The University of Haifa

School of political science

Department of National Security

National Security Studies Program

Course: National Security: The Practitioners’ Perspective

Seminar paper:

“Destruction of Russian society during 1991-1996”

Lecturer: Dr. Dan Schueftan

Student: Olga Sukhman

2014

Content

Introduction…………………………………………………………………….3

Chapter I. Reforms during 1991-1996 and its impact on

the society………….6

Chapter II. Main social problems……………………………………………..11

Summary……………………………………………………………………...18

Bibliography…………………………………………………………………..20

2

Introduction

National security is a giant concept, which

includes both interior and exterior threats. Besides,

the crucial issue is that there is no national security

without a nation. The key component of a state is its

own society, which is the start point. The goal of this

seminar paper is to provide integrative analysis of

Russian society during the presidency of Boris Yeltsin

in 1991-1996 and to estimate outcomes of economic

reforms on common people lives. The research question

must be the following how democratization affected the

3

Russian society? The idea is not to give proposals for

the future development of Russian society, as this

issue will be out of the table for a long time, but it

is a good case study for understanding the mistakes of

what is estimated and what happened in reality, and

that it is tremendously ignorant to start fundamental

transformation so rapidly without any preparation

throughout your own society.

Even though soviet society was not the best pattern

of values, there was a strong nation, which in last 23

years does not exist anymore. The transition period of

wild democratization destructed Russian people and it

is difficult to see any solution in closest future. The

way democracy was building in Russia is the most

ineffective attempt that can be imagined. The worst

mistake, which was done by Russian government, was not

logical focusing on its internal problems, but external

position satisfaction with political elite interest in

enrichment.

4

Russian society often faced difficulties in all

periods of existence; there has always been a clash

between tradition and modernity. The issue, where do

they belong to the East or to the West seemed to be

unresolvable. There were a lot of painful actions,

however the transition period in the 90-s is likely to

be one of the most destructive. Starting from the

Perestroika we can see how unprepared was Russian

officials to reorganize one system and build a new one.

The key aspect was unbelievable difference between

actions and reality, their understanding of the

outcomes of the reforms, which were held and lack of

midterm and long strategy. After the destructive

processes were launched, there was no attempt by senior

officials to take responsibility and prevent failure,

what concluded with authoritarian regime and Putin came

into power. For the purposes of preparedness for the

next possible unstable situation, it is crucial to

5

analyze mistakes of the past, especially the key

component of national progress – the society.

We can distinguish some variables, which are

important for this research: values of society, socio-

demographic situation, social structure, education,

medicine and social guarantees. Focusing on the list of

criteria above it will be easier to analyze the impact

of system transformation on common people.

Chapter I. Reforms during 1991-1996 and its impact on

the society

6

Back in the USSR there was a system of centralized

planning economy. The government was the one, who make

all decisions: investment, consumption, prices and

income. Gorbachev thought to change the whole system

and replace it with fully functioning market economy.

In the beginning Perestroika seemed to be successful,

however by 1988 a large budget deficit, high inflation,

rationing and etc. became a true. There were many

reasons of it most of them political, despite they

coupled with peoples’ fear of mass unemployment.

Yeltsin took power in July 1991 and on the 28th of

October the first step was taken – extensive

liberalization of prices was announced, although the

situation was difficult and this measure aimed to save

nation from starvation (this issue is still

disputable), it became a disaster. The main problem of

economic reforms was that they were done partially, so

liberalization of prices could not gain any goal

7

without proper monetary policy, as well as

institutional change. During 1992-1993 Russia has

continued its drive towards market economy via a

program of macroeconomic stabilization, foreign trade,

privatization, institutional reforms and etc. The

result of these measures was the rapid decline in the

standard of living. For example, “by June 1992,

consumption of basic foodstuffs stood at late 1950-s

levels and pensioners received benefits two time below

the basic wage. All in all, whereas in 1991, 55 per

cent of the population lived below the poverty line, by

mid 1992 an estimated 90 % were said to be in such

position”1. The cost of living increased twelve times

between March 1991- March 1992. “Inflation by the end

of 1992 was 2600 %, meat prices rose 26 times while

that of milk and other diary, basic foodstuffs by 100-

125 times, butter and sugar by 130-160 times; transport

costs by 13-23 times, health care by 20 times, the cost

1 Gennady Osipov. Reformation of Russia: Myths and reality (1989-1994). M., P.122

8

of childcare places by 32 times and so on. These trends

compared with the rise of wages of only 10 per sent”.2

As a result a staggering 82 per cent of families said

that they could not cope in 1992, compared to only 20

per cent the year before.

Furthermore, Russian industrial production was

falling dramatically, by October 1993 it “was 56,2

percent of its 1990 level: unemployment stood at 1

million and exports had fallen by 12 per cent while

imports declined by 20 per cent”.3 In 1994 Yeltsin made

a decisive move towards the market. The following

measures were about to be taken: “financial

stabilization, the removal of artificial constrains on

competition within Russia’s internal market,

privatization, clear-cut guarantees on property rights,

the introduction of a bankruptcy program and the

transfer of resources from inefficient to efficient

2 Russian society in transition. Edited by Christopher Williams, VladimirChuprov, Vladimir Staroverov. A., P. 11.3 Ibidem. P. 11.

9

sectors of economy”.4 However the goal of a stable

economic growth was not reached, as after facing

pressure from extremist the right and left Yeltsin

began a U-turn. This meant “a relaxation of

macroeconomic policy; great maneuvering between the

various economic and political groupings supporting

manufacturing industry; a closure of the external

market; the placing of restrictions on competing

foreign goods and services and greater targeting of

domestic consumers".5 It is obvious that transition

could not happen in 2 years, and U-turn was even more

painful, as a result unpaid wages totaled trillion of

rubles, industrial output was down by 27 percent, GNP

fell by 17 percent and 24,8 million Russians were

living below the poverty line by October 1994. Economic

indicators for the first half of 1995 showed that

aforementioned crisis had deepened. The number of poor

4 Ibidem. P. 11.5 Russian society in transition. Edited by Christopher Williams, Vladimir Chuprov, Vladimir Staroverov. P. 11.

10

rose from 307 per 1000 in 1994 to 474 per 1000 by mid-

1995.

In his book The Struggle of Russia Boris Yeltsin

wrote: “I will use shock therapy on myself and not just

one time. Sometimes it takes a sharp break or rupture

to make a person move forward or even survive at all”.6

‘Shock therapy’ had a high social cost of

transformation. It involves the rapid and simultaneous

pursuit of a package if reforms intended to privatize

the economy and promote economic growth. It was assumed

that these policies would create material difficulties

in a short term, but would ultimately bring efficiency

and prosperity and would promote general good of

society. Market reforms were accompanied by inflation,

increased unemployment and fiscal restraint.

Privatization allowed wealthy elites to emerge, but the

middle classes and vulnerable social groups often found

them worse off than they had been under socialism.

6 Chandler. A. Shocking Mother Russia: Democratization, Social Rights, and Pension reform in Russia, 1990-2001. T. P. 3.

11

Price liberalization led to reduction of purchasing

power and at the same time introduced more fear and

uncertainty, such as unemployment. “Reasons of reform

failure: defects of itself, the government’s

inconsistent approaches to reform, lack of commitment

to reform and the failure of the West and international

institutions to offer enough support for reform”.7

One of the explanations of such dramatic

consequences of economic reforms is within elite

theory, thus the political power of nomenclature elites

has not been transferred to other political groups but

passed of the old elite, who named themselves democrats

to another section of the same elite. “They were

creating capitalism instead of communism, but their

actions legitimized the notion, associated most of all

with Stalin, that the transformation of society

justifies any human cost”.8 Even though there are much

7 Chandler. A. Shocking Mother Russia: Democratization, Social Rights, and Pension reform in Russia, 1990-2001. P. 7.8 Statter David. It was a long time ago, and it never happened anyway: Russiaand the communist past. N.H. P. 5.

12

more elites in Russia (managerial, bureaucratic,

intellectual etc.) all of them wanted the same thing-

to maintain the new status quo and not challenge it.

The key question in 1990-s in Russia was not who was in

power but how it was used. Another important issue is

the role of the West, as IMF and many advisers have

forced changes of a ‘shock therapy’ nature upon Russia,

what concluded in shock without therapy. According to

theirs predictions inflation might increase in the

shirt term by 3-5 times, however the reality was not

the same.

Another aspect of these changes was a growing gap

between rich and poor with an awful tendency, when

criminals were becoming powerful whereas knowledgeable,

educated people lost their importance. The impact of

this change was tremendous on young people, but we will

speak about it in the second chapter. “By the beginning

of 1995, Russia had a very thin layer of rich people at

13

2,5-3 percent”.9 There were two groups of richest

people: politicians and mafia (later) with small amount

of real businessmen, which was an outcome of economic

reforms. Privatization was done through vouchers, which

were distributed through people, however, no one

explained what and how they can do with it and only

people who were connected to the government knew what

to do. Furthermore, people faced tremendous poverty and

were changing these vouchers to any amount of money or

even on a bottle of vodka. In the beginning of 1990-s

the list of richest people included “V.V. Zhirinovsky,

B. Yeltsin, A. Yakovlev, M. Gorbachev, A.I. Volskiy

etc. – all politicians, K. Zatulin – a businessman, M.

Khodorskii – entrepreneur and A. Karpov – a chess

player”.10 A “New Millionaires” survey of 1992-93

discovered that people in the list were 35 years old

average, natives of Moscow and of intelligentsia

background. Some of them had a CPSU, Komssomol or KGB9 Russian society in transition. Edited by Christopher Williams, Vladimir Chuprov, Vladimir Staroverov. P.116.10 Russia facing a choice. Moscow obozrevatel. P. 41.

14

connections and backgrounds”.11 These figures showed

that common people were destructed. Soviet people were

very naive and believed that politicians must be

committed to people’s best interest. They could not

take immediately responsibility of their life after 70

years of prohibition of doing it. New politicians made

everything to cheat to them and took all that they

could from all natural resources without thinking about

future of the country.

Another crucial aspect of 1991-1996 was a

criminalization of business sector, the principle

‘whatever is not prohibited legally is permissible’

became crucial for surviving and getting profit, as

legislative institutions were very weak. It was spread

all over morality, mentality and values of many

Russians. The means were: setting prices, the quality

of goods and services, endangering people’s health and

life and so forth. According to Michael Joseph “30 per

cent of the starting capital in the private sector was11 Ibidem. P.12.

15

of the criminal origin while 51 per cent of sales

operations had the similar ties”12, although real

figures must be much higher. Russian criminals were

trying to imitate Western counterparts to become

successful, however through their own methods. The sate

was doing nothing to cope with organized crime, the

reasons could be different, on the one hand they could

not do it because of resource constrains, on the other

hand, it seemed that many of criminals were regime

supporters and both groups got benefits as their

interests were similar.

Finally, the way economic reforms were held in

Russia was wield. The most important problem was that

they were partial and very fast, there was no

transition period for people to cope with changes step

by step. The outcomes were enormous poverty,

criminalization of market, and lack of real resources

in governmental hands to continue, what they started.

12 Joseph Michael. Comrade Criminal: The theft of the Second Russian revolution. P. 112.

16

The impact on the society was tremendous, it was in all

spheres of theirs lives, in the next chapter we will

try to concentrate on demographic and social welfare

system to show what effect of destruction of old system

without building a new one was in those sectors.

Chapter II. Main social problems

In the first chapter the main goal was to show the

impact of economic and political change on the society,

however, the key issue, which must be changed was the

values of people. It was crucial for them to understand

for what goal they were suffering and where they were

going, despite no one tried to explain it and social

welfare system became much worse than it was during

communism. There were no real means (money and

knowledge) to optimize communist social welfare system

to a new market economy. This issue was very difficult,

17

that was the reason government was trying to postpone

any solution till the day when there was no money in

budget to pay.

The key spheres for any healthy society except

economic development are the following: demographic

situation, youth policy, education and healthcare. We

will see what happened in these spheres during 1991-

1996.

To begin with demographic situation the impact of

transformation was far from positive. “The birth rate

has declined since 1985 from 16.6 per 1000 population

to 9.6 per 1000 in 1995. In the meantime, the death

rate has increased from 11.3 per 1000 population in

1985 to 15.7 per 1000 in 1995. The overall difference

between the birth rate and death rate has also

increased from 5,3 to 6,1 per 1000 population in this

decade”.13 The reason of such statistic was an ‘abnormal

death rate’. The worst figures in the number of deaths

13 Russian society in transition. Edited by Christopher Williams, Vladimir Chuprov, Vladimir Staroverov. P. 57.

18

increase were from 1992 to 1995, as it grew from 15

percent to 64. On the one hand, the answer for roots of

such a catastrophe was in “the drastic deterioration in

medical services, mass poverty, a poor diet for tens of

millions of people, growing unemployment, stress,

anxiety over an uncertain future, alcoholism and so

forth”.14 On the other hand, the same reasons matched to

people undesired giving birth to children. Although,

economic problems were crucial, the aspect of poor

health among women because of ecological situation was

important as well. Moreover, the level of marriages was

falling, while divorces were rising. The family

institution was in the same situation as demography.

“In the early mid-1990s, every second marriage ended in

divorce; many children- 16 per cent- were born out of

wedlock; 12 million were said to live in a ‘social-

risk’ families”15. Furthermore, government expenditure

on schools, kindergartens, hospitals and maternity14 Russian society in transition. Edited by Christopher Williams, Vladimir Chuprov, Vladimir Staroverov. P.57.15 Ibidem. P. 62.

19

facilities were reduced dramatically since 1986. All

this led to the lack of interest of people in anything

except surviving, what gave freedom of actions to

politicians.

Second aspect of new Russia, which must be vital

for rebuilding of the state was youth policy. In the

research on this topic Prof. Chuprov was trying to

analyze the position of youth in terms of transition

from school to work and the data was the following.

Nearly one-third of his 1994 sample “considered the

work as the only mean to achieve other goals and there

was a great decline of young workers in state

structures”.16 Young people were open to new

opportunities, however their attitude towards hard work

was not positive, they knew that there were other ways

(business = criminal) to become successful. “During

1990-1994 there was a 40 percent increase in the

16 Ibidem. P. 129.

20

proportion of young people willing to engage in illegal

activity to solve money and other worries”17.

In educational sphere situation was not positive as

well, old system was sufficient for soviet needs, but

did not answer a new reality. Universities needed time

to reorganize and to analyze new market demands. Plenty

of people with higher degrees could not find a job and

the tendency was to work on any job that you can find,

the same was with colleges and professional schools.

Many people were trying to get degrees in management,

economy and marketing, and good job could be found

mostly in international companies. There were opened

many private universities with poor quality, as the

only they needed was money. In overall terms, “there

was less interest in technical subjects (down by 37,6

percent), social studies (down to 29,2 percent), but a

greater stress on business studies (up to 53

percent)”.18 In December 1995 when Uriel Procaccia was17 Russian society in transition. Edited by Christopher Williams, Vladimir Chuprov, Vladimir Staroverov. P. 132.18 Ibidem. P. 133.

21

invited to Moscow to teach a course for students he

memorized: “My job was to initiate my young disciples

into such Western ideas as the corporate form,

commercial paper, and the other main subjects. Having

detected many a blank expression among their young,

eager faces, the reason was that no one ever took the

trouble to familiarize them with the fountainhead of

all private law-contract.”19 “Several of my Russian

colleagues had only very fleeting notion of what

contract law might be all about, and an astounding lack

of curiosity to find out”20. All cash payments were

closely scrutinized for fear of counterfeit. All

economy was about barter and some primitive mechanism.

Politicians gave freedom of actions to the society,

which was controlled for so long without understanding

that it could not be effective.

“More than 50 percent of young workers and

specialists between 1990-1994 had jobs that required19 Procaccia Uriel. Russian culture, property rights and the market economy.C. P.1.20 Ibidem. P. 2.

22

lower or different skills. In 1994 more then 30,5

percent of young people were indifferent towards their

work. Only 25 percent of Russian young people linked

education to social advancement and only 10 percent to

a career”.21 In reality many young people became

dependent on parental support, figure increased from 81

percent in 1990 to 88 percent in 1994, and the tendency

was becoming much worse.

In western societies civil activity is a norm for

development, however for Russian people it was

something very new, that was true for 1991-1996 and is

still the same, “young people were indifferent to all

forms of socio-political activities”.22 The majority of

young people believed that the responsibility for

carrying out the reforms lied with the President; they

saw a strong leader as essential to solve all the

21 Russian society in transition. Edited by Christopher Williams, Vladimir Chuprov, Vladimir Staroverov. P. 130.22 Chuprov Vladimir. Russian youth; characteristic of integration processes.

A., P. 34.

23

difficulties facing Russia. It is evident that soviet

background was still there. The most painful thing was

that all these figures were about urban people, the

situation in the rural districts was much worse; they

became victims of agriculture sector collapse.

Finally, it is important to pay attention on social

welfare system, concentrating our attention on

healthcare and pension system. Economic crisis and

falling production have led to difficulty collecting

tax revenues. As a result of the shortage revenue, the

state has lacked the capacity to grant and index

pension and healthcare reforms according to the Russian

people’s demands. There was a growing gap between needs

and resources. Moreover, the difficulties were added by

bad demographic tendencies.

The issue of soviet healthcare system quality is

very disputable, still it was much better than it

became afterwards. In 1991 a substantial health reform

program ‘On safeguarding the health of citizens’ was

24

started, but the whole project was closed after

collapse of the USSR Ministry of Health in November,

with a transfer of many resources, staff and etc. to

the new independent states. During 1992 the reforms

were restarted, “under ‘shock therapy’, the following

aspects were emphasized; preventive medicine; a reduced

state role in health care; the introduction of national

medical insurance; the need to put healthcare on a more

commercial basis; and finally a greater involvement of

foreign firms in the development of the Russian health

sector”.23 In reality once again reforms, which sounds

reasonable for westernization, was held awfully, one of

the reason was that there was no money in budget to

make all these changes. Medical staff was dissatisfied;

one indication of this was the strikes in January and

April 1992 and again in August 1993. They were among

people with high income in the USSR, but in modern

Russia those who work in public hospitals still receive

23 Russian society in transition. Edited by Christopher Williams, Vladimir Chuprov, Vladimir Staroverov. P. 195.

25

one of the lowest salary. Until nowadays quality is

poor in both private and pubic hospitals, while in

private the only thing, which is important is profit,

so it is easy to imagine what was happening during

1994-1996, while during the first 3 years old system

was more or less appropriate. The overall decline in

health status was due to failing food consumption;

inadequate funds to promote environmental protection;

by tight budget constrains and declining health

expenditure. “During 1992- 1994 it became evident that

Yeltsin administration could not cope with healthcare

crisis, 86% of people thought that new government was

not in a position to provide ‘good social services’”.24

In 1994 Russia was ranked 68th in the world in terms of

healthcare. In addition to all economic problems there

were: 30 percent of Russia’s water supply was not up to

WHO standards, diet did not contain all elements that

24 Russian society in transition. Edited by Christopher Williams, Vladimir Chuprov, Vladimir Staroverov. P. 197.

26

people needed, most diseases were rising, morale among

medical staff was becoming lower.

According the example of healthcare system failure

the same situation was in all spheres of social welfare

system. “The fate of pensions was an excellent

illustration of how the dramatic, state-sponsored

institutional changed that accompanied Yeltsin’s ‘shock

therapy’ reforms triggered intense political

controversy and social discontent”.25 Most pensioners

were not asking a cash-strapped government to support a

lavish lifestyle: this was about much more modest

expectations, namely, being able to live adequately

throughout the whole month, without always having to

queue up for one’s pension. “The growth in social

activism among the elderly has helped maintain pension

reform at the top of the formal political agenda”.26

That fact led us to one important conclusion in the

SU depended on a social contract, whereby the state25 Chandler. A. Shocking Mother Russia: Democratization, Social Rights, andPension reform in Russia, 1990-2001. T. Preface.26 Ibidem. P.10

27

provided considerable social benefits to the citizenry

in return for social stability27. The outcomes of

Yeltsin policy was that there was no opposition, no

civil society and no even those welfare state which was

in the USSR to fight for any changes in social welfare

system.

27 Chandler. A. Shocking Mother Russia: Democratization, Social Rights, and Pension reform in Russia, 1990-2001. P.13

28

Summary

Nothing is more wonderful than the art of being

free, but nothing is harder to learn how to use that

freedom. This seminar paper was dedicated to provide

integrative analysis of Russian society during the

presidency of Boris Yeltsin in 1991-1996 and to

estimate outcomes of economic reforms on common people

lives. The democratization affected Russian society

very painfully. What happened to Russia seemed to be a

final victory of the West in Cold war and the only

lesson from it is that people must understand that they

have to take responsibility over theirs life. Although,

29

the solution sounds easy it was and still is very

difficult to born any responsibility in the society

where there was government control in all spheres of

life. Russian people have a different set of values

where humanism, individualism, authority, wealth are

not the same concepts that are in the West.

“Westernization was more about means to preserve her

oriental heritage against the advancing Western foe,

rather than as an independently chosen way of life”28.

Through the whole research body there was an

attempt to show partial character of reforms, which

were held by Yeltsin administration. There was no clear

strategy and no estimation of outcomes. The way

transition was done made Russian people suffering from

poverty, illnesses, uncertainty, decreasing social

welfare system quality and quantity. All these figures

were presented in figures according different

statistical sources. People in Russia got a lot of

28 Procaccia Uriel. Russian culture, property rights and the market economy. P. 279.

30

foreign products and goods, but they lost their values

and identity. They were afraid of each other and hate

each other, as the only value for survival became

money. The gap between government with its politics and

population was growing tremendously fast. In new Russia

government was not committed to its nation best

interest, there was no attempt to attract people to

make decisions about state’s future, during this period

there was no place for civil society. Even though,

first Russian president is considered to be weak, the

key issue in Russia political culture of a new period

is that politicians use power for enrichment and do not

care about population, while last do not understand

that it is theirs responsibility to influence on the

government. That is why many Russian people would like

to reborn the USSR because there were clear values and

politicians were working for people, although ideology

was far from ideal. During 1996 presidential election

leader of Communist party G. Zyuganov was very close to

31

Yeltsin, moreover, according to some sources final

results were falsified.

The period of 1991-1996 was very painful for

Russian nation, there was no strict plan of transition,

the destruction of institutions and systems, which were

working quite well in the USSR was a very easy process,

although building new happened to be much more

difficult thing.

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32

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35