When the Cold War ended, in 1990, Russia was in a very weak position, no real threat at all (except for nuclear weapons, but the nuclear rivalry had been greatly reduced via arms-control agreements). Communism was proven to have failed as an economic system, and this failure of communism had left a former U.S.S.R. that was decayed and unproductive. The Russian people were in misery. Alcoholism, which was historically a huge problem among Russian men, and which kept Russia’s overall life-expectancy figures remarkably low, was rampant. Here, courtesy of Trading Economics, is a chart showing the longevity of Russian men (the main victims of alcoholism), during the period from 1980 to 2010 (Russia’s transition out of communism, and into capitalism):
As you can see, there was a burst of progress at the end, right before 1986, when the fading regime merely relaxed controls (while it started a campaign against alcohol-consumption) and didn’t go into capitalism, but this progress mildly reversed during the reign of the liberal Mikhail Gorbachev, 1985-1991, and it sharply plunged during 1991-1994, which was the period of the libertarian Boris Yeltsin’s privatization of Russian industries. Russia’s climb-back, after that libertarian surge, was brief, ending in 1998, and Russia still hasn’t yet improved itself beyond the Soviet era. Communism had certainly failed there, but capitalism also failed there — or at least the capitalism that Russia tried did, and this capitalism was designed for them by the Harvard economics department, the capitalist world’s dominant economics department: it was mainstream economic theory being put into practice in a non-capitalist economy, capitalist theory being introduced where there had been no capitalism before. The same economic theory that a decade later would produce the 2008 global economic crash was being applied in Russia during 1991-1998, and it did not get Russia out of the doldrums.
The unspoken but universally recognized truth was that communism had failed, and that the Cold War had been won by the capitalist nations of the OECD (U.S., Western Europe, and Japan), not by any nations of the former Soviet Union.
There was no longer any doubt that Marxism was dead, and that it can never come back. As an ideology, its value had gone to zero. A few people (in places such as Cuba) still spout Marxism, but it’s actually finished, and there was in its wake within Russia only a kleptocratic form of capitalism, mainstream-economics “greed-is-good” corporatist or “fascist” economics, which, when introduced after communism, turned out to be hardly better than the communist regime itself was at its end. Though the 70-year Marxist experiment had definitely failed, Russia is still crippled by what Harvard designed and largely implemented in Russia to replace it. Since 2004 at the latest, Russia has been recovering from that form of “capitalism,” Harvard-economics capitalism, mainstream-economics capitalism.
Here, from p. 66 of Charles I. Jones, “What Every Leader Should Know About Macroeconomics”, is a chart showing the per-capita GDP of various nations, including Russia, as compared to the U.S. (=100%), from 1990-2010:
Measured in this way, purely economically, Russia started recovering earlier, in 1998, rather than in 2004. Perhaps there was a six-year delay in the impact of the improving economy showing up in the public’s improved health. As you can see from this graph, Russia went down during 1990-1998 (the era of the Harvard-run reforms), and has been edging back up ever since, toward the percentage now it had had at the very end of the Soviet Union. Growth at that rate, since 1998, makes them an economic threat to the U.S., long-term — a threat to continued U.S. global dominance, this time an economic threat, which it never seriously was before, but still not necessarily a military threat, which is a different matter.
If you want to understand why Russia was hobbled during 1990-1998, that’s explained in two excellent articles, one (brief) from Mark Ames in November 2008 titled variously “The Summers Conundrum” and “Larry Summers: A Suicidal Choice” (that latter referring to Obama’s committing his Administration to suicide by appointing Summers to lead Obama’s economic team), and the other (very lengthy) from David McClintick in February 2006, titled “How Harvard lost Russia.” Basically, it’s the story of how Harvard’s leading economists engineered the creation of Russia’s kleptocracy, or fascism, and how it hurt Russia. Russia’s switch to fascist or “crony” capitalism (the thing that Mark Ames feared then from Obama) was planned and masterminded first by Jeffrey Sachs in 1990-1991, then by the Russian-born Harvardian Andrei Shleifer in 1991-1997, who was the protégé of Lawrence Summers, who had been the protégé of Martin Feldstein, who had been the Chairman of President Ronald Reagan’s Council of Economic Advisors, at the time (the 1980s) when “Greed is good” first became publicly and proudly the Republican Party’s ideology (subsequently to be championed with such phrases as, “Drill, baby, drill!”). Feldstein-clone Summers sent his man Shleifer, a native Russian-speaker, into Russia, during 1991, to take over the process from his previous man Jeffrey Sachs, who had introduced economic “shock therapy” in Poland the prior year, in 1990, and then run it for a year in Russia. Sachs and then Shleifer applied to Russia the “greed-is-good” economic theory that’s taught worldwide under the aegis of Adam Smith’s beneficent “invisible hand,” and that in the U.S. dominates the Republican Party, both ideologically and in practice, and that dominates the Democratic Party only at its very top, Presidential, level in actual practice, though not in the Democratic Party’s rhetoric, because the view that “Greed is good” had been condemned by Franklin Delano Roosevelt in the 1930s, and it rabidly violates the Democratic Party’s egalitarian basic principles, which were established by FDR and his “New Deal”; and FDR’s ideology had dominated this entire country until Reagan’s “Greed is good” ideology came in after 1980 and replaced the progressive post-FDR-era with the conservative post-Reagan-era. [Note: We at Washington’s Blog believe currently there is no difference between the mainstream Republican and Democratic parties.] Anyway, those two articles, about the Harvard operation in Russia, document a deeply corrupt economics profession (corrupt at its very top), and the application of its similarly corrupt “free market” economic theory, to Russia, as a form of supposed “aid” from the “West,” which was tragically invited into Russia at the very time when Russia was trying to recover from the clear and disastrous failure of communism.
The bottom line is that the economics of fascism wasn’t much, if at all, better than the economics of communism; and, so, the Russian economy kept on plunging, while the Harvard plan was being put into place there. Afterwards, and clearly after 2004, Russian growth has more closely mimicked the stellar growth in the Chinese economy, which never subjected itself so fully to the Harvard, or “capitalist,” economic system, and thus never experienced the “capitalist” (actually fascist capitalist) failure that Russia experienced during 1990-1998.
If you look at those trend-lines, both for Russia and for China, after 1998, they could cross America’s in per-capita GDP, within 20 to 30 years. This would mean the end of the dollar’s being the international reserve currency, within merely a few decades [Note from Washington’s Blog: we believe that will happen within months to years … not decades.]; and the consequence of that happening would be catastrophic for the U.S. economy, which benefits enormously from having the planet’s standard currency for international business transactions. That’s because it would mean the end of “the American Century,” the era of the dollar. For example, without the dollar as the global-exchange currency, the ability of the U.S. Federal Reserve to carry out “Quantitative Easing” (“QE1,” “QE2,” etc.), or unlimited monetization of “toxic assets” at full value, simply would not exist. That’s just one of many economic-policy tools that are available only to the nation that “prints” the world’s reserve currency. Consequently, if and when the dollar-era ends, the U.S. economy will probably go into a tailspin unprecedented in U.S. history (since we never previously experienced the end of the era of dollar-domination, since we’re still in it). This would unwind many decades of pent-up corruption within the U.S. economy (the result of the “Greed is good” ideology), which would be suddenly cast aside by international investors, after decades of U.S. immunity, that protect this country against otherwise-basic economic realities (the realities that non-reserve-currency countries must face every day).
Furthermore, Russia post-2004 has undertaken to slash its astronomical alcoholism-rate. This recent program increases the economic threat to the aristocrats in the U.S. Here is a good graph from Britain’s The Lancet, 26 April 2014, “Alcohol and mortality in Russia”: