conventional weapons, Russian was in second place in 2009, reaching 23% of total exports. See sipri Yearbook 2010, Armaments, Disarmament and International Security.

12“As (...) one of the countries with the most land, the Russian Federation has some of the most rich reserves of natural resources. The abundance of these resources has not only determined the country’s low dependence on foreign resources, but has also turned these resources into one of the country’s main economic pillars, which today is clearly oriented towards exporting. According to Yuri Tretnev, Minister of Natural Resources and Ecology, production of minerals and raw materials represents 60% of all income for the Russian budget.” See Social Indicators of the Russian Federation, at www.cidob.org/es/.../file/Rusia_ indicadors+economicosociales.pdf-Similares, p, 516.

13 Jesús de Andrés, Universidad Nacional de Educación a Distancia (uned) and Rubén Ruiz, Universidad Nacional de Educación a Distancia (uned) in “And Putin found the way. Institutions and the political regime in Russia in the twenty-first century.” See unisci Discussion Papers, num. 17, May 2008, issn 1696-2206, p. 12.

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PROBLEMAS DEL DESARROLLO. REVISTA LATINOAMERICANA DE ECONOMÍA, Volume 49, Number 195 October-December 2018 is a quarterly publication by the Universidad Nacional Autónoma de México, Ciudad Universitaria, Coyoacán, CP 04510, México, D.F. by Instituto de Investigaciones Económicas, Circuito Mario de la Cueva, Ciudad Universitaria, Coyoacán,
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