What Really Happened in 1990’s Russia and Why Should We Care?
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What Really Happened in 1990’s Russia and Why Should We Care?
By Daniel Satinsky
About Daniel Satinsky:
Daniel Satinsky is an author and business consultant. His most recent book, “Creating the Post-Soviet Russian Market Economy: Through American Eyes,” (2023) documents the impact of American business in Russia during the ‘90s, based on interviews with entrepreneurs, aide officials and citizen diplomats. Previously, he was a co-author of "Hammer and Silicon: The Soviet Diaspora in the U.S. Innovation Economy" (2018). Active in business in the USSR and Russia from 1990 to 2014, he is the former president of the board of the U.S.-Russia Chamber of Commerce of New England (1998-2014). He holds a master’s degree from the Fletcher School of Law & Diplomacy and a JD from Northeastern University Law School.
«Сила есть, ума не надо»
“If you have enough strength, then thinking is not needed.” A Russian saying.
My translation of this Russian saying, with its underlying irony, captures a lot of current thinking about geopolitics. More specifically, it captures the behavior of many Americans and Russians towards each other in the 30 years since the dissolution of the Soviet Union.
At the time of the collapse of the Soviet Union, the United States was at the height of its soft power as the aspirational role model for many people worldwide, especially Russians. In 2023, we are again adversaries and probably more estranged than the Cold War period. Examining the disconnect between power and knowledge after the dissolution of the Soviet Union can add to understanding how we got here again.
Examining this dichotomy was one of the motivations for my recent book, Creating the Post-Soviet Russian Market Economy: Through American Eyes. The book intends to help preserve the rich history of those times through in-depth interviews with entrepreneurs, citizen diplomats, and government officials who participated in the most significant direct personal interaction between Americans and Russians.
Completed before the second invasion of Ukraine in February 2022, the interviews focused on the direct experience of Americans contributing to transforming the Soviet-planned economy into a market economy. As a neglected source of information about Russia and counterweight to purely academic research, the interviews revealed essential insights on how Americans made assumptions about Russia that came from being so strong that we do not need to think very deeply.
“The economic and even political destiny of what was not long ago a threatening superpower is now increasingly passing into de facto Western receivership.”
Zbigniew Brzezinski, Foreign Affairs, Fall 1992.
The assumption that post-Soviet Russia was a defeated Cold War foe, no longer in control of its destiny, requiring Western tutelage, colored the American approach to Russia in the 1990s. It was a period in which Americans and Russians worked together to construct the new institutions of the Russian market economy, but often with very different assumptions, goals, and objectives in mind. The Russian elite surrounding Boris Yeltsin was determined to privatize state property and dismantle the old Soviet institutions rapidly. They called upon Western expertise to help implement these goals but never intended to turn over control to foreigners. Implicitly or explicitly, the Russians were following Peter the Great’s model of exploiting foreign expertise to modernize the country. The Russian view of this process was hardly receivership, and increasingly, the American sense of superiority based on the assumption of a defeated Soviet Union began to rub badly on some elements of Russian society. As one of the Americans I interviewed for my book put it:
“The idea of Westerners coming to teach Russians how to do things was rubbing thin. My deputy, who was a brilliant guy…He resented that I was making a salary much greater than he was…It was even worse in Siberia because you had all these shoot-from-the-hip oil guys from Texas…Russians found out that the foreigners were doing nothing they couldn’t do…It added onto the overall underlying sense of discord and disenfranchisement among the Russian population in general.”
In the Foreign Affairs September/October 2022 issue, Fiona Hill and Angela Stent described the opening and closing of the Russian world as follows:
“… Peter the Great opened a window to the West by traveling to Europe, inviting Europeans to Russia to help develop its economy and adapting European artisans’ skills. Putin’s invasions and territorial expansions have slammed that window shut. They have sent Europeans and their companies back home and pushed a generation of talented Russians fleeing into exile. …”
While Hill and Stent correctly describe the process, their timing is off. Russia began closing the window in the late 1990s after rapidly acquiring and assimilating those Western business practices into a specifically Russian market economy. While Americans saw the 1990s Russia under Boris Yeltsin as a period of liberation from Soviet tyranny and an economy integrating into the global market, ordinary Russians saw this period differently. At the time, the political change and transition to a market economy left most Russians economically worse off. During the Yeltsin years, the gross domestic product per capita declined by more than 40%, substantially worse than the United States during the Great Depression.[1] Inflation peaked at over 2,000%.[2] Life expectancy declined from 68 in 1990 to 65 in 2000.[3] As their standard of living dramatically declined, they were aware of the accumulating wealth in the hands of the new oligarchs. For those who did not benefit from the new market economy, there was a yearning for a return to the order and guaranteed minimal living standards of the Soviet period. In business circles, pushback against American hubris grew, and public sentiment toward criminality and declining living standards began to show.
The 1998 financial crisis was a turning point in this process and the start of closing the window to the West, much earlier than proposed by Hill and Stent. Russians began expressing growing self-confidence and reasserting national pride as “Americans should stop telling us how to live.” By the early 2000s, there were two simultaneous threads of Russian attitudes to the West among Russian elites. One was the desire to be considered equals in the globalized world, and the other was a nationalist resentment of Western cultural and political values antithetical to Russia’s unique character. As the Putin-affiliated new oligarchs displaced the Yeltsin-era oligarchs, they adopted and expanded the second thread of increasingly aggressive Russian nationalism.
From the beginning, American analysts have had difficulty correctly characterizing Vladimir Putin and understanding his ongoing evolution. As one of the Western businesspersons interviewed for my book expressed it:
“Westerners who never lived in Russia just really don’t understand who Putin is or was and his significance…He was great in the first years. He seriously cut down the corruption that we dealt with daily. We now know that one of the mechanisms was that he was consolidating power… we saw a reduction in everyday corruption and an immediate improvement in law and order…. At the beginning of Putin’s first year, there was still something you might call mafia…By the end of Putin’s first year, you did not have to deal with the Mafia to run an ordinary business.”
This interview took place before the second Russian invasion and the acceleration of authoritarianism in the Russian-managed democracy, so most likely, the person who expressed this view would be more critical of the later stages of Putin’s years in power. However, the simplistic posing of the good and democratic Boris Yeltsin against the bad and anti-democratic Vladimir Putin has a degree of distortion that continues to taint the characterization of Russia in the US media among some analysts and policymakers.
In contrast, businesspeople active in Russia in the ‘90s and early ‘00s had an opportunity to experience the complexity of Russian life first-hand. The deep pool of practical and experiential knowledge generated from this historical period deserves much more attention to complement academic analysis and as an antidote to commonly accepted stereotypes.
One of those stereotypes is that Russia is always on the verge of collapse. This point of view was expressed quite directly on the cover of The Atlantic of May 2001, titled “Russia is Finished.”
The assumption of imminent collapse is repeated over 20 years later with some level of uncertainty as to its accuracy. If history is any guide to the future, it would be a mistake to continue to underestimate Russia.
Even though the window to the West is firmly shut and the American and European multinational companies are leaving, the Russian market economy remains profoundly influenced by its basic structure of the 1990s. Russia is still based on private ownership of dwellings, land, and business in an economy heavily influenced by the government, but it is not a socialist-planned economy. Russians shop in malls, eat fast food, and talk on mobile phones, none of which they did during Soviet times. Even with all the controls and restrictions, Russians are as heavily dependent upon the Internet as Westerners are for essential services and information. Despite sanctions, Russia is a significant player in world energy markets, strategic materials, fertilizer, grain, and arms production. Russia is far from finished, as it continues to play a strategic role in the evolving world political and economic order.
While we must unqualifiedly condemn Russian aggression in Ukraine, current trends towards “canceling” Russia as an expression of moral opprobrium and simultaneously the trend of declining interest in a deeper understanding of Russian society would be a failure “to think.” Our relative position of strength that allowed a lack of clear thinking in the past is a luxury that we cannot afford in the future. Russia continues to be important in geopolitics and the global economy and, as such, demands continuing informed and sophisticated analysis.
The learnings from the 1990’s American experience in Russia:
ECONOMIC DEVELOPMENT: Future American economic aid to Ukraine and Russia will differ greatly based on their different post-Soviet market economic and political experience. Each country now has an established market infrastructure and seasoned business talent pool, in-country and abroad.
COMMUNICATION AND SELF-AWARENESS: Americans need to better understand the complexity of social forces and interests in each country based on distinct histories and an understanding of self-interest held by diverse population segments. Putin is not Russia. Zelensky is not Ukraine.
AMERICAN EXCEPTIONALISM: The assumption of self-evident superiority of the American economic model and ongoing American cultural dominance will not be unquestionably accepted in either country as it was post-Soviet collapse, despite the continuing impact of economic and business patterns introduced by Americans and Europeans.
ACADEMIC RESEARCH: The application of scholarly and policy research helps shed light on Russian perceptions of their own economic and political interests; without this ongoing research, Americans to be locked into stereotypes that impede an accurate understanding of Russia. As an example of efforts to develop new approaches, I would recommend looking at the CORUSCANT Manifesto for the Emergence of New Russian Studies.
I'm just whispering to those who might and want to listen.
[1] Paul Krugman, “Wonking Out: The nightmare after Gorbachev,” New York Times, September 2, 2022.
[2] Krugman, “Wonking Out: The nightmare after Gorbachev.”
[3] Krugman, “Wonking Out: The nightmare after Gorbachev.”
Vol 2, No 06 - BWR 01.02.2023
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