Has Russia reached a turning point?

Putin has maintained his iron grip on Russia by being the most ruthless in a sea of gangsters

Robert McGarveyThe murder of Russian opposition leader Boris Nemtsov in the shadow of the Kremlin is so obvious an act of political gangsterism that future generations could well – in retrospect – view it as a turning point in the history of Russia and the West.

With this killing the last veils are being ripped off the corpse of Russian civility as naked power and the politics of fear return to haunt this troubled land.

In Putin’s Russia, violence, as a legitimate tool of statecraft, has returned with a vengeance. The rule of law in Russia was never on very solid ground, even at the height of the reform process, when Western ideas of law, democracy and human rights were in fashion. Today, no one, no matter how powerful, is safe from wanton, arbitrary, violence.

It is a far cry from the optimism that greeted the fall of the Berlin Wall and the hopeful enthusiasm of the early ‘90s. In those heady days, optimism was in the air in Russia. Ironically, Canada played a critical role in generating that sense of hope at the end of the Soviet era.

It all began with Gorbachev. In 1983, then-Agricultural Secretary Mikhail Gorbachev made his first visit outside the Soviet Union, to Canada, to study Western agricultural practices. He punctuated that historic event with a special visit to the home of his Canadian counterpart – (cowboy/farmer) Eugene Whelan. The Secretary and his gleaming fleet of luxury limousines were met at Whelan’s rural home by their complete opposites. Rather than strict Russian formality and elitism, Whelan and his wife Liz, presented an open and humble private residence and the quiet simplicity of Canadian farming life. The populist experience he received over the next few days would significantly change Gorbachev’s mind about the West and capitalism. It was the beginning of the end for Soviet Communism.

Within a decade the Wall was down and the Soviet Union was dissolved. The Russian people and the rest of the world breathed a giant, collective, sigh of relief.

The question is; how did it all go wrong?

Looking back, it’s obvious the Russian reform process was fatally flawed from the beginning. Russian’s are a proud people, given to passionate romanticism, and both of these traits were on full display in the design and implementation of the reform process the early ‘90s.

The first attempt at reform was ambitious – to say the least. Instituted by Russian President Boris Yeltsin, it involved the rapid transition of the command economy of the old Soviet. Inspired in part by American economist Jeffery Sachs, the ambitious Plan 500 envisioned a 500-day period of rapid institution restructuring leading to a market economy.

The Plan involved converting the rouble to a hard currency, the immediate deregulation of prices, a massive privatization program and broad and wide ranging deregulation on the movement of people, goods and capital.

The effect of this ill-conceived process was the creation of a powerful elite which, in the name of privatization, seized control of the instruments of the Soviet command economy. It was an oligarch’s free-for-all, governed by greed and backed by powerful private armies. Needless to say, it was a disaster.

The growth of corruption was explosive. In 1992, for instance, US$2 billion in hard currency simply vanished from the accounts of the foreign trade ministry. The new Russian banking system was compromised from birth. A market clearing system was established in the early ‘90s, replacing the former system of direct clearing between banks. Criminalization of the system was immediate and massive. These abuses combined with a general refusal to pay taxes resulted in a 13 trillion (ruble) shortfall in government revenues.

After nearly a decade of such ‘reforms,’ Russia was in tatters while life expectancies had fallen dramatically. Yeltsin’s resignation on December 31, 1999 marked the end of an era and the appointment of his hand-chosen successor, the young but daring Vladimir Putin, launched Russia on its present dangerous course.

Putin is no idealist; this former KGB operative has presided over an Oligarchical system of opportunism and violence. He has maintained his iron grip on Russia by being the most ruthless in a sea of gangsters. Under Putin, the integrity of law, any meaningful human rights and international obligations simply evaporated in the personality cult he erected around himself and his murderous regime.

Nemtsov represented that part of the Russian character most attractive to Westerners – open, tolerant and hopeful of a more just and law-abiding world order. His shocking demise, however, is just the kind of tremor that might awaken Russians to all that has been lost.

Maybe, in the present darkness, it will rekindle a flame of hope for Russia and the world.

Robert McGarvey is an economic historian and former managing director of Merlin Consulting, a London, U.K.-based consulting firm. Robert’s most recent book is Futuromics: A Guide to Thriving in Capitalism’s Third Wave.

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