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Yegor Gaidar: the reformer who died of neglect

Yegor Gaidar, architect of the radical economic reforms in Russia which followed the fall of Soviet power, died on 15 December. Dmitry Travin reflects on the achievement of a great economist and patriot who saved his country and quietly shouldered the hatred that followed.
Dmitri Travin
23 December 2009

Gaidar was 35 when Boris Yeltsin offered him post of Minister of Finance and Economy, charged with carrying out radical economic reforms in Russia’s first post-Soviet government. Several months later, he became acting Prime Minister, although this appointment did not get the blessing of parliament. By the end of 1992, parliament was demanding Gaidar’s resignation, and Yeltsin was forced to obey them. However, by that time the country had effectively already made the transition to the market. 

Gaidar’s work was continued in 1993 by the new finance minister Boris Fyodorov. He only remained in this position for a year, and left the government in January 1994, having achieved some success in stabilizing the country’s finances. Fyodorov’s fate was in many ways similar to Gaidar’s. He died after a serious illness on 20 November 2008, at the age of 50.

Fyodorov’s resignation in early 1994 slowed down the battle with inflation. The result was soon apparent. The money supply continued to grow. The Central Bank and the government believed that issuing more money would create more demand, and stop the economic decline. Instead, it all ended in catastrophe, with “Black Tuesday”, when the ruble lost about a third of its value against the dollar.

After this, Anatoly Chubais, a good friend and colleague of Yegor Gaidar, was put in charge of financial stabilisation. Chubais succeeded in getting inflation down. But he could not protect Russia from the effects of the Asian crisis of 1998. The scheme Chubais had created to manage the national debt collapsed. None the less, after 1999 the economy started growing steadily. This  would not have been possible if the economy had not been stablilised.

Chubais has been luckier than Gaidar or Fyodorov. He is still sought after by the government and is the head of a state corporation. Still, he only just survived an attempt on his life in 2005. Colonel Kvachkov of the Russian army’s central intelligence department was charged with the crime. Although he did not admit his guilt, he did not hide his hostility towards Chubais.

We should add the name of Alexei Golovkov to the tragic list of Russian reformers. He died at the age of 53 on 7 January 2009, little known to his compatriots. It was he who introduced Yeltsin to Gaidar in 1991. Without Golovkov, Gaidar’s reforming government would not have happened.

Hatred and neglect

The fate of reformers in Russia is hard. In the view of Gaidar’s friend Pyotr Aven, Minister for Foreign Trade in 1992, and now the head of a major financial group, his old comrade was killed not so much by illness, as by neglect. The authorities had not allowed Gaidar to manage the country’s economy for a long time. His opinion was listened to at the Finance Ministry, which is now headed by another of his friends, Alexei Kudrin. But once Vladimir Putin came to power, he was no longer able to stop the government from making fundamental mistakes.

The same could be said of Fyodorov. He too died of neglect, no longer needed by his government. At one time, Fyodorov, as a minority shareholder, tried to influence Gazprom’s policy, but his intervention failed.

What Aven, as a major businessman, did not say publicly was that the people who carried out reforms of the 1990s were under terrible psychological pressure from all sides. The vast majority of Russian citizens today believe that the reforms were wrong, and that they could have gone ahead without a fall in industrial production, without any devaluation of the currency. A certain (quite significant) number of people hold the view that Gaidar and his team got rich from carrying out reforms. The anger that can be felt today in many publications, speeches by political figures, and thousands of comments on the internet was probably felt very keenly by Gaidar, Fyodorov, Golovkov and other reformers. The hatred of the crowd undermined their health, and eventually led to an untimely death for all of them.

They were persecuted, despite the fact that the reforms of 1992 not only ensured Russia’s transition to the market, but effectively saved the country from famine. As long as prices remained fixed, the government was unable to provide enough food, even with coupons. Liberalization stimulated first food imports and then the production of goods.

Reform was bound to be difficult, as the unthinking economic policy pursued by successive governments in the final years of the USSR had left the country so awash with money that the supply of goods had completely dried up. Had prices not been liberalised,  Russia could have faced famine. It was inevitable that people’s savings would be devalued by liberalisation. There is no such thing as painless reform. Any reformer would have been hated by the people, who were poorly-educated, and the politicians (especially on the left) who consciously manipulated them to their own ends.

Gaidar carried out reform honestly, and did all that he could for the normal, civilized development of Russia. Many people believe that he thought only of the economy, and so did not wish to alleviate the social consequences of the reforms. However, that was not my impression when I met Gaidar.

What Gaidar told us

Several years ago, at the newspaper Delo where I worked, about a dozen of us got together to talk to Gaidar, who respected our publication and was prepared to answer controversial questions in private. In his view, Russia was gradually moving towards a crisis. He probably realised that it would hit Russia harder than other countries, because the “successes” of the Putin era had all been based exclusively on the flow of petrodollars.

Is it worth helping a government like this, one of my colleagues asked? Wouldn’t it be better to let everything collapse? People need to see that Russia was not actually getting up off its knees, just bingeing on petrodollars. They would find themselves in just the position they were before Gaidar came to power in the autumn of 1991, when you could only buy food with coupons. Wouldn’t it be better for the country to come to its senses and support new reforms, so that our children and grandchildren, who are destined to live in an era when oil will run out, do not live in poverty? 

For my part, I do not support the principle “the worse things are, the better”. But at that moment I really did think that a disaster might serve to remind people of a thing or two. In 1992-93, Gaidar enjoyed a lot of popular support, as evidenced by the fact that his movement “Russia's Choice” received more seats in parliament at the first Duma elections than the Communists and Zhirinovsky’s party. People came to hate the reformers more and more as the reforms became part of history, and it became clear that groceries were no longer going to disappear from shops. In other words, today one can safely hate the reformers. No one can change what they have done for Russia.

In answering my colleague’s question, Gaidar categorically rejected the idea that he should stop giving advice to the government and let the crisis destroy Russia. To my surprise, the liberal reformer turned out to be deeply patriotic. But his was a reasonable patriotism, not the aggressive kind which has become so widespread in Russia today. Gaidar, as always, reasoned in a measured way, and his reasoning was more eloquent than any oratory.

I have been at the head of government, said Gaidar;  I know what poverty means in a country which has nuclear weapons. I know what it is like to run a country at a moment when all ties have been broken, when people hate one another, when it is not clear who obeys whom…

He reminded us of the terrible danger Russia was facing in late 1991- early 1992. It is not hard to understand what would have happened to ordinary people if conflicts of the Yugoslav kind had started up in the ruins of the Soviet Union. If the peoples of the USSR had begun fighting like the peoples of Yugoslavia, but with rockets with nuclear warheads instead of Kalashnikovs.

If, God forbid, Russia ever reached the state that it did in autumn 1991, we would have to call in the reformers again. Then the reformers of the past would once again be held in high regard. But Gaidar did not want to uphold his reputation at this price. He helped as best he could to keep the country from disasters, and listened in silence to the nasty things that it had become so fashionable to say about his reforms.

Dmitri Travin is Research Director at the European University in St. Petersburg's Centre of Modernization Studies

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