Crisis of mid-1980s
At this time, the Soviet administrative economy was still fundamentally different from the market economy in the West. The problems were specific. We had to increase the effectiveness of the economy, though we lacked the tools used to solve these tasks in a market economy.
However, in the mid-1980s the Soviet Union faced a drop in world oil prices, and accordingly a reduction of revenue from export. In this sense, the Russian economy was already linked to the international economy. Indeed, some analysts consider the state of the world market of energy resources to be the key factor which triggered the start of perestroika and the economic transformations in the USSR.
But this was far from being the only factor. With or without petrodollars, the Soviet economy was in a state which dissatisfied a large section of the population. Most goods were in short supply. This reasons for this deficit were deeply rooted in the administrative economy. They could not be tackled without radical reform. Buying consumer goods abroad could to some extent mitigate the dissatisfaction, but not solve the problem. So when Mikhail Gorbachev proposed to carry out serious changes, he received very wide support. At the same time, almost no one among the population knew what the dynamic of oil prices was at that moment, and whether it had any effect on the quality of consumption.
The first economic reforms were carried out in 1987-88. At this time, the economic problems of the Soviet Union were probably no more serious than they had been, say, five or seven years earlier. But if at the beginning of the 1980s, under Leonid Brezhnev, problems were addressed by issuing purely declaratory documents, such as the "Production program", under Gorbachev it was different. An attempt was made to manage the economy differently. Firstly, enterprises were given real independence and stimulus to improve their production activity. This was an act of "good will" by the authorities, and was supported by the people. Under another regime, there would have been no reforms. If Brezhnev (or a successor such as Konstantin Chernenko) had lived 10 years longer, there would have been no changes until the 1990s, regardless of oil prices.
In other words, it seems that the crisis of the mid-1980s is a rather tentative concept. Reforms were a reaction to society's dissatisfaction with the entire system as such, and not with the specific events of those years. Of course, different people had a different understanding of the nature of the problems faced by the country. Already by that time, some were thinking about a market based on the model of western countries, and some were in favor of returning to the Leninist principles of economy. But there was rather wide consensus on the need for some kind of changes in the USSR at the time.
The fact that reforms were a reaction to a way of thinking, and not to specific economic problems, is shown by the fact that the "improvement" of the system of managing the Soviet economy gave rise to a terrible macro-economic imbalance over the space of several years. And this happened because when carrying out changes, the reformers did not react to specific economic problems of the time, but the ideas they had about what "good" socialism should be, purged of the "bad" legacy of Stalin and Brezhnev. For example, allowing members of the work collective to vote for directors of enterprises, or giving enterprises independence, in a situation where there was a lack of competition and freedom of price formation, could not give rise to anything else but total chaos. However, this is the path we took in 1987-88.
Crisis of early 1990s
During the previous stage of reforms, the USSR had not become part of the world economy, so this crisis was still determined by the internal problems of the country. During the new crisis, the Soviet reformers had to react to real challenges from the collapsing economy. Things were so bad that the Brezhnev era seemed almost like a golden age. Almost everything was in short supply, and even when coupons were issued there was nothing to give consumers.
The main anti-crisis measure in the early 1990s was to ensure macro-economic balance. A specific task had to be solved - to achieve market balance, and give consumers the chance to buy at least the most basic goods for money. Fuel and products were in such short supply that it was not possible to "play" at building socialism with a human face, or other games of a similar type, which the reformers had dreamed up themselves, and did not constitute a response to a real challenge.
Attempts to balance the economy varied in their nature. Initially there was an attempt to achieve relative balance in the USSR, with administrative price fixing, by raising prices drastically and at the same time taking away part of the people's savings by carrying out money reform. However, it soon turned out that strong lobbying reduced all these efforts to nothing: different groups of influence forced the government to pay different types of anti-inflation compensations, and so the imbalance was preserved. So as a result, from 1992 Yegor Gaidar transferred Russia to a system of market pricing.
The main problem arising from the crisis of the early 1990s was thus solved. By drastically increasing prices, the macro-economic balance was gradually restored. Shops filled with goods. But perhaps this was not even the main consequence of Gaidar's reform. The emergence from the crisis fundamentally changed the structure of the Russian economy. A large number of enterprises which were unable to work in market conditions essentially stopped functioning, thus opening the way for various new types of business.
Gaidar's anti-crisis policy may be considered successful in the sense that it solved the main task that was faced in the early 1990s. However, this does not mean that it was successful as a whole. Like the reforms of the 1980s, the new Russian changes gave rise to problems which ultimately led the country to another economic crisis. By ensuring the relative macro-economic balance and laying the foundations for a new structure of the economy, the reformers of the early 1990s were not able to achieve stability of prices, and after their departure they left a legacy of extremely high inflation to the next government. In the fight with lobbyism, the reformers of the early 1990s were essentially no stronger than their predecessors.
This crisis was the consequence of the long-term rejection of a fundamental solution to problems caused by the reform of the early 1990s. High inflation was caused by the excessively mild monetary policy of the money authorities. Society reacted to high prices by calling for state support, and the state initially tried to "put out the fire of inflation" by constantly pouring new money into the economy.
When the error of this policy became fully clear, the government tried to remove the "excess" money that was crushing the market, by creating a system of state debt. In other words, the state tried to "print" less new money, and solve serious social problems by borrowing temporarily freed-up funds from the population and businesses, both within the country and abroad. However, it was not possible to make Russian state obligations sufficiently attractive. As a result, by August 1998, on the wave of the Asian financial crisis, capital flight from Russia led to a default (i.e. the government was unable to make payments on its obligations) and also to a drastic devaluation of the ruble.
The special nature of this crisis was that for the first time in recent history, Russia "became the victim" of processes taking part in the world economy. The Russian authorities at the time clearly did not take this danger seriously enough. They did not pay attention to the possibility of irrational, panicky capital flight provoked by events in Indonesia, Thailand and South Korea, which seemed to be completely unrelated to events in Russia. The authorities hoped that they would be able to establish order gradually in financial and monetary policy, but did not take into account the fact that the panic caused by events on Asian markets did not leave them enough time to do so.
Unlike the two previous crises which gave rise to powerful reforming efforts, the crisis of 1998 essentially did not require any fundamental reform. It automatically (as happens in the market economy) released mechanisms for solving the problems faced by the country. Although in 1998-99 in Russia it was widely believed that the new government of Evgeny Primakov would save the country, this was in fact one of the most passive governments in recent Russian history. Its achievement is that it did not hinder the natural process of recovery.
The basic reason for the recovery came down to the fact that devaluation drastically raised the competitive advantage of Russian enterprises, as most consumers could no longer afford to buy imported goods. Increased competitiveness ensured the beginning of a long period of economic growth, which in turn made it possible to overcome the deficiency of the budget. The government began collecting taxes successfully and abandoned the practice of constant borrowings on the financial market.
Crisis of 2008-09
Outwardly, the crisis of 1998 resembles the present economic crisis. Now, as then, we are dependent on processes taking place on the international market. Under the influence of these processes, capital is actively leaving Russia as in the earlier crisis. This leads to a significant weakening of the ruble. As in the previous crisis, the fall in the national currency causes serious social problems, as the financial solvency of the population is falling. There is a rather gloomy joke going around in Russia at the moment that the current events are nothing more than an extremely large-scale and lavish celebration of the 10th anniversary of the pervious crisis.
However, the similarities between the events of 1998 and 2008 are somewhat tentative. The similarity is on the surface, while the differences lie in the essence of the economic processes taking place in Russia.
On the one hand, there is no doubt that with each new crisis, Russia is increasingly becoming a part of the world economy and increasingly suffers from the afflictions of the world economy, and not from its own specific afflictions. If the anti-crisis policy of the 1980s, as noted above, was not at all connected with the economic problems of the time, the anti-crisis policy of the early 1990s was a response to the challenge of the moment, in full accordance with international practice of reforms. And in 1998, the market economy regained its efficiency of its own accord, without the intervention of reformers.
On the other hand, in 1998, unlike 2008, Russia's problems were completely caused by the mistaken macro-economic policy that was implemented in the preceding period. If there had been no mistakes, there would have been no crisis. If debt had not been accumulated because of a mild financial policy, there would not have been such catastrophic capital flight and a default. The connection of our economy with the world economy in 1998 was not yet close enough to cause a crisis in any scenario.
But today the situation is different. Over the past few years, the government has not accumulated a debt, as it did in the mid-1990s. Accordingly, there is currently no panicky "unloading" of government bonds. Capital flight takes place along other channels. Investors sell bonds to corporations, and depositors withdraw their funds from commercial banks. At the same time, rubles are being changed into dollars and Euros. Furthermore, major borrowers such as Gazprom, Rosneft and other companies are forced to pay off their foreign creditors for debts of previous years, and this also leads to a flow of capital from Russia.
In other words, the money that "came to us of its own accord" over the past few years is now leaving of its own accord. As the Russian "prosperity" of the past few years was completely determined by the favorable situation on the world market of energy resources, the crisis became an inevitable consequence of an objective change to this situation. A sensible economic policy by the government could mitigate its development, but could by no means eliminate the problem as such.
Thus, the situation in the Russian economy today sets fundamentally new challenges for the country. Looking back at previous Russian crisis is unproductive. These crises cannot give us much information to understand the present situation. We have become part of the international economic system, and we suffer from the same afflictions as it does.
