Russia Chooses “the Pinochet Option”
The man who ignited political and social change in Russia wasn’t around long enough to lead it. Mikhail Gorbachev became head of the Soviet Union’s Communist Party in March, 1985, believing the economy stalled and needed change. His solution became glasnost (liberalizing opening up) and perestroika (reconstruction), and Soviet Russia would never be the same again. By the early 1990s the press was freed, the constitutional court was independent, and elections were held for Russia’s parliament, local councils, president and vice-president. In addition, Gorbachev favored a Scandinavian-style social democracy combining free market capitalism with strong social safety net protections. He hoped to build “a socialist beacon for all mankind.” He never got the chance.
While still in office at the 1991 G7 meeting in London, his fellow heads of state delivered a free market message Chicago School-style. Later, the IMF, World Bank and other international lending agencies reinforced it - Soviet-era debts must be honored and aid depended on adopting strict shock therapy rules. The Soviet Union soon dissolved, Gorbachev was out, Boris Yeltsin became Russia’s president, and Chicago School fundamentalism was adopted as needed “reform.” Klein calls what happened next “one of the greatest crimes committed against a democracy (in peacetime) in modern history.”
Yeltsin assembled a team of Chicago School ideologues to remake the economy. Jeffrey Sachs showed up, too, with other US-funded transition experts to help write privatization decrees, launch a New York-style stock exchange, and craft a total radical economic makeover for a country long used to central planning. Only one thing stood in the way - democracy, and a parliament able to vote down what Yeltsin’s team designed. A clash of wills drew closer in the spring of 1993 when parliament’s budget diverged from IMF demands for strict austerity. Yeltsin reacted with the “Pinochet option.” He issued decree 1400 dissolving parliament and abolishing the constitution. Two days later, parliament voted 636 - 2 to impeach him, and battle lines were drawn.
Yeltsin sent troops to surround parliament and cut off power, heat and phone lines. The army backed him and he pressed on. He then proceeded to dissolve all city and regional councils in the country. Then, on October 4, 1993, he ordered the army to storm the parliament, set it ablaze and “defend Russia’s new capitalist economy from the grave threat of democracy.” The assault took about 500 lives, wounded nearly 1000 others with the enthusiastic support from the West in headlines like the Washington Post proclaiming “Victory Seen for Democracy” in Russia. Some democracy.
Yeltsin now had unchecked dictatorial power, the West had its man in Moscow, and shock therapy had an open field to inflict wreckage on Russia’s people who didn’t know what him them as it unfolded. A corporatist state replaced a communist one, and its apparatchiks were winners along with a handful of western mutual fund managers who made “dizzying returns investing in newly privatized Russian companies.” In addition, “a clique of nouveaux billionaires” (17 in all called “the oligarchs”) were empowered to strip mine the country of its wealth and ship profits offshore at the rate of $2 billion a month.
As a result, Yeltsin’s popularity plunged, so he did what all desperate leaders do to hold power with the next election to worry about: He began a war in 1994 in the breakaway Chechen republic killing 100,000 civilians by the late 90s. Elections were held in 1996, and Yeltsin won by overcoming his low approval ratings with huge oligarch-funding and near-total control of television coverage. He then quietly handed power to Vladimir Putin on December 31, 1999, without an election, but with the stipulation he was exempt from criminal prosecution. His legacy was devastating with Klein noting “never have so many lost so much in so short a time.” When Russia’s 1998 financial crisis hit:
• 80 percent of Russia’s farmers were bankrupt;
• around 70,000 states factories had closed;
•an “epidemic” of unemployment raged;
• before shock therapy in 1989, two million Russians lived in poverty on less than $4 a day; by the mid-90s, the World Bank estimated 74 million were impoverished and by 1996 conditions for 25 percent (almost 37 million) Russians were “desperate” and the country’s underclass remained permanent;
• Russians drink twice as much now as before; painkilling and hard drug use increased 900 percent, and HIV/AIDS threatens to become epidemic with a 20-fold jump in infections since 1995; suicides are also rising, and violent crime increased more than fourfold; and
• Russia’s population is declining by 700,000 a year with capitalism having already having killed off 10 percent of it as one more example of free market-inflicted disaster. That’s the brave new world disease spreading everywhere with another scorched-earth stop below. Friedman called it “freedom.”
