The Challenge for International Institutions
International Institutions and Global Governance series
Edited by John-ren Chen and David Sapsford
Chapter 11: Privatization and Poverty: The Case of Russia
Alois Wenig INTRODUCTION The classical Soviet-type command economy was in a severe crisis in the whole eastern hemisphere by the mid-1980s. The communist leaders had again and again promised to catch up with the standard of living in Western countries, but, instead of the economic gap between the East and the West being closed, the differences became increasingly large. The people in the communist countries had lost all hope that their economies would ever overcome the notorious shortages of consumption goods, the inefﬁciencies of the public administration, the omnipresent corruption and the lack of political and economic freedom. In the Soviet Union and its satellite states even the members of the communist parties agreed that drastic changes, in particular economic reforms, were inevitable if they were to avoid a total collapse of their societies. Earlier endeavours to restructure the centrally planned economies in the East had failed. In Czechoslovakia, for example, a military invasion led by the Soviet Union in 1968 abruptly ended the attempt to implement market elements in a system of strict central planning and to try a more democratic political life instead of the strict dictatorship of the communist leaders. Only Hungary and Yugoslavia had managed to combine market elements with their otherwise also state-run economies. However, when Mikhail Gorbachev came into ofﬁce as president of the Soviet Union, the situation changed. He proclaimed a political thaw and an economic reconstruction (glasnost and perestroika), a programme which ﬁnally led to a breakdown of the Soviet...
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