What I Got Wrong About "Shock Therapy"After witnessing a historic financial collapse in the former Soviet Union, I thought bad advice from Western economists was a root cause. Now I think failure was the plan
In Moscow on the morning of July 24th, 1993 I fixed a cup of tea, rubbed the hangover out of my eyes, and walked out to look for breakfast. I was living then above the Metro station at VDNKh, the ex-Soviet equivalent maybe of New York’s World’s Fair grounds, and saw right away something was wrong. Old women on the street were bawling, a group of men was shouting at a beat cop, and sidewalks were full of people walking in a daze, as if a neutron bomb had gone off. The government of Boris Yeltsin had decreed it was withdrawing all old rubles from circulation. Russians who’d stuffed rubles in mattresses for decades would be wiped out, unless they could fight through huge bank lines to exchange bills. Worse, the maximum amount was 35,000 rubles, or roughly $30-$35, about 60% of a Russian’s average monthly salary of 58,700 rubles. Those who exchanged the full 35,000 had passports stamped barring all future exchanges. I’ll never forget seeing a burly woman yelling, to no one in particular: “Vori, blyad!” (“Fucking thieves!”). “Black Saturday” is remembered as a breaking point in the arc of post-Soviet history, the moment when many Russians stopped believing a glorious new democratic future was just around the corner, if it was coming at all. A week or so after the event, on August 6th, 1993, then-Prime Minister Viktor Chernomyrdin burned his name in the nation’s history books. An aphorism-spewing figure whose unique place in Russian lore is like a cross of Yogi Berra and Spiro Agnew, Chernomyrdin said one of the most purely Russian things of all time: “Hoped for better, turned out as always.” With inflation above 2500% the previous year of 1992, Russia was beginning a long period of economic suffering that wouldn’t hit climax until 1998, when the country defaulted and plunged into a crisis presaging the rise of Vladimir Putin. It’s hard to describe the disaster of the nineties in terms that will make sense to Americans. Life expectancy for men dropped seven years almost overnight, from 64 in 1990 to 57 in 1994. Deaths from disease doubled. An already heavy-drinking country saw alcoholism rise by 60%. The Lancet estimated Russia that decade saw seven million “excess deaths,” whatever that means. I know what it looked like: mass poverty, spiraling crime, and sharply rising levels of fury toward the West, largely seen as a primary culprit in designing Russia’s crony-capitalist hellscape. Harvard economist Jeffrey Sachs, whose ideas for quickly transforming communist economies to market-based systems were dubbed “shock therapy,” saw his name become synonymous with pain. Though he’d overseen successful reforms in a similar situation in Poland, fellow Harvard acolytes Yegor Gaidar and Anatoly Chubais had a lot less luck when appointed economic czars in Boris Yeltsin’s Russia. Russians early on associated “shock therapy” with inflation and the abrupt removal of safety nets they’d grown used to in Soviet times (though residents were awarded their apartments as property, and kept a few other important subsidies like cheap home energy). Loss of access to good medical care was a particular problem in the new paradise. I wish I’d taken a picture, but I remember seeing graffiti on an apartment building when visiting the Arctic mining town of Vorkuta during the 1998 crisis. It read, ФОК ТЕРАПИЯ: “Fuck Therapy.” Now, on a day the Biden administration is leveling sanctions over the unkillable Russiagate hoax for the umpteenth time, Sachs has come forward with a new account that suggests the U.S. never wanted to lose Russia as an enemy:... Unlock this post for free, courtesy of Matt Taibbi.A subscription gets you:
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