Collapse of an Empire: Lessons for Modern Russia
by Yegor Gaidar
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Book Summary Information
Author: Yegor GaidarTranslator: Antonina W. Bouis
Edition: Hardcover
Published: 2007-10-17
ISBN: 0815731140
Number of pages: 332
Publisher: Brookings Institution Press
Book Reviews of Collapse of an Empire: Lessons for Modern Russia
Book Review: An Insider's View of the Collapse of the Soviet Union
Summary: 5 Stars
Yegor Gaidar's Collapse of an Empire is an insider's view of the causes and events that led to the collapse of the Soviet Union in 1991. The author is has a fascinating and improbable background. He served as acting Prime Minister, First Deputy Prime Minister, and Economics Minister of Russia under Boris Yeltsin in the early 1990s but is an academic economist rather than a politician or bureaucrat. He received his PhD in economics under the Soviet educational system but, somehow, developed a solid understanding of economics of free markets. In Collapse of an Empire, Gaidar offers his historical and economic perspective on the Soviet collapse as a lesson and caution for today's Russia. It is as close to a definitive work on the Soviet collapse as I have yet read.
Gaidar starts with two general observations, one on empires and one on oil, and then proceeds to describe the Soviet Collapse.
Empires
Empires come in two flavors: Overseas empires (British, French, Dutch) and territorially contiguous empires (Austria-Hungary, Tsarist Russia, Ottoman Turkey, Soviet Union, and, on a smaller scale, Yugoslavia). Of these two types, the overseas empires are the easier to dismantle: The imperial power can simply declare the former colonies free and, possibly, repatriate a limited number of colonists with a claim to citizenship in the mother country. In territorial empires, diverse ethnic, cultural, linguistic, and religious groups usually reside in close proximity to each other and often have longstanding conflicts over rights to land and under the law. Abolishing a territorial empire leaves all these conflicts in place, ready to boil over as soon as imperial control has been lifted. Members of the formerly dominant ethnic group may even find themselves a minority in one of the successor states and subject to the rule of one of their formerly subject people. Many of the troubled areas of the world today (Balkans, Middle East) are parts of former territorial empires where population segments have not succeeded in making peace with their neighbors.
Oil
Countries with significant natural resources, especially oil, have generally not been on the forefront of democracy or economic liberalism. Gaidar attributes this phenomenon to the steady stream of revenues the sale of oil provides the ruling party. Secured by this source of income, the government has no need to reach an accommodation with its people that gives them a voice in how they are governed. In exchange, the tax burden on the population often remains very light. The western democracies grew out of accommodations that essentially gave the people a voice in how their countries were governed in exchange for their acceptance of the government's imposition of taxes.
Soviet Collapse
Prior to WWI, Russia was one of the largest grain exporters in the world. In the West, industrialization followed the production of an agricultural surplus which released excess farm labor for industrial employment. Russia followed a different path after the Bolshevik revolution. Rather than building an agricultural surplus, Lenin and Stalin seized the grain and other agricultural products of the countryside to feed the urban and industrial populations. Simultaneously, they reallocated labor from agriculture to industry to support their goal of rapid industrialization. The result was an economic and human disaster. Soviet agriculture never recovered, never produced a sustained surplus, and the country became dependent on imported grain. (See Robert Conquest's Harvest of Sorrow for details). By the 1970s, the Soviet Union was the world's largest grain importer.
At that time (the 1970s), the Soviets were able to pay for their grain imports by exporting oil. This was the time of high oil prices and the Arab embargo on oil exports to the US. Grain prices were low, so Soviet trade balanced nicely: Expensive exports, inexpensive imports.
In 1979, the Soviets invaded Afghanistan and Ayatollah Khomeini overthrew the Shah of Iran. These events led the Saudis to become concerned about a Soviet drive to the Persian Gulf and a threat to their kingdom. To counter this perceived threat, in the mid 1980s the Saudis greatly expanded their production and export of oil causing the world price to drop from the $30-40/bbl range to about $10/bbl. Obviously, this price change damaged the Soviet balance of trade.
At about the same time (mid 1980s), the world price of grain shot up significantly. This further damaged the Soviet trade balance.
If this wasn't enough, the volume of Soviet oil production declined in the late 1980s for two reasons. First, to generate foreign exchange, oil production had been focused on the most productive fields which were exploited at a rate that was harmful to the long-term productivity of the fields. Second, the reduced availability of foreign exchange and the continuing requirement to import grain led the Soviet government to reduce imports of industrial materials from the West, including equipment for oil drilling, production, and transport.
By 1989, food subsidies constituted a third of the Soviet national budget. Retail prices were fixed at artificially low levels, which was one form of subsidy. At the same time, the Soviet government was subsidizing the import and domestic production of food. The costs of producing or importing food were as much as 70% higher than the retail prices. With a net outflow of hard currency and a grossly imbalanced domestic budget, the only way to "pay" the government's bills was to print more rubles. With prices fixed by the state, the resulting inflation could only result in shortages at the retail level and a huge increase in individual "savings" since there was nothing for the population to buy with its rubles. By 1991, of 1200 officially recognized consumer goods, 1150 were not readily available.
Declining credit-worthiness drove most western commercial banks to refuse to make further loans to the Soviet government, leaving Gorbachev with only the option of begging for foreign aid from the capitalist governments. Gaidar even suggests that he made the following deal with George H. W. Bush at their Malta conference in 1989: In exchange for US financial assistance, the Soviet government will refrain from using force to maintain its control of its Eastern European satellites.
Throughout its 70+ years of existence, the mantra of the Soviet government and the Communist Party had been that The Party had a special role in the Soviet system because of its unique "wisdom", its understanding of communist economics and the Soviet man. By the late 1980s, the Russian people and even the Soviet bureaucracy knew that this was a lie. However, the inertia of the system did not allow The Party to admit it's "wisdom" had been wrong and that a major economic reform based on free markets was desperately needed.
By revealing the true history of the Soviet Union (e.g., the Molotov-Ribbentrop pact), Glasnost destroyed any lingering myth of the legitimacy of the Soviet Empire. In the end, the Empire could only be maintained by force, but the use of that force would have ended any hope for financial aid from the West.
The August 1991 coup was only the farce that followed the tragedy that constituted the history of the Soviet Union.
Summary of Collapse of an Empire: Lessons for Modern Russia
In today's Russia, nostalgia for the Soviet era is growing. Many Russians reflect wistfully on the passing of an era when the Soviet Union was a superpower, commanding international respect, and they blame its demise on external enemies and foolish changes in policy. In an address to the Russian Federal Assembly, President Vladimir Putin called the breakup of the Soviet Union the greatest geopolitical catastrophe of the 20th century. In Collapse of an Empire: Lessons for Modern Russia, however, economic reformer and former prime minister Yegor Gaidar clearly illustrates why such notions are misguided, ill informed, and dangerous. As he explains in the introduction: "My goal is to show the reader that the Soviet political and economic system was unstable by its very nature. It was just a question of when and how it would collapse."
Although the Soviet Union never referred to itself as an empire, it fit Gaidar's definition: "a powerful multiethnic state formation in which the power (or at least the right to vote) is concentrated in the metropolis and its democratic institutions (if they exist), though the power and those institutions do not extend to the entire territory under its control." The U.S.S.R. sat on a shaky foundation of far-flung lands, conquered peoples, centralized authoritarian government, and a command economy overly reliant on natural resources. Gaidar explains why this once-powerful state was doomed to fail eventually, and why Russians should be looking forward rather than backward in building their nation. He worries that Russia is repeating some of its tragic mistakes, including uneven economic development that leaves the nation vulnerable to fluctuations in the energy market.
Gaidar uses the Soviet case as a device for understanding the life cycle of empires, which found themselves at the wrong end of history in the twentieth century. World War I spelled the end for the Hapsburgs, Ottomans, and Romanoffs, for example, and Europe's overseas empires began breaking apart after World War II. In the 1990s, the final remaining territorially integrated empire-the Soviet Union-fell. This is no mere coincidence: "The dissolution of empires in the twentieth century is a component of the process of global change that is called modern economic growth." To reproduce such a flawed model of governance would be a tragic mistake, yet many Russians still look backward through rose-colored glasses as their government centralizes power again. Such misplaced nostalgia defies reality while it imperils the future of Russia and its people.
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