This transcript analyzes the collapse of the Soviet Union, focusing on why it occurred and why it was relatively peaceful. It examines the rise of "gangster capitalism" in Russia and the subsequent transition of power from Boris Yeltsin to Vladimir Putin. Finally, it delves into the deeply ingrained corruption within Russia and the factors contributing to it.
The lecturer starts by setting the stage with a description of the August 1991 coup against Mikhail Gorbachev, highlighting the presence of tanks in Moscow and the rise of Boris Yeltsin as a figure of resistance. Gorbachev, who came to power in 1985, introduced reforms like Perestroika (restructuring of the economy) and Glasnost (free speech), aiming to modernize the Soviet Union. However, he faced opposition from both hardliners and radical reformers. The coup attempt ultimately failed due to Yeltsin's leadership and the military's decision to support him.
The end of the attempted coup marked the real power shift from Gorbachev to Yeltsin, the democratically elected president of Russia, who ultimately resigned. Despite a referendum in March of 1991 supporting the continuation of the Soviet Union, the momentum shifted towards independence. Estonia and Latvia declared independence during the coup, followed by Ukraine. Yeltsin, in agreement with the Ukrainian president, declared that the Soviet Union no longer existed. By December 1991, the Soviet Union was officially dissolved, and replaced by the CIS, a group of independent states.
The lecture then turns to the question of why the Soviet Union collapsed, citing factors such as the unsustainable command economy, the arms race, and the quagmire war in Afghanistan. Containment, a policy formulated in the 1940s, put fiscal pressure on the already weakened Soviet System. But, most importantly, the lecturer emphasizes the remarkable peacefulness of the collapse, attributing it to a decline in loyalty among elites and citizens.
The framework of Albert Hirschman's "Exit, Voice, and Loyalty" is introduced to understand this phenomenon. It argues that when people feel that something is in decline, they can react by either leaving, complaining, or fixing it. In the Soviet Union, the elites had lost faith in the communist ideology and the ability to change the Soviet Union. The opportunity to create an opportunity for themselves, especially with the formation of the new Russia, reduced the cost of exiting.
The discussion then shifts to the rise of the oligarchs, who profited from the chaos and corruption surrounding the collapse. Their wealth came from various sources, including embezzled state funds, looted assets, and speculation against the ruble. Boris Yeltsin's 1996 re-election campaign was also aided by the oligarchs, who bought the assets of bankrupt firms. These actions indicate the weakness and corruptibility of the state during this time. A weak state is characterized by an inability to enforce rules, difficulty raising revenue, and arbitrary or unpredictable use of power.
The lecturer then addresses the transition from Yeltsin to Putin, emphasizing Putin's initial focus on strengthening the state. Putin reformed the tax system, increased revenue collection, and cracked down on some of the more egregious oligarchs, like Mikhail Khodorkovsky, to regain state control. This also marked a clear change in philosophy from the Yeltsin regime.
Finally, the discussion turns to Russia's persistent corruption. Path dependence, the looting of assets in the 1990s, and the "resource curse" (specifically oil) are identified as significant contributing factors. The dependence on oil revenue creates a system where access to the oil sector is highly valued, leading to corruption and rent-seeking. Furthermore, the reliance on oil also becomes a source of geopolitical power, making diversification of the economy less desirable for the government, despite its vulnerability to oil price fluctuations. The video clip of Bill Browder highlights some of the corruption that continues to this day.