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Rewriting Russia's Recent Economic History

Ten years ago this month, Russia's parliament, the Duma, was seeking to impeach then President Boris Yeltsin, initiating a time of stalemate and struggle that ended seven months later when Yeltsin ordered tanks to fire on the Duma's headquarters. Yeltsin's victory settled who ruled Russia and who would determine economic policy. But were Yeltsin's economic policy choices the right ones for Russia?

The move from communism to capitalism in Russia after 1991 was supposed to bring unprecedented prosperity. It did not. By the time of the ruble crisis of August 1998, output had fallen by almost half and poverty had increased from 2% of the population to over 40%.

Russia's performance since then has been impressive, yet its GDP remains almost 30% below what it was in 1990. At 4% growth per annum, it will take Russia's economy another decade to get back to where it was when communism collapsed.

A transition that lasts two decades, during which poverty and inequality increase enormously as a few become wealthy, cannot be called a victory for capitalism or democracy. Moreover, the longer-run prospects are far from rosy: with investment a mere 10% of what it was in 1990, even if that investment is better allocated, how can growth be sustained?