To be honest, all I really know is that Wikipedia articles, e.g. Privatization in Russia, claim that the economic shock therapy allowed a small group of Russian oligarchs to buy up all the state assets, and this ruined the Russian economy and standards of living.
The story I heard (admittedly, I don’t remember the sources) has always been that post Soviet Russia was corrupt and wasteful in part due to economic shock therapy, rather than that “the reform had been too limited” (only economics, not enough politics).
Do you have any reasons (or sources) which might convince me this story is wrong?
It’s a complex topic, nobody is going to tell you for sure. But having lived through the period, although in Czechoslovakia, which handled it much better than Russia, I do have some intuitons. In essence, you are going to reform the economy. You are going to open the market. Arbitrage opportunities will abound. You are going to privatize. The entire economy will be up for grabs. Everything is going to be super fragile and exploitable for a while. At the same time you have the secret service inherited from the communist era. Communists were tough on crime, so people who would otherwise be mobsters often ended up in secret services. So you have this well-organized quasi-criminal network, endowed with the power of the state. And the secret policemen attend the same parties as the communist politicians who still form a majority in the parliament. Those guys are going to decide on what the law will be. No way that can go wrong.
If the problem seems to be former members of the secret police and siloviki gaining a lot of power (in politics, business, or organized crime), why is the solution a very fast dismantling of government services?
State run industries and services in the USSR were definitely problematic, but on average, they probably weren’t worthless, since the USSR did have enough industrial might to rival the West. My (potentially wrong) intuition is that privatizing or dismantling them very quickly could lead to the loss of important services for the people, and sources of revenue for the government (e.g. the oil and gas companies). It could empower a small number of people who buy up the privatized corporations, potentially worsening the “well-organized quasi-criminal network, endowed with the power of the state.”
Oh, they haven’t had an option. Once private property of the means of production wasn’t banned any more, people started doing all kind of things to get their hands on the state property. Here’s Yeltsin in 1991: “Privatization in Russia has been going on for a long time, but wildly, spontaneously, often in criminal fashion. Today we have to seize the initiative.”
As for the government services: Yes, that was one of the points I was trying to make. Saakashvili could only shut down the traffic police because it did more harm than use. If Doge tried to do the same thing, traffic chaos, traffic jams, pain and eventually electoral backlash would follow. Reforming functional institutions is much harder than reforming dysfunctional ones.
I think we agree that US government institutions are functional and shouldn’t be dismantled or privatized completely. My intuition is that this was true even for the USSR (minus the traffic police maybe). Dismantling and privatizing government institutions very quickly in Russia didn’t stop people from the old communist government regain power and influence, it only worsened the economic situation.
I’m also no expert :/
To be honest, all I really know is that Wikipedia articles, e.g. Privatization in Russia, claim that the economic shock therapy allowed a small group of Russian oligarchs to buy up all the state assets, and this ruined the Russian economy and standards of living.
The story I heard (admittedly, I don’t remember the sources) has always been that post Soviet Russia was corrupt and wasteful in part due to economic shock therapy, rather than that “the reform had been too limited” (only economics, not enough politics).
Do you have any reasons (or sources) which might convince me this story is wrong?
It’s a complex topic, nobody is going to tell you for sure. But having lived through the period, although in Czechoslovakia, which handled it much better than Russia, I do have some intuitons. In essence, you are going to reform the economy. You are going to open the market. Arbitrage opportunities will abound. You are going to privatize. The entire economy will be up for grabs. Everything is going to be super fragile and exploitable for a while. At the same time you have the secret service inherited from the communist era. Communists were tough on crime, so people who would otherwise be mobsters often ended up in secret services. So you have this well-organized quasi-criminal network, endowed with the power of the state. And the secret policemen attend the same parties as the communist politicians who still form a majority in the parliament. Those guys are going to decide on what the law will be. No way that can go wrong.
If the problem seems to be former members of the secret police and siloviki gaining a lot of power (in politics, business, or organized crime), why is the solution a very fast dismantling of government services?
State run industries and services in the USSR were definitely problematic, but on average, they probably weren’t worthless, since the USSR did have enough industrial might to rival the West. My (potentially wrong) intuition is that privatizing or dismantling them very quickly could lead to the loss of important services for the people, and sources of revenue for the government (e.g. the oil and gas companies). It could empower a small number of people who buy up the privatized corporations, potentially worsening the “well-organized quasi-criminal network, endowed with the power of the state.”
Oh, they haven’t had an option. Once private property of the means of production wasn’t banned any more, people started doing all kind of things to get their hands on the state property. Here’s Yeltsin in 1991: “Privatization in Russia has been going on for a long time, but wildly, spontaneously, often in criminal fashion. Today we have to seize the initiative.”
As for the government services: Yes, that was one of the points I was trying to make. Saakashvili could only shut down the traffic police because it did more harm than use. If Doge tried to do the same thing, traffic chaos, traffic jams, pain and eventually electoral backlash would follow. Reforming functional institutions is much harder than reforming dysfunctional ones.
I think we agree that US government institutions are functional and shouldn’t be dismantled or privatized completely. My intuition is that this was true even for the USSR (minus the traffic police maybe). Dismantling and privatizing government institutions very quickly in Russia didn’t stop people from the old communist government regain power and influence, it only worsened the economic situation.