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[Second Issue of the Day]
#1
Moscow Times
February 7, 2002
The Russian Success Story
By Anders Åslund
Nothing is as easily taken for granted as success. Only a decade ago, the Soviet Union collapsed. Walking around Moscow at the time, I found people fearful as if they expected the sword of Damocles to fall upon them at any moment.
Prophecies of impending disasters abounded. Civil war was widely predicted. The West mobilized food aid to avert famine, expecting that millions of starving Soviet citizens would flee to the West. Would the 30,000 Soviet nuclear warheads fall into the hands of criminals? Soon, worries about a communist resurgence, or a fascist rise, emerged.
The problems appeared insurmountable. Many argued that Russia's dour history precluded the possibility of democracy or a market economy in the foreseeable future. The most pessimistic alleged that Russia suffered from a unique form of genetic degradation because of Stalin's purges and environmental devastation. The country seemed condemned to ever worse horrors.
The contrast between those premonitions and the current reality could hardly be greater. Today, Russia is a stable, if imperfect, democracy with a popularly elected president, parliament and local governments. About 70 percent of the economy originates in the private sector, and inflation is under control at below 20 percent a year. The foreign debt has dwindled from over 100 percent of GDP to only 40 percent. The concerns about Russia's debt repayment in 2003 are exaggerated and indicative of how few economic problems there are left to really worry about.
As the rest of the world sinks into recession, Russia booms. It has enjoyed an average growth of 6 percent during the last three years. There is good reason to believe that Russia has attained high sustainable economic growth driven by structural economic reforms. However strong Russia's recovery is, the cost of communism remains high, and Russia will need decades to reach a Western economic level.
But rather than grumbling about remaining problems, such as a weak legal system, inefficient public health care and the dearth of small enterprises, we need to take stock of the truly amazing achievements. How were they possible?
Russia's first democratically elected president, Boris Yeltsin, averted civil war by initiating the dissolution of the Soviet Union in December 1991. Thus, he let the other 14 Soviet republics go their own way. Never has an empire ended so peacefully. Later on, Yugoslavia illustrated a bloody alternative.
The fears of famine abated in early 1992 after chief economic reformer Yegor Gaidar freed prices. The shortage of food was never absolute, but the communist state had ground to a halt and could no longer distribute essentials. As anywhere else, free markets could take care of that. Within days, millions of Russians were out trading hoarded surpluses in the streets, showing their entrepreneurial spirit.
Amidst a multitude of collapsing states, loose nukes posed an obvious danger. Fortunately, all the four former Soviet republics with strategic nuclear arms welcomed cooperation with the West. Two U.S. administrations have cooperated deftly with them to disarm that threat, and the Nunn-Lugar program continues to destroy superfluous nuclear arms.
The threat of red-brown revanche was arguably most intimidating. The first Russian parliament was elected in a not-very-democratic way in March 1990 before actual democratization. Absurdly, it could change the Constitution instantly by a simple majority. When President Yeltsin finally dissolved this unrepresentative body, red-brown forces launched an armed uprising in October 1993 that was quashed.
Since then, democratic forces have managed to hold their own in Russia's many free elections. The Communists' popularity is dwindling, and Russian nationalism has never become much of a force. President Yeltsin's liberalism was actually incredible.
Contrary to common prejudice, Western assistance to Russia has been minute. In the 1990s, Russia actually paid back more to Western governments on old Soviet loans than it has received in grants or loans from Western governments, the IMF or the World Bank.
Yet Western advice has been useful. The three main economic aims of Western assistance have been accomplished. Russia has become a market economy; financial stabilization has long been attained; and Russia has undertaken the greatest privatization the world has ever seen in less than a decade. But the achievements are Russian. The West could only be effective when it tried to assist the country's reformers with their programs.
Russia's success was by no means inevitable. Its Western neighbor Belarus failed to liberalize and privatize early. Not surprisingly, its humble reforms have crumbled, and it is now the only remaining dictatorship in Europe. Ukraine chose Russia's reformist road -- but later on -- and its population is still suffering from that unfortunate hesitancy.
The lessons from the Russian transformation are plain. If people get freedom and property, markets and democracy start working. Now, new private entrepreneurs are demanding ever better legal regulation, driving an impressive reform wave. Next, the rule of law is likely to be imposed, and small enterprises will probably mushroom. It is time to realize that Russia is a country that solves its problems with an efficacy and speed that the West can only envy.
Anders Åslund, a senior associate of the Carnegie Endowment for International Peace and author of "Building Capitalism: The Transformation of the Former Soviet Bloc," contributed this comment to The Moscow Times.
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