Notes on Liberal Shock Therapy in Russia

Introduction

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• Discussion on the transition of the USSR and the concept of liberal shock therapy.

Historical Context

• End of the USSR often framed as a triumph of capitalism and democracy.
• Events like the Berlin Wall's fall and Reagan's speeches contribute to this narrative.
• The narrative suggests a clear victory of capitalism over communism, leading to the idea of U.S. manifest destiny in spreading democracy.

Reality of the Transition

• The transition from the USSR to modern Russia was marked by violence and suffering.
• The concept of "shock therapy" involves abruptly transitioning from a planned to a capitalist economy, implementing multiple economic changes at once.
• Shock therapy evokes a medical metaphor, but in practice, it leads to severe consequences for the populace.

Shock Therapy Explained

• Shock therapy includes:
  • Removal of price controls
  • Privatization of state-owned enterprises
  • Opening the economy to international capital
  • Implementation of austerity measures.

Political Changes in Russia

• The USSR was illegally dissolved; Boris Yeltsin capitalized on this to push neoliberal reforms.
• Yeltsin's government was marked by undemocratic practices and consolidation of power, leading to internal conflict.
• The legitimacy of the dissolution process is questioned, as the majority of the populace supported preserving the USSR.

Economic Consequences

• January 1992 saw the implementation of shock therapy:
  • Price increases of 250% on basic necessities.
  • Unemployment surged by 56%, with GDP dropping by 14.5%.
  • Hyperinflation reached 1,354%.
• Death rates increased while life expectancy declined significantly.
• By 1992, 85% of Russians were below the poverty line, later corrected to 35%.

Social Impact

• Many Russians resorted to selling personal possessions in makeshift markets to survive.
• Organized crime flourished due to chaotic economic conditions.

Privatization Process

• Rapid privatization resulted in a significant concentration of wealth and creation of a Russian oligarchy.
• 47,000 state companies were privatized in 1992, with shares sold quickly and often benefiting insiders rather than the general populace.
• The process was characterized by sloppiness and corruption, driven by a push for speed over fairness.

International Influence

• The IMF played a crucial role in enforcing neoliberal reforms by withholding funds until changes were made.
• Yeltsin's consolidation of power included ordering military actions against his own legislature.

Democracy and Economic Control

• Democracy was not a goal; rather, the aim was to eliminate labor power and establish capitalist hegemony.
• The resulting political and economic structures led to sham elections and a capitalist-dominated economy.

Long-term Consequences

• The concentration of wealth and dependency on oil and gas shaped modern Russian capitalism.
• Current geopolitical conflicts stem from these economic foundations, leading to human suffering.

Conclusion

• True democracy and peace have not emerged from capitalism, which historically leads to repression and economic domination.
• Call for a reevaluation of the impact of shock therapy on Russian society and its future.