From State to Market

The sudden collapse of the Soviet Union marked the death of communism, and state control disappeared from the Soviet state overnight. Many people blame Mikhail Gorbachev for the demise of both the union and the state-controlled economy. However, Gorbachev always believed in the ideals of the Communist System inspired by Lenin. He only wanted reforms within the system to keep it relevant to the needs of the time. He was keen to maintain the Soviet Union as a liberal multiparty democracy with more autonomy for constituent republics but strictly within the federation of the Soviet Union. The three Baltic states - Estonia, Latvia, and Lithuania - were not voluntary participants among the 15 republics that formed the Soviet Union. They were annexed under the Molotov-Ribbentrop Non-Aggression Pact between the Soviet Union and Nazi Germany at the start of World War II in 1940. In 1989, a continuous human chain spanning more than 600 km across the three Baltic states was formed as a demonstration of their opposition to Moscow's rule. The "Human Chains of Hong Kong draw Inspiration from this" movement. Gorbachev, being a liberal, opposed this silent revolution and even crushed it with an iron fist, as he did not support the secession of any republics, including the Baltic states, from the union. After the fall of the Soviet Union, where almost all property was held by the state, there was a massive privatization of the economy within a very short period of time. This process of privatization, known as "Shock Therapy," occurred overnight. However, this did not result in a true market economy but ultimately gave way to an oligarchy, where the economy was dominated by a few oligarchs who still hold power in the Russian economy. Many blame Gorbachev and his policy of Perestroika for this. However, privatization during Gorbachev's era was mostly restricted to the formation of joint-stock companies. The real massive privatization of state companies occurred only after the dissolution of the Soviet Union, primarily due to pressure from global institutions and Western governments to adopt a market economy. This shock therapy and oligarchy resulted in the erosion of purchasing power, leading to a significant increase in poverty and unemployment in the country that once had zero unemployment and was the world's second-largest economy, with a per capita GNP of over $9,000 before the collapse in 1991. Lastly, it would be unwise to draw parallels between India and Russia. India was a very small economy before 1991, with an even smaller per capita GDP. Despite its own challenges with privatization, it has resulted in improving the growth rate and size of the economy. Additionally, India now has a much more diversified economy. © Dr Amol M Yadav