Economic reforms of Gaidar Yegor Timurovich

Yegor Gaidar became a member of the Government on November 6, 1991. It is this date that can be considered the starting point of economic reforms in Russia. The authorities set themselves the task of ridding the country of the communist past as soon as possible. Do it without radical changes in the economy, which for many years existed in the form of a planned economy, it was impossible.

The reforms of Gaidar served as a leverage that created a free market in Russia. The government of that period liberalized retail prices, reorganized the tax system, and created a new system of foreign trade. All these abrupt changes were soon called "shock therapy".

Liberalization of prices

On October 28, 1991, a few days before Yegor Gaidar was appointed Deputy Prime Minister for Economic Policy, Russian President Boris Yeltsin delivered a keynote speech at the Congress of People's Deputies of the RSFSR. The head of state announced the need for price liberalization. It was the most important sign of the classical market economy. The initiative of the president was adopted by the congress delegates almost unanimously.

The beginning of Gaidar's economic reform was to be carried out as soon as possible. It was planned that the liberalization will be announced as early as December 1. This was opposed by the union republics, which still had a single ruble zone with Russia. The reforms of Gaidar were remembered by compatriots by the name of this economist for a reason. Although Boris Yeltsin, who enjoyed his presidential powers, defended the new bills before the parliament, the development of all projects lay on the shoulders of Yegor Timurovich and his team.

The actual beginning of Gaidar's economic reform came on January 2, 1992, when the presidential decree "On Measures for Liberalizing Prices" was adopted. Change made itself felt instantly. The state stopped regulating 80% of wholesale prices and 90% of retail prices. The federal government temporarily retained control over only socially important consumer goods: milk, bread, etc. This reservation was accepted not in vain. Gaidar's economic reform was carried out in conditions of public turbulence, when the population remained empty-handed after the crisis of the planned system and the collapse of the Soviet system.

Gaidar's program

Preparing its program, the government proceeded from the point of view that Russia has no "special path", and it needs to adopt all the main features of Western market economies. Until the end of 1991 it was still not clear which agenda the Russian government would choose. Various politicians and economists offered their projects: Yavlinsky, Shatalin, Saburov, Abalkin, and so on.

As a result, Gaidar's program "won" after all. It was not only economic. Reforms were supposed to create a new national statehood in the country through the construction of market relations, the place of which was empty after the collapse of communism. His ideas Yegor Gaidar outlined in the documents "The nearest economic prospects of Russia" and "Russia's strategy in the transition period." According to these projects, the reforms were carried out based on the principles of privatization, liberalization and financial stabilization.

Gaidar's team identified three main problems that the young state inherited from the Soviet Union. These were inflationary, payment and systemic crises. The last one was that the state authorities had lost their ability to regulate the flow of resources.

It was planned, first of all, to restructure and substantially raise the overall level, as it was done by the Rakovski government in Poland at the time. Gaidar believed that in this case in the country at the beginning about half a year inflation will remain. However, this project had to be abandoned. The calculations showed the authorities that the country will not survive another six months of the crisis. Therefore, it was decided to start radical liberalization immediately. Time has shown that neither one nor the other way promised the economy anything good.

The collapse of the economy

The liberalization of prices has led to a multitude of negative consequences that were inevitable at such an accelerated rate of change in the economy. The new order in the market went against the monetary policy - in the summer of 1992, domestic enterprises lost their working capital. In the spring, the Central Bank began issuing a large number of loans to industry, farmers, former Soviet republics, etc. This was done in order to cover the budget deficit. However, at the same time, a huge jump in inflation occurred. In 1992, it reached the level of 2,500%.

The collapse occurred for several reasons. First of all, the catastrophe broke out due to the fact that before the liberalization of prices, money was not replaced, which would save the country from obsolete Soviet rubles. The new currency appeared only in 1993, when Gaidar's economic reform was already over, and he himself left the Government.

Hyperinflation left a significant part of the population of Russia without a livelihood. In the mid-1990s, the share of low-income citizens was 45%. The Soviet deposits of the population in Sberbank, which lost their purchasing power, were depreciated . The government blamed the Supreme Council for the crisis that had caused it, which forced it to conduct additional currency emission.

The issue of additional money supply began to be practiced in the last Soviet years, when the state used it to finance domestic expenditures. When Gaidar's reforms began, this system finally collapsed. The former republics of the USSR paid with the Russian enterprises the same ruble, which only further aggravated the crisis. In the summer of 1992, special non-cash correspondent accounts were created as a countermeasure , with the help of which settlements were made with the rest of the CIS countries.

Parliament v. Government

From the outset, Gaidar's economic radical reforms were severely criticized by people's deputies. As is known, on April 6 they opened their Sixth Congress. By that time, the government had received a sufficiently cohesive opposition, based on agrarian and industrial lobbyists, who were dissatisfied with the reduction of state funding.

At one of its sessions the congress adopted a resolution, in which the main claims to the policy of the Government were formulated. The reforms of E.T. Gaidar were called the cause of a number of economic problems: the fall in the standard of living of the population, the destruction of previous economic ties, the production slump, a shortage of money, etc. Overall, the Government was unable to keep the situation under control. Deputies believed that Gaidar's reforms were conducted without regard to the opinion of the society and business owners. In the resolution the delegates of the congress proposed to the president to change the economic course taking into account all their proposals and reservations.

In response to the attack of the deputies, the Government together with Gaidar handed over to Boris Yeltsin an application for resignation. In the attached report, the ministers criticized the congress's proposals, noting that if the government follows this course, public costs will rise to above trillions of rubles, and inflation will reach a threshold of 400% a month.

Resignation was not accepted, but Yeltsin still made concessions to the deputies. He introduced new people to the government - the so-called "red directors" who lobbied for the interests of the owners of large enterprises who received their posts in the Soviet years. In this cohort there were Vladimir Shumeiko, Georgy Khizhu and Vladimir Chernomyrdin.

Then there were attempts to stabilize the financial situation. To this end, the Government has reduced public spending, and has also introduced new taxes. In May 1992, inflation fell slightly. One more demand of the Supreme Council was fulfilled - the monetary policy was considerably softened. Also, the Government has allocated 600 billion rubles for the payment of arrears to miners and other striking workers of large enterprises

In July, there were changes in the leadership of the Central Bank. The new head, Viktor Gerashchenko, who already held this post in the Soviet Union, opposed the reform of E. Gaidar, which implied a reduction in spending. In the second half of 1992, the volume of lending to the Central Bank grew threefold. By October, the budget deficit decreased by 4% of GDP compared to August figures.

The beginning of privatization

In June 1992, Yegor Gaidar became the Chairman of the Government. In the same summer, privatization began in Russia. The reformers wanted to implement it as quickly as possible. The Government believed that Russia needed the emergence of a class of proprietors, which would become the backbone and support of the state's economic policy. Privatization of enterprises took place in conditions when factories and factories actually went bankrupt. Enterprises sold for a pittance. The purchases took an avalanche-like character. Due to the numerous holes in the legislation, transactions were committed with violations and abuses.

When Gaidar's reforms had already ended, in the mid-1990s, in Russia, pledge auctions took place, at which the largest and most important enterprises of the country passed into the hands of new owners at prices that were repeatedly understated. As a result of these transactions a new class of oligarchs has appeared, which has led to an even greater social gap between the rich and the poor.

Supporters of the reform of the Gaidar government and privatization believed that it was necessary to abandon the old Soviet system of the national economy as soon as possible with excessive monopolization and centralization. The accelerated rates of sales have led to numerous bends and errors. According to opinion polls, about 80% of the Russian population considers the results of privatization to be illegitimate.

Vouchers

For mass privatization, a voucher was introduced - a privatization check, which was intended for exchange for assets in state enterprises. He was transferred to private hands. It was planned that with the help of this tool, municipal enterprises would become private property.

A total of 146 million vouchers were printed. Citizens who received a check could use paper to subscribe to shares of the whole enterprise or to participate in the auction. Also, the paper could be sold. Residents of the country could not participate in privatization directly. They needed to privatize their enterprises or pass vouchers to check investment funds (CIF). More than 600 such organizations were created.

Practice has shown that privatization checks have in fact become objects of speculation. Many owners of these securities sold them to businessmen with a dubious reputation or invested in mutual funds, hoping to receive significant dividends. As a result of this practice, the real value of securities fell rapidly. In such conditions, the population began to strive to get rid of vouchers as soon as possible. Basically, they settled in the hands of shadow traders, speculators, officials and the administration of the enterprises themselves.

Because of its haste, privatization (the name of the economic reform of Gaidar) took place in conditions of price liberalization, when the value of the voucher fund became ten times less than the real value of enterprises. According to calculations, speculators could buy 500 largest factories and plants for 7 billion dollars. However, in reality they were estimated at $ 200 billion. This was the so-called "wild capitalism", which allowed 10% of the population to establish control over the national treasure. The main revenue was exported by gas, oil and non-ferrous metals. Enterprises with new owners not only did not return profits to the Russian economy. They did not even go to pay off the rapidly growing external debt of the state.

Agrarian Policy

In 1992, the beginning of Gaidar's reforms was also marked by changes in the village. An important role in the agrarian economy began to play new forms of farms. Closed and open joint-stock companies, cooperatives, as well as limited partnerships appeared. In total, they amounted to about 2/3 of the agricultural sector of the economy. The crisis hit hard on all these new farms. There was a shortage of agricultural machinery, motor vehicles, mineral fertilizers, and so on.

The government has adopted a program to eliminate the survivals of the Soviet system - state farms and collective farms. In March 1992, there were approximately 60,000 individual farms of the farm type in Russia. By the fall, their number had increased five-fold. However, due to lack of technology, they still could not provide the country with a sufficient amount of harvest. Regress led to the fact that by the mid-90s, production fell by 70% compared with the last Soviet season. The farmer could not feed Russia, and all because of a significant increase in prices for reagents, equipment, etc.

Defense Industry Complex

In 1992, the state sharply reduced the purchase of weapons. In the Soviet era, the military-industrial complex became too bloated. The lion's share of the budget was spent on it. In the conditions of the economic crisis, the state simply could not provide the work for most of the enterprises, which led to their bankruptcy and sale to third parties.

Particularly acute was the problem with research and development (R & D). The order of financing of this complex was destroyed, because of which highly qualified teams disintegrated and were left without work. It was then that the so-called "brain drain" began - the emigration of scientists, engineers, designers, etc. They massively left for Western countries in search of a better share, while their enterprises were idle.

The government, reforming the defense industry, made several serious mistakes: it did not begin to restructure or transfer to the reserve of factories. Some experts note that the authorities did wrong when lifted the restriction on the import of consumer goods, which left the enterprises without a niche in the market.

Gaidar's resignation

In December 1992, Yegor Gaidar resigned from the post of Prime Minister. His departure became a compromise in the relations between the Supreme Council and the Russian president. It was assumed that the agreement would allow a painless referendum on a new constitution. However, in 1993, the deputies refused to fulfill their obligations, which led to a conflict between the Government and the president. It ended with the October events, when Moscow survived several days of street fighting.

In that crisis autumn Gaidar once again returned to the government and became there first deputy chairman, as well as minister of economy. He left the highest leadership positions on January 20, 1994. By this time, all of Gaidar's major economic reforms had already been carried out, and the country was living in a new economic reality.

Positive results of reforms

Back in December 1992, on the eve of the first resignation, he summed up his work. The Head of Government at the Seventh Congress of People's Deputies stressed the main successes of the authorities. The tax system was reorganized, privatization and agrarian reform began (reorganization of state farms and collective farms), restructured by the fuel and energy complex, established oil companies, and reduced expenditures on the purchase of ammunition and military equipment.

Minister of Economy and colleague Gaidar Andrey Nechaev also called other important steps of the Government in the crisis period. In addition to the liberalization of prices already described, the state allowed free trade, settled external debts through opening credit lines in the West. The reform of Gaidar in 1992 allowed to reduce the budget deficit. Important tax innovations were the appearance of taxes on oil production. The planned system of the economy remains in the past. The state began to resort to state orders. In the field of investment, the relationship between government and private entrepreneurs has become the key. Trade with the former union republics was built in a new way-it switched to world prices and market bases.

E. T. Gaidar, whose economic reforms led to the restructuring of all financial relations, advocated the establishment of commercial principles in the export of weapons for the army. An important innovation was the adoption of the law on bankruptcy. With the advent of a market economy, the first investment companies were created, as well as exchanges that could not be in the USSR.

"Shock therapy"

After the collapse of the Soviet Union, Russia was at a crossroads, which had not yet been in the history of mankind. A huge state with a 70-year life under communism and a planned economy behind shoulders had to move to a civilized market model. In the 1991-1992 gg. Yet no country in the world has conducted such a forced experiment on itself. Two years before Russia, such transformations began in Poland and Czechoslovakia, but they still did not have a visible result and existed only in the form of sketches.

The essence of Gaidar's reforms was that the Government had to operate literally blindly, at its own peril and risk, to the sick economy of its country. True, something still was taken over from former comrades in the socialist camp. For example, temporary jobs were created in Russia in analogy with the Decree on Freedom of Trade in Poland. These measures allowed to fill the street counters. True, these changes also had their costs. Such a trade took on strange forms - new kiosks arose chaotically and without any regulation.

The economic reform of the government of E. Gaidar (the transition from a socialist economy to a market economy) began too late. In fact, time was lost in the late 80's, when the first serious signs of the crisis appeared. The Soviet raw material economy survived the agony due to the fall in oil prices, which led to queues in stores and the card system before the Gaidar reform began. The name "shock therapy" was given to changes deservedly - the system had to be changed in emergency conditions.