POLI 11 Lecture Notes - Lecture 8: Boris Yeltsin, Crony Capitalism, Mikhail Gorbachev

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21 May 2018
Why Soviet Communism Fell:
Inecient command economy:#
Failure of command economy - a mismatch between supply and demand, the people who
work in the command economy have no incentives to improve the quality but only to
appease the government. If managers overproduced (met higher than gov demands) they
were promoted and so private interests made this problem even bigger. #
Lack of innovation, inertia of government apparatus#
Fostered corruption: People reported false figures to Party in order to make up for
demands that could not be met so this was a system that breeds lies and
corruption.Hundreds and thousands of economic planners were employed in Moscow, on
the basis of faulty information.#
Boris Yeltsin: Russian President#
Humble peasant background, his father was a victim of GULAG concentration camp#
In 1985, he was appointed mayor of Moscow by Gorbachev. Gorbachev fired previous
mayor n order to prevent him for staging a coup. Yeltsin made a name for himself as a mayor
of a smaller city.#
After some years Gorbachev founds Yeltsin isn’t a very good lieutenant as he was too
mouthsy so he is fired but as he is quiet popular and Gorbachev needs support he brought
him back. #
Yeltsin’s Challenges and Policies 1#
Keeping Russia Together:#
Sovereignty movements in Chechnya, Tatarstan, Sahka Republic#
-Federalism, bilateral agreements w state governs#
Major issue: Preventing a return to Communism #
The Communist party had a lot of influence and was still I control of aa lot of resources and
a lot of people in legislature were old regime communists as faced by Yeltsin#
Seizure #
Economic Challenges:#
Economic Stagnation and government indebtedness:#
1. 1991-2001: Private sector grows from 5% to 70%#
2. Crony Capitalism: Rise of the Oligarchs#
Foreign capital deterred by corruption, crime#
1991-98: 50% economic contraction#
Worse than US Great Depression#
Economic output in 2001: Equal to Netherlands#
Poverty and Social Problems:#
Declining life expectancy (65 to 58) very unusual for country like Russia#
40% poverty rate #
Some people gaining a lot of wealth #
Moscow Book, Rural Bust. #
Rapid increase in economic inequality #
Yeltsin had to establish a new rule of law:#
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