Friday, May 9, 2014

End of the Soviet Union: Yeltsin's Shock Treatment, Capital Flight, and IMF Puppet Strings


The transition of Russia and her people during the collapse of the Soviet Union and through the early post-Soviet era was a socially and economically tumultuous time, especially for the Russian working class population, as “bureaucrats converted apparatus power into capital wealth”  (Pirani, p. 16, 2010).  The last few years of the Soviet Union could almost be described as a mass scheme in capital laundering of state funds to private ownership by those in high government positions, as banking reforms in 1987 through 1988 and the privatization of state companies allowed state capital to drain into the private sector (Pirani, p. 18, 2010).  Interestingly enough, instead of rejecting the privatization process and the encroachment of parasitic capitalism, the majority of Russian workers unwittingly accepted it with high hopes in which laborers formed labor unions in the hope that Russian natural resources and Russian labor could be sold on the free market for higher prices which would result in higher profits being reinvested in better working conditions for laborers (Pirani, p. 21, 2010).  After the disintegration of the Soviet Union, Yeltsin’s “shock therapy” mimicked “a method developed in the United States in the 1970s” (Pirani, p. 24, 2010) that was utilized to economically exploit Latin American states, which consisted of abolishing price setting, by allowing the international market to determine the value of the ruble (via the International Monetary Fund), and to rapidly privatize state property on a massive scale resulting in 90,000 companies being privatized by end of 1993 (Pirani, p. 25, 2010).

Yeltsin was a western puppet leader, propped up by the capitalist west, who opened his state to the international free market and recklessly engaged his country into conditional programme loans by the IMF while allowing U.S. policy makers to make “every significant economic decision” (Parani, p. 27, 2010) of his presidency.  As the Russian people starved on the streets in the in the face of hyperinflation, soaring unemployment and spiking poverty levels due to mass capital flight from Russia, U.S. President Clinton and the IMF would carefully show support for Yeltsin at politically critical times, specifically in the form of increased IMF loans, in order to keep their capitalistic-stringed puppet in power.  During this period, “capital flight from Russia totaled $56-70 billion in 1992-1993, and about $17 billion a year in 1994-1998” (Parani, p. 29, 2010).

In addition to the capital flowing into the private sector and out of the state, the post-Soviet satellite states were also lost to Russia as they were quickly sucked up into the World Trade Organization’s global market and economically exploited through the ravishing of natural resources by the most powerful capitalist private entities on the international stage through tariff-free trade blocs.  During the decade after the dismembering of the Soviet Union, the state that had once been one of the world’s two superpowers began to portray worse socio-economic issues than many post-colonial states had displayed as their European colonial master states withdrew and western-friendly puppet leaders were placed in those newly declared independent states. 

Russia’s transition into the global private market wasn’t much different than the transition from state controlled colonialism to international private sector free market debt during the decolonization to globalization period.

Pirani, Simon. 2010.  Change in Putin's Russia: power, money and people (London: Pluto Press, 2010), 16-31.

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