A recovery the West has never forgiven Russia
In her superb book – The Shock Doctrine (2007) – Canadian writer and journalist, Naomi Klein, sets out in forensic detail the way in which the Russia that emerged from the dissolution of the Soviet Union in the early 1990s was used as a laboratory by American free market think-tanks, gurus, and economists. They descended on the country while it was still reeling from the shock of the implosion with the objective of setting up a pure market economy shorn of any and all state intervention, wherein the market would decide who worked and who did not, who could heat themselves and who could not, who ate and who starved – ultimately who lived and who died.
The record shows that many did starve, did go cold, and did indeed die.
The beating heart of the shock doctrine methodology and ideology applied to Russia in 1991-92 was from the economics department of Chicago University, commonly referred to as the Chicago School. The major influence within the Chicago School was the late Milton Friedman, the man credited with devising the architecture of neoliberal economics based on monetarism. This is an economic model which places a focus on controlling the money supply as a way to anchor inflation, which he and his co-thinkers viewed, and still view, as the enemy of economic growth.
The human factor was relegated in order of importance by comparison, which meant ending any pretension of an economic system serving the interests of society. Now, under Milton Friedman’s theory, society existed to serve the economic system. The challenge, given the severe impact such an extreme economic model would have on the lives of millions, was how to implement it successfully with minimal resistance from the people it was harming. The solution was encapsulated in his statement: “Only a crisis - actual or perceived - produces real change.”
In her book, Klein places the economic and social shock therapy administered in Russia at the behest of this group of Chicago School luminaries in historical context alongside previous examples where it was applied. She explores the chaos to beset Chile in 1973, after the democratic socialist government of Salvador Allende was brought down by a brutal right wing coup led by General Augusto Pinochet: South Africa after the end of apartheid: Poland post the collapse of the Eastern Bloc: and Iraq after the US/UK war on the country in 2003.
What all of these countries had in common, along with the others that were prey to the imposition of this extreme free market economic model, was that at the time they were in a state of crisis, which had the effect of rendering their political institutions, economies, and people vulnerable to the kind of shock therapy diagnosed by disciples of the Chicago School.
When it came to Russia, the primary aim of these economic “hit men” was the destruction of any last vestige of state involvement in the nation’s economy or economic life. Rather than the arbiter of social justice and guarantor of economic stability, the government would be reduced to the role of facilitating and protecting the interests of international investors, shareholders, speculators, and corporations. This involved the deregulation of the economy and banking system, the removal of social programs and safety nets, the lifting of price controls and the privatization of all state owned sectors of the economy, which were sold off at a fraction of their true value to speculators.
These were the conditions laid out by the IMF after newly installed Russian President Boris Yeltsin had applied to join, heavily influenced by Yegor Gaidar, one of his deputy prime ministers and an eager convert to free market orthodoxy.
Russia’s economy was near bankrupt, lumbered with an external debt of some $66 billion upon the dissolution of the Soviet Union, and the creditor nations of the G7, exploiting Russia’s vulnerable state, made a condition of their cooperation in rescheduling the debt that the IMF should play a central role as a policy advisor, lender, and coordinator of assistance.
In truth, as with every nation that has fallen prey to the IMF’s strictures of economic reform and structural adjustment, Russia was being purified by pain. Rather than view the end of the Soviet Union as an opportunity to forge a relationship of mutual respect and cooperation with Russia as it moved from a socialist command economy to a market economy, Western ideologues viewed themselves as victors in the Cold War and Russia as a defeated foe that needed to pay a heavy price for that defeat. As the Harvard academic and passionate Russophobe, Daniel Pipes, wrote at the time: “It is desirable for Russia to keep on disintegrating until nothing remains of its institutional structures.”
The impact of this economic medicine on Russian society was devastating. Most Russians consumed 40 percent less in 1992, after a year of shock therapy, than they did in 1991, while a third of the population had fallen below the poverty line. By 1994 the suicide rate had doubled, drug use had risen to record levels, and violent crime had increased by four times its previous rate during the Soviet era. Russia was on the precipice of disaster with the State Duma and President Boris Yeltsin, in full blown civil war against one another as a consequence of the chaos that had beset the country.
Two decades on and Russia is no longer an economic basket case. Its recovery from those dark years of economic shock therapy has been remarkable, contingent upon the re-establishment of national sovereignty and its liberty from the economic vandalism of international speculators and the oligarchs who exploited the crisis of the early nineties to plunder the country’s wealth.
It is a recovery the West has never forgiven.
The statements, views and opinions expressed in this column are solely those of the author and do not necessarily represent those of RT.