Causes and Impact of Post-Soviet Collapse

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September 7th, 2016 – Fort Russ News
History – Analysis, By Tatzhit –

When Vladimir Putin famously described the collapse of the USSR as “the greatest geopolitical catastrophe of the century”, this quote was immediately seized by various Western pundits to show that Putin wants to re-establish Russian rule over much of Europe and Asia (examples here).

However, the people in post-Soviet countries understood it very differently. What Putin actually meant is that the collapse of USSR cost tens of millions of people their jobs, homes, dignity, and often their very lives.

This trauma forms a very important layer of post-Soviet consciousness. However, as the Western misinterpretations of Putin’s words show, the catastrophe is largely unknown or misunderstood outside post-Soviet space (it’s not discussed much, mostly because it was caused by the same neoliberal ideas that still dominate Western mass media).

So, in this article (as well as a couple related personal stories, to be posted shortly), I aim to fix that.


A couple pictures here speak louder than words:

<Birth rate (red), death rate (black) per 1000 citizens for Russian Federation>

<Number of drug addicts in Russia>

The total ex-USSR human losses of the 90s – due to addiction epidemics, crime, civil wars, forced emigration and birth deficit – are usually estimated at 20-30 million people.

Thus, the damage inflicted by hardline “anti-Stalinists”<Note 1> eclipsed that inflicted by Stalin himself. It is also worth noting that while Stalin’s crimes did “pay off” in some important ways (as the popular quote goes, “he got Russia with horse plows and left it with nukes”), the liberal “reforms” nearly reversed those gains, evoking comparisons with the times of late Russian Empire (when the country had to import most manufactured goods, even things as basic as railroad rails <Note 2>).

Below, we’ll discuss what happened in the 90s, and why.

As for the aftermath – how Russia was pulled out of its nosedive in the early 2000s – thankfully I have already published a piece on that:

To understand why Russians love Putin, you should look back to his first term (link)

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“Why did the collapse happen, and why did it go so badly?” is a very broad question, so I’ll try to reduce the answer to an analogy.

USSR was one big, unified “Titanic” of a state, competing against smaller but more agile “motorboats” of capitalist corporations. The merits of different socioeconomic models are beyond the scope of this discussion  <Note 3>, but in the end, many people – especially among the leadership – decided that they would be better off looking out only for themselves.

Obviously, dividing a huge unified system into a multitude of smaller ones would be tough to manage even for the most skilled and dedicated leaders. The bigger problem, however, was that most “democratic reformers” had no interest whatsoever in the “Titanic’s” continued stability or prosperity.

It’s simple: The Soviet system didn’t allow honest people to amass money for themselves. Therefore, the only ones with money were either corrupt officials, or foreign-funded agents. Under the new system, money was power, so those that had it – i.e. high-ranking thieves and foreign agents – ended up on top.

The thieves were only interested in ripping as much as they can from the “Titanic”, and abandoning the sinking ship with their loot.

The ideologically-motivated foreign agents (the few that weren’t simply crooks clamoring for grants) were chiefly interested in complete and utter annihilation of the socialist system they’ve been trained to hate. This basically meant they did their best to smash the “Titanic” to bits.

To illustrate that last point, here is a quote by Chubais, one of the chief “reformers” of early 90s, explaining how “economic reforms” had nothing to do with economy or prosperity:

“… We were not trying to [fill the budget]. We were destroying communism. This is a different problem, with very different costs

What is “privatization” in the mind of a normal Western economist, say Jeffrey Sachs? <Note 4> … In accordance with Western textbooks, he viewed it as a classic economic process – earning capital while transferring state assets to the most qualified private investors.

But for us, every factory that we sold was a nail in the coffin of communism. Whether we got paid for it, or had to give it away free of charge, or even had to pay someone to take it – that mattered very little…

Privatization in Russia, prior to 1997, wasn’t an economic process at all. It had very different, broader goals. Few people understood this back then [in Russia], and even fewer in the West. The main task was to destroy communism. And we accomplished it. We won completely. … Sachs thinks we [sold USSR] too cheaply, we could have earned much more if we managed it better. But we were working on a completely different problem, and we solved it once and for all.”

Video (in Russian):

I think that last sentence also refers to the fact that, because of the highly centralized economy of USSR, there was no need to destroy every last enterprise in order to irreversibly dismantle the system. As long as a few components in the technological chain were destroyed, or a few components within the government checks&balances became corrupt, large parts of the “Titanic” couldn’t function.

For example, one giant manufacturing plant could be making essential components for dozens of other factories all across USSR (e.g. an engine plant making engine and drive-train parts for multiple trucks, tractors and other vehicles).

If that plant was “privatized”, that would generally mean anything valuable in it would be looted and sold abroad ASAP (before the next gang of thieves can wrest control from the current “owners”). Thereafter, the plant would close, and thousands of workers would be left without a way to feed their families.

The damage wouldn’t stop there, though. The plant’s destruction would probably ruin every other enterprise in post-Soviet countries that used its engines (in our example, most plants making vehicles), as well as factories that produced components and raw materials for the entire technological chain. This, in turn, would be a severe blow to all enterprises using the products of _those_ factories (i.e. shutting down everything that used transport – or at best, forcing them to buy foreign-made tractors and trucks).

The example is somewhat exaggerated, but it goes to show how the “privatization” of a single large enterprise could be a severe blow to thousands of organizations employing millions of people, all across the former USSR.


As for government checks and balances going out of control, a good example are the “events of October 1993” in Russia, when President Yeltsin unconstitutionally tried to disband the Parliament (which was protesting against him “sinking the Titanic” <Note 5>). The Parliament impeached the President in response. The subsequent armed standoff between pro-Parliament volunteers and pro-Yeltsin army units ended with his tanks and special forces storming the Parliament, with hundreds killed and wounded.  

<People watch as Yeltsin’s forces are storming the House of Parliament>

<Note 6>

This was the final victory of Yeltsin’s team over the remnants of Soviet “checks and balances”, and legislative branch could no longer reign in the executive. Lack of legislative representation at the top then rapidly led to legislative branches of government becoming ornamental at regional levels, too.

The judiciary branch gradually lost its power some time before, by the way, as corrupt Party officials made themselves immune from prosecution.

We can also note that, just three years after the executive branch sided with Yeltsin’s team against the Parliament, key figures within “law enforcement and army” bloc were removed from power themselves – after a failed attempt to prosecute the “democratic reformers” for corruption <Note 7>. Thus, the last vestiges of a proper government were extinguished.


Of course, the examples above are merely the highlights – there were a multitude of other “reforms”, events and processes that have played a hand in post-USSR collapse. In the next couple of days, I’ll publish two more stories, which talk about that catastrophe on a more real, personal level.

As for conclusions, nothing comes to my mind, except to misquote Forrest Gump – “Bad things happened in the 90s. That is all I have to say about that”.×685.jpg



<Note 1>

Although it would be more appropriate to define Yeltsin’s “democratic reformers” (and their modern-day followers) as “anti-communists” or simply “neoliberals”, they normally described themselves as “anti-Stalinists”.

Yes, it was illogical to criticize Stalin – who was denounced by the Communist party themselves, shortly after his death, some 30 years before Perestroika. But Stalin made for a lot easier target than the pre-Perestroika USSR, which people could still remember very well, and clearly see that “democratic reforms” were no improvement. Since the “reformers” completely controlled the mass media both in Russia and abroad, this “apples to oranges” comparison of 1930s to 1990s wasn’t usually challenged.

Incidentally, for this same reason, all discourse about USSR and comparing it to the West is focused on comparing modern-day Western countries to 1930s USSR. However, if we compare _any_ modern state to _any_ 1930s regime, the contrast would be just as striking (e.g. think of 1930s USA with its Great Depression, state-mandated racial/gender discrimination, widespread lynchings, etc.).

<Note 2>

Until a few years ago, the Russian state railroad company(RZHD) had to resort to purchasing large amounts of Japanese and Austrian-made rails – much like Tsarist Russia, which couldn’t build enough railroads because rails had to be imported from France. Thankfully, by 2014 two Russian manufacturers have modernized and were able to produce the needed high-quality rails in-country.

Link (in Russian)

<Note 3 – Soviet Economy>

It’s worth pointing out that “socialism never works” mantra is obviously untrue, because:

– It did work in USSR for 60 years

– Very heavily socialized Chinese economy has rapidly overtaken USA and EU (by GDP-PPP)

– Many EU countries are heavily socialist

I found a very eloquent comment by Alexander Mercouris to an article by Anatoly Karlin. I think that comment describes Russian economic history over the past century rather well. It’s too long to present here in full, but I linked it below. By the way, I think that the Karlin article, that Mercouris was commenting on, is far less useful and true than the comment itself.

Except from comment by Alexander Mercouris:

“Any starting point to a discussion of Russia’s economic history should start with a recognition of the very particular problems Russia faces. <…>

Suffice to say that in developing its economy Russia has had to overcome a structural problem of extreme capital and resource scarcity such as no other industrialising economy has had to face. <…>

When the tsarist government in the 1880s decided to make economic development its priority it sought to overcome the problem of capital scarcity by importing capital and technology from western Europe. This achieved a lot of success as Anatoly rightly says but came at a price of very heavy foreign borrowing and continuous budget and trade deficit problems, which created a volatile economic environment. <…> The political turmoil of the period is in fact directly related this economic instability <…> Russia’s dependence on foreign capital also forced Russia into political alignments with its main foreign creditors, Britain and France, which it would have been wiser to avoid. This led directly to the First World War, a catastrophe for Russia <…>

The Soviet government that replaced the tsar found itself faced with the same problem of capital and resource shortage that the tsar had faced with the added problem, not faced by the tsar, that it was denied access to foreign capital, a fact that persisted until the very end of its existence. Any discussion of Soviet economic development needs to confront the fact that it was undertaken, uniquely for any industrializing country, entirely on the strength of the country’s own capital base, which was already very limited. <…>

The system of extreme economic mobilization that emerged out of this crisis successfully industrialized the country maintaining high levels of economic growth for around fifty years. An economic system that is able to maintain high levels of economic growth for fifty years cannot by the way be simply written off as a failure. Along the way the Soviet leaders killed hundreds of thousands of people, imprisoned millions more, fed, clothed and housed the remainder, persecuted the Church, defeated Hitler, achieved universal literacy (a great achievement even if it might have been achieved by the tsar, which is doubtful), established an impressive scientific and educational base, sustained the arms race with the United States, provided economic and military support to a variety of other countries, pioneered the exploration of space and despite occasional bans and persecutions maintained the country’s cultural level at the already impossibly high level it had achieved under the tsar.”

<Note 4 – Sachs talks about corruption of the 90s>

Sachs (who was an economic advisor to the Russian government at the time, and is blamed for a lot of their policies) claims that he was against many of the economically and socially disastrous reforms of the 90s, and that the main reason things turned out so badly was that Yeltsin’s team was lying about wanting to reform the economy, and was actually only interested in stealing.

Sachs quote:

During my final trip to Moscow in early 1995, the infamous “loans-for-shares” deal was just getting underway.  This deal involved a massive and corrupt transfer of natural resource enterprises to the Government’s cronies, disguised as a collateralized loan to the Russian Government by Russian banks.  The arrangements were blatantly corrupt from the start.  I spent my final visit in Moscow visiting Western officials to warn them about what was happening.  I felt that my antennae were pretty sound at that point, and that my perspective would be helpful to head off a disaster.  I was stunned by the obtuseness of the response, from the IMF, OECD visiting mission, and later from very senior U.S. officials, including Larry Summers.

Nobody wanted to look closely at the abuses, and certainly nobody wanted to blow the whistle.  Most close observers believe that the hyper-corruption surrounding the massive giveaways of the oil and gas sectors was linked to the campaign financing for President Yeltsin’s re-election.  Tens of billions of dollars of natural resource assets were given away, and hundreds of millions were collected in return as campaign contributions.  It was a pretty lousy and inefficient way to finance an election campaign, but such a linkage perhaps explains the remarkable reticence of the U.S. Government in responding to this flagrant corruption – a level of corruption that easily outpaces anything seen in other parts of the world in recent years.

<Note 5 – Parliament was crooked, but popular support was real>

As all instances of civil unrest, it’s hard to tell who was in the right during the events of 1993. More than likely, many/most of the Parliament leaders only spoke out against the disastrous actions of the President’s team in a bid to usurp power for themselves, and rob the country just the same.

That said, the popular discontent with “democratic reforms” that gave the Parliament a large number of volunteer supporters was real. The President’s people controlled virtually all of domestic TV broadcasting (and had the support of foreign media), yet the people still came out in numbers to support the Parliament.

<Note 6 – Footage of 1993 fighting>

Footage of 1993 fighting that gives some idea of what was going on. It’s set to a rather aggressive song, “When Our Tanks Enter Moscow” by Zahar May. The lyrics quotes the radio exchanges between the volunteers defending the building of Parliament (nicknamed “White House”), and pro-Yeltsin army officers.

Lyrics translation:

When our tanks enter Moscow,

Many of you will hang.


Start digging a grave, traitorous bitch,

We’ll hang you.


Leningrad punks smoking grass

Waiting for some Western band…

When our tanks get to the White House

We’ll open it like a can.

Dig your own grave


This is f*cking it

Dig, bitch

<Note 7 – About Yeltsin’s team playing “Cops and Robbers”, and Robbers winning>

This is an excerpt from a 2016 interview of Alexander Korzhakov, the former head of President’s Security Service (“SBP”, same as US Secret Service). In 1996, he caught two members of Yeltsin’s “democratic reformer” team stealing huge amounts of money from Yeltsin’s own reelection fund, and was fired for it.

Link to interview in Russian

Interviewer – Did Yeltsin know about <the famous sting operation against his election officials>?

Korzhakov – He did not know the details, that’s not a president’s job. But when I told him, yet again, that Chubais’ team is stealing from his election fund (and I had plenty of proof), he snapped: “Well, catch someone!”. So, we acted. We already knew that the loot was stored in the safe of German Kuznetsov, deputy finance minister at the time.

… After my conversation with Yeltsin, Secret Service (SBP) officers inspected Kuznetsov’s office safe that very night. We found a lot of financial reports, records from banks of the Virgin Islands, the Baltic countries. They were stealing hundreds of millions, USD! The Balts should be forever grateful to us for all the capital <moved to their tiny countries>. We also found their emergency stash, $2.5 million in cash. Transcribed, filmed, recorded. We installed wiretaps, hidden camera. We waited, recorded the conversation of Lisowski and Evstafiev.

<Next, you know everything – those two tried to sneak half a million cash through security in the infamous “Xerox paper box”, we caught them, scandal went to the press, and we all got fired.>

I recall that <leader of the thieves>, Chubais, called our resignation a “final nail in the coffin of communism”! To this day, I still have no idea what communism had to do with any of it.

Interviewer – … But why did Yeltsin decide to fire you, as well as <head of FSB> Barsukov, <vice president> Soskovets? You weren’t the ones caught red-handed with stolen money!

Korzhakov – We acted within the law, and they were acting outside of it! Secret Service was not allowed to continue the investigation. Investigation was handed off to <some general> from Moscow FSB office. Lisowski wrote a misspelled explanatory note, Evstafyev “was sick” (had heart trouble due to being a coward). They were let go.

We reported everything to Yeltsin in the morning. But his wife Naina and daughter Tatiana already spent the whole night shouting to him <that we’re bad>! Chubais pressured Yeltsin, who was weak both physically and morally by then. He gave an ultimatum: choose between him <and his “liberal economists> or Korzhakov and his <law enforcement> friends! Wrong choice means losing the throne! He claimed that the West would not support Yeltsin if he was surrounded by <the “law and order” faction>. Although already, during my tenure as head of Secret Service, Clinton and Kohl gave Yeltsin hundreds of millions of dollars for his election. And the Italians, as far as I recall, gave a non-refundable contribution (i.e. a gift) of a billion dollars!

So. The West gave money <for Yeltsin’s reelection>. His “democratic reformers”, together with his wife and daughter, stole the money. I caught them. Yeltsin betrayed me. That’s it.

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