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Great Pain with Little Cure


However, the political opposition and the broad mass of citizens, whose standards of living plummeted, appraised the results of the reform very differently. The “shock therapy” strategy put intolerable strains on the economy and society. It resulted in a rapid impoverishment of the majority of the population. People were subjected to dubious privatization schemes, their lifelong savings made worthless by inflation, and millions suffered from the nonpayment of wages and pensions.

Worthless Soviet roubles

The radical monetarist approach advocated by Gaidar failed to achieve its express aim of preventing inflation and showed a complete indifference to the plight of average citizens. Shops almost overnight became stocked with imported goods, which most people were unable to afford. All this abundance only irritated and generated social tensions.

Russia’s industrial output halved between 1989 and 1994, a sharper contraction than the United States suffered during the Great Depression of the 1930s. A drastic fall in the standard of living for the majority of people was accompanied by the emergence of the super-rich “new Russians,” creating an abyss between the very rich and the very poor. The vast majority of the population was impoverished and deprived of a stake in privatized property.

“Shock therapy” was more like a surgical operation on Russia’s peculiar economic and social organism. It inflicted great pain but gave little cure. It was a Bolshevik-style attempt to destroy the old economic system to its foundations in the hope that the phoenix of the market would rise from its ashes.

This, however, did not happen. The reformist strategy of the government was a utopian attempt to achieve a “great leap” into capitalism. In real life it led to the appearance of such unattractive characteristics of Russian capitalism as the concentration of former state assets in the hands of a small group of financial and industrial magnates and the economy’s nontransparent and semicriminalized nature.

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Great Leap to Capitalism

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