In 1989, the soon-to-be Russian leader Boris Yeltsin had an unexpected tour of a Houston supermarket. Having just left the Johnson Space Center, Yeltsin’s group decided on a 20-minute stop at Randall’s (now a Food Town).
Describing his impression, Yeltsin later said in his autobiography that seeing, “those shelves crammed with hundreds, thousands of cans, cartons and goods of every possible sort, for the first time I felt quite frankly sick with despair for the Soviet people.”
One reporter said that Yeltsin looked amazed as he walked along Randall’s aisles:
When Boris Yeltsin became Russia’s President in 1991, the economy was collapsing. Dour clerks, long lines and shortages faced consumers while the state-controlled factories and collective farms were equally inefficient.
The solution was supposed to be the market. Instead we wound up with an oxymoron.
The Transition to a Market
Perhaps recalling Randall’s supermarket, Boris Yeltsin led Russia’s privatization process. Trying to move state-owned assets into private hands, he also created inflation, chaos and crime.
In Putin Country, former NPR correspondent Anne Garrels tells us that during the 1990s dissolved state farms no longer had seeds or replacement parts or cows. When workers in Chelyabinsk got ownership vouchers for the massive factories in which they had worked, there was little they could use them for. Typical families lived in a single room sharing a communal kitchen and bathroom and inflation decimated their savings. Whereas a minority enjoyed the opportunity to make money, most people struggled.
Statistics confirm Garrels’s evidence from Chelyabinsk that Russia’s initial transition to a market was catastrophic:
Our Bottom Line: State Capitalism
In Good Capitalism, Bad Capitalism, capitalism is defined as recognizing private ownership of property. Then, though, the authors point out that so broad a definition necessitates dividing capitalistic countries into 5 categories: 1) state-guided, 2) oligarchic, 3) big-firm, 4) entrepreneurial, 5) a blend.
After Vladimir Putin succeeded Boris Yeltsin in 1999, the Russian blend of capitalism changed. Whereas the private share of GDP (2003) had been 70%, Soviet officials estimate that the number slid to 50% (2015). In finance, energy, transportation and the media, the state returned. Meanwhile saying the state should determine criteria for technological development, Putin moved innovation to government.
With state initiatives driving the economy, we wound up with an oxymoron. Like jumbo shrimp or a working vacation, Russia has state capitalism.
My sources and more; Putin Country is the perfect starting point for a grasp of recent Russian economic history as was the Houston story about Boris Yeltsin. By focusing primarily on Chelyabinsk, Putin Country presents an anecdotal complement to academic papers here, here and here.