As the old Soviet centrally planned economy continues to collapse, the country is caught in the Great Russian Depression. However shabby the welfare state of the former Soviet Union, it did provide security. That is now in very short supply. On top of all this is the resentment and humiliation that many Russians feel as they struggle with the question of identity. The empire is gone; dialectical materialism has given way to Madison Avenue materialism.
Yet the current gloom obscures another reality. Beneath the rhetoric and drama of politics a new market economy is developing–and more rapidly than many would have expected. Despite the lack of property rights and a capitalist tradition–and in the face of high inflation, punitive taxes and vicious mafia–entrepreneurs are starting businesses and creating jobs in a private sector that was inconceivable even half a decade ago. Russia has a well-educated population that for the first time has real incentives to work. There is a huge pent-up demand for goods and services. The spread of new technologies in telecommunications and computers will facilitate the growth of the market economy and enable business people to plug into the world economy. And the country has oil, gas and other natural resources that can generate the hard currency required for investment.
Russians hold an estimated $15 to $20 billion outside the country in Swiss bank accounts and elsewhere. But now, in a clear sign of growing confidence, some of that money is starting to come home for investment in industry, construction, natural resources and services. The new Constitution will ease the creation of the underpinnings that a market system needs–contractual and property rights. And it is no longer implausible to envision the possibility of a russkoye chudo–a hard-won Russian economic miracle–over the next decade if the country can successfully make its way through the current traumas.
The ultranationalist Vladimir Zhirinovsky has made clear that his next goal is a victory in the 1996 presidential election. Whether or not he (or someone like him) succeeds depends on how well the reformers heed the lessons of the recent election. They must work together and demonstrate that they recognize the social costs of the transition. Their programs have to connect with the real world and not, in the rush to market, “atomize” (as one critic put it) Russia’s hightech capabilities. If the Russian economy is doing better, and people experience firsthand the benefits of progress, they will support reform next time they go to the polls. But if their standards of living are still in decline and their insecurity high, then the message of a Zhirinovsky will be irresistible and democracy itself will be in trouble.
There are two big challenges between now and 1996. The first is economic: as the country moves to convert or close down the “dinosaurs”–the defense enterprises that supported the Soviet war machine–a country that has not known unemployment for decades will face a major unemployment crisis for which it is hardly prepared. The private sector will not be able to quickly absorb the unemployed; some will never be reabsorbed. Without some kind of social safety net, this unemployment will be a weapon for the extremists, especially if it can be blamed on “foreigners”–Western policies and international financial institutions. The second challenge is in Russia’s relations with its neighbors. Both the political and economic connections with the other former Soviet republics remain ambiguous and confused. Tensions with the “Near Abroad” could well grow, particularly with extreme nationalists on both sides of the new borders seeking to play upon animosities. Overt conflict not only could have a major impact on domestic Russian politics but also could threaten relations between Russia and the West.
Russians themselves will mainly determine their future, but the West can make a critical difference. Another Marshall Plan, as is sometimes mentioned, is out of the question; the money is not there and even if it were, Russia lacks the institutions to channel it through. But more modest aid, of the type Bill Clinton is likely to discuss, can certainly help the Russians along the difficult road they face for the next few years. Such help should be seen as an investment in America’s own security, on the order of a battleship or two. Given what the cold war cost us, such an investment is manifestly in our own interests. The first step is to get the aid that has already been approved to flow. But it is essential that the West not be seen as “dictating” reform policies. Otherwise, it will be held responsible for imposing the pain and there will be an inevitable nationalistic reaction.
No less important is an understanding of how truly difficult is the triple transition in which the Russians now find themselves. It will take a long time and will likely be marked by crises. And it is one that holds out not only opportunities but also, as the votes for Zhirinovsky and the communists demonstrate, considerable risks. The Russian Bear is far from inevitable but is certainly lurking midst the ruins of the Soviet empire.
