Economic decline: not so bad as all that?
It's very easy when discussing Russia's history after the Soviet Union to lapse into doom and gloom. The Russians themselves, after all, are so good at it and they have some impressive figures to back them up: official statistics showed a drop in Gross Domestic Product (GDP), or the value of the economy, of over 50 percent in the years from 1989 to 1996.
According to these statistics, Russia has to have undergone one of the most dramatic collapses ever in a large country. To put it in context, politicians in the industrialised democracies of the West are generally in trouble if they fail to preside over a two percent annual increase in GDP - and even that would work out as a 17 percent RISE in GDP over the 89-96 period.
Of course, it's true that many ordinary Russians have suffered in the transformation of their economy to rampant free market capitalism - particularly those who relied on savings or pensions from the old, all-embracing Soviet state. But there are many reasons for thinking that these official figures are misleading, and overstate the true extent of collapse in the economy.
Managers of state enterprises in the old Soviet Union routinely inflated their figures for output to earn themselves political favour and qualify for plan-fulfillment bonuses. So a lot of what the GDP declined from may not actually be real.
Because so much econoomic activity in the old Soviet days was driven by politics - the goal of the management to be seen fulfilling the plan of the Communist party - a lot of production was wasteful and useless. Remember all those mountains of plastic sandals and exploding TV sets? This means by contrast that when this type of production stopped, the numbers dropped but it didn;t necessarily affect ordinary people's living standards.
A lot of the lost output was military production that wasn't in the least bit helpful in increasing the amount of value - either in cash or capital - in the real Russian economy.
There was a greater fall in investment than in actual consumption. Of course, this doesn't bode well for the future but what it suggests is that living standrads fell less sharply than sheer figures would indicate.
The dramatic leap of prices caused when Yegor Gaidar liberalised prices in 1992 actually had a hidden benefit in economic terms - no more queues. In the brutal rearrangement of the economy, prices became the factor of distribution rather than supply. Many Russians were still in the same position with regard to their purchasing power but for a different reason. Now they could no longer afford many products whereas before they could afford them but had simply not been in the right queue at the right time or didnlt know the right people in the party or the state enterprises. But the net result is no queues. Nobody can quantify exactly how much impact queuing had in the old communist regimes but it is clear that economically speaking they were a drain on resources.
As in most parts of the world, the official figures clearly understimate the vitality of the private sector. There are now over a million private concerns in the Russian economy, many of them growing very fast - and hiding their existence even from the authorities. Other areas such as household production of food have also been largely bypassed in official statistics. |
