Which of Factors That Precipitated Collapse of USSR Are Relevant For Russia?

The purpose of this post is to dispute claims that Russia today is in a position that is strongly reminiscent of the position USSR find itself as it neared disintegration in the 1980s. I will do so by outlining specific drivers of political instability in the latter years of the Soviet Union identified by Yegor Gaidar  in his book "Collapse of an Empire: Lessons for Modern Russia"and then stating whether they are relevant to the present case of Russia:

Long-term drivers:

  • Integration into the world economy:

    • Dependence of the budget revenues on exports of volatile commodities to the world markets (oil). Relevant for Russia.

    • Dependence on imports of grain, food, industrial tools, which required payment in hard currency. Not relevant for Russia.

    • Overall integration into the world economy is far greater in Russia’s case.

  • Rigidness of opposition by the powerful military-industrial lobby to any significant cuts in defense spending even though the latter were an unbearable burden to the budget. The lobby’s power has diminished and thus this is not relevant for Russia.

  • General economic inefficiency and non-competiveness, including non-completive industrial sector, inefficient oil extraction and inefficient labor. Relevant for Russia.

  • Inefficiency of agricultural sector. Not quite relevant.

  • Politically-conditioned foreign loans. Not relevant.

  • Disproportionate geopolitical ambitions: Not relevant.

    • Global competition/arms race with U.S. in spite of economic disparity. (Soviet Union’s economy was ¼ of the U.S., yet Soviet Union maintained military parity with U.S.)

    • War in Afghanistan.

    • Massive subsidies to allies and clients.

  • Absence of checks and balances to rigorously evaluate policy proposals. Relevant for Russia.

  • Quality of ruling elite low due to promotion of inadequately educated, but loyal peasants and workers. Not relevant for Russia.

  • Political system allowed no meaningful comprehensive policy debates. Relevant for Russia.

  • Access to quality information and analysis – it took Gorbachev 3 years to understand scale and nature of the problems facing country. Not quite relevant for Russia.

  • Ideological constraints over strategy and decision-making. Not relevant for Russia.

  • Popular access to foreign sources of information on freedoms and well-being of other nations. Relevant for Russia.

  • Distinct ethnic entities within the state. Relevant for Russia.

    Short-term drivers:

  • Failure to re-affirm the key conviction that the state could use unlimited force to suppress expression of dissatisfaction.
  • Increasing popular conviction that the regime is corrupt and ineffective. Not relevant currently, but may become relevant for Russia.

  • Three main economic mistakes made by Gorbachev:

    • Limitations on sale of alcohol, which significantly reduced budget revenues.

    • Launch of a capital-intensive, but ineffective economic acceleration program, which drained the budget.

    • Reduction of imports of industrial goods.

When extrapolating these drivers to modern Russia, Gaidar concludes that “risks attendant on an inability to adapt and the growth of the country’s dependence on dynamics not controllable by the regime” have not disappeared, albeit the risks of destabilization in Russia as of 2006 were “much lower” than those in the USSR of the early 1980’s.

That said, if the current stagnation of the Russian economy is followed by a period of shrinking of GDP, in part because of the economic sanctions over Crimea, then that would require further extrapolation of Gaidar’s findings which require the Russian government to adapt to the changing environment. If there is a protracted economic, then the Russian government might eventually run out of cash reserves to honor its contractual obligations. The government would then have several options:

  1. Obtain foreign loans, which it will find increasingly difficult to secure and which may come with political strings attached, if the crisis persist

  2. Implement reforms to diversify away from oil and gas, which has been accounting for 60 percent of budget revenues in order to generate alternative sources of revenues. But whether such alternative can be secured within two years is doubtful.

  3. Alter the contract with the population by raising taxes while allowing more freedoms.

  4. A combination of the three aforementioned options.

As stated above, Vladimir Putin and his team are flexible enough to realize the need to try exercising the aforementioned options to avoid political instability, although     doubts linger about execution of the options.

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