10 tough years in Russia

Marshall I. Goldman is Davis Professor of Economics emeritus at Wellesley College and associate director of the Davis Center for Russian Studies at Harvard University.

RUSSIA HAS ALWAYS been a country tormented by its history. But for a few August days 10 years ago, it looked like it had shaken off that heritage and was about to embark on a new beginning. In a heroic response, Boris Yeltsin challenged a group of conspirators who had put the president of the Soviet Union, Mikhail Gorbachev, under house arrest. They were attempting a coup.

Standing on a tank, Yeltsin rallied the public to his side and with a minimum of bloodshed. The conspirators abandoned their quest and surrendered.

In Moscow while this was happening, I had never seen ordinary Russians so euphoric. Abandoning their dour mood, they smiled and applauded one another's determination to do the right thing. The future in Moscow that week in August never looked brighter. Given that impetus, what went wrong? Once the celebrations had come to an end, the public came to realize that it would take more than the tearing down of a few statutes to free Russia from its past. More than that, although President Yeltsin's determination to break Russia out of the Soviet Union and make it a separate country had its advantages, it entailed certain costs. The Russians were now free from having to prop up some of the poorer republics in Central Asia, but that meant that some of the sources of supply for Russian factories had also been cut off.

More than that, Yeltsin and his advisers assumed that once they decided to do away with state ownership and central planning and move to the market and private ownership, the economy would respond immediately and give birth to all the institutions essential to the way markets function. With all the country's natural resources, Russian factories would convert quickly to producing for Russia's long-neglected consumers, and prosperity and full employment would follow automatically.

What few appreciated was that to work, markets require the rule of law and a whole range of institutions including (whether we like them or not) salesmen, accountants, and lawyers as well as transparency and public information. Most of these institutions were nonexistent. Ten years ago, Moscow even lacked telephone books - the phone numbers were treated as state secrets.

If the absence of such institutions was not enough of a hurdle, even the most energetic and able leader would have had a hard time finding a way to offset the loss of the 20 percent of the country's GDP that disappeared when the Cold War came to an end. That was how much the Soviet Union had been devoting to its military-industrial complex. And, of course, given his frequent absences for health reasons, Yeltsin was anything but the dynamic leader he appeared to be at the time of the coup.

No wonder, then, that over the last decade the Russian economy has suffered badly. Recently, because of the increase in the price of oil, which Russia exports, the Russian GDP these last 2 1/2 years has been growing. Yet most Russians are quick to remind you that the GDP is still only about 60 percent of what it was a decade ago. On top of that, Russia has been hammered by massive inflation, so it takes the equivalent of 1.6 million rubles today to purchase what 100 rubles would have bought then. As a consequence, those with savings in rubles have ended up with nothing.

This turmoil has spawned the growth of all manner of social mutants, including the mafia, corruption, and an oligarchic class that includes almost a dozen who have within only 10 years accumulated at least $1 billion of assets that once belonged to the state.

Given all this turmoil, it is understandable why the Russians crave a strong hand and why Vladimir Putin, a former lieutenant colonel in the KGB, met that requirement. He is the model of the young, dynamic leader that Yeltsin after a few years was not. And Putin has pushed through important legislation dealing with taxes, pension, land ownership, the courts, and red tape, something Yeltsin couldn't do.

The drawback is that Putin has surrounded himself with former colleagues from the KGB, and more and more they, like Putin, are slipping back into the behavior patterns of the past. The Russian people want order, and Putin is giving them order. As he put it, democracy means the dictatorship of the law, with the emphasis on dictatorship. Thus his positive reforms are offset by a crackdown on freedom of the press and a whole series of arrests of Russians accused of spying and espionage. Nor does Putin show any sign of abandoning his winless war in Chechnia. It almost seems that after every step forward, he takes a step backward.

The Russian people endure what others would never tolerate. That Russia has not imploded is due more to that stoicism than wise leadership.

Ten years ago the Cold War came to an end. Most Russians will tell you that it is the outside world that has been the main beneficiary of that upheaval. Now that their economy is growing, more Russians are beginning to share in that change. But it has taken a long time, and there is a long way to go before the Russian public at large will feel that way, and it is not clear that Putin will take them there. The Russian people deserve better.