The history of the Soviet Union from 1982 through 1991 spans the period from Leonid Brezhnev's death and funeral until the dissolution of the Soviet Union. Due to the years of Soviet military buildup at the expense of domestic development, economic growth stagnated. Failed attempts at reform, a standstill economy, and the success of the United States against the Soviet Union's forces in the war in Afghanistan led to a general feeling of discontent, especially in the Baltic republics and Eastern Europe.
Greater political and social freedoms, instituted by the last Soviet leader, Mikhail Gorbachev, created an atmosphere of open criticism of the communist regime. The dramatic drop of the price of oil in 1985 and 1986 profoundly influenced actions of the Soviet leadership.
Nikolai Tikhonov, the Chairman of the Council of Ministers, was succeeded by Nikolai Ryzhkov, and Vasili Kuznetsov, the acting Chairman of the Presidium of the Supreme Soviet, was succeeded by Andrei Gromyko, the former Minister of Foreign Affairs.
Several republics began resisting central control, and increasing democratization led to a weakening of the central government. The USSR's trade gap progressively emptied the coffers of the union, leading to eventual bankruptcy. The Soviet Union finally collapsed in 1991 when Boris Yeltsin seized power in the aftermath of a failed coup that had attempted to topple reform-minded Gorbachev.
By 1982, the stagnation of the Soviet economy was obvious, as evidenced by the fact that the Soviet Union had been importing grain from the U.S. throughout the 1970s, but the system was so firmly entrenched that any real change seemed impossible. A huge rate of defense spending consumed large parts of the economy. The transition period that separated the Brezhnev and Gorbachev eras resembled the former much more than the latter, although hints of reform emerged as early as 1983.
Brezhnev died on 10 November 1982. Two days passed between his death and the announcement of the election of Yuri Andropov as the new General Secretary, suggesting to many outsiders that a power struggle had occurred in the Kremlin. Andropov maneuvered his way into power both through his KGB connections and by gaining the support of the military by promising not to cut defense spending. For comparison, some of his rivals such as Konstantin Chernenko were skeptical of a continued high military budget. Aged 69, he was the oldest person ever appointed as General Secretary and 11 years older than Brezhnev when he acquired that post. In June 1983, he assumed the post of chairman of the Presidium of the Supreme Soviet, thus becoming the ceremonial head of state. It had taken Brezhnev 13 years to acquire this post. Andropov began a thorough house-cleaning throughout the party and state bureaucracy, a decision made easy by the fact that the Central Committee had an average age of 69. He replaced more than one-fifth of the Soviet ministers and regional party first secretaries and more than one-third of the department heads within the Central Committee apparatus. As a result, he replaced the aging leadership with younger, more vigorous administrators. But Andropov's ability to reshape the top leadership was constrained by his own age and poor health and the influence of his rival (and longtime ally of Leonid Brezhnev) Konstantin Chernenko, who had previously supervised personnel matters in the Central Committee.
The transition of power from Brezhnev to Andropov was notably the first one in Soviet history to occur completely peacefully with no one being imprisoned, killed, or forced from office.
Andropov's domestic policy leaned heavily towards restoring discipline and order to Soviet society. He eschewed radical political and economic reforms, promoting instead a small degree of candor in politics and mild economic experiments similar to those that had been associated with the late Premier Alexei Kosygin's initiatives in the mid-1960s. In tandem with such economic experiments, Andropov launched an anti-corruption drive that reached high into the government and party ranks. Unlike Brezhnev, who possessed several mansions and a fleet of luxury cars, he lived quite simply. While visiting Budapest in early 1983, he expressed interest in Hungary's Goulash Communism and that the sheer size of the Soviet economy made strict top-down planning impractical. Changes were needed in a hurry for 1982 had witnessed the country's worst economic performance since World War II, with real GDP growth at almost zero percent.
In foreign affairs, Andropov continued Brezhnev's policies. US−Soviet relations deteriorated rapidly beginning in March 1983, when US President Ronald Reagan dubbed the Soviet Union an "evil empire". The official press agency TASS accused Reagan of "thinking only in terms of confrontation and bellicose, lunatic anti-communism". Further deterioration occurred as a result of the 1 Sep 1983 Soviet shootdown of Korean Air Lines Flight 007 near Moneron Island carrying 269 people including a sitting US congressman, Larry McDonald, and over Reagan's stationing of intermediate-range nuclear missiles in Western Europe. In Afghanistan, Angola, Nicaragua and elsewhere, under the Reagan Doctrine, the US began undermining Soviet-supported governments by supplying arms to anti-communist resistance movements in these countries.
President Reagan's decision to deploy medium-range Pershing II missiles in Western Europe met with mass protests in countries such as France and West Germany, sometimes numbering 1 million people at a time. Many Europeans became convinced that the US and not the Soviet Union was the more aggressive country, and there was fear over the prospect of a war, especially since there was a widespread conviction in Europe that the US, being separated from the Red Army by two oceans as opposed to a short land border, was insensitive to the people of Germany and other countries. Moreover, the memory of World War II was still strong and many Germans could not forget the destruction and mass rapes committed by Soviet troops in the closing days of that conflict. This attitude was helped along by the Reagan Administration's comments that a war between NATO and the Warsaw Pact would not necessarily result in the use of nuclear weapons.
Andropov's health declined rapidly during the tense summer and fall of 1983, and he became the first Soviet leader to miss the anniversary celebrations of the 1917 revolution that November. He died in February 1984 of kidney failure after disappearing from public view for several months. His most significant legacy to the Soviet Union was his discovery and promotion of Mikhail Gorbachev. Beginning in 1978, Gorbachev advanced in two years through the Kremlin hierarchy to full membership in the Politburo. His responsibilities for the appointment of personnel allowed him to make the contacts and distribute the favors necessary for a future bid to become general secretary. At this point, Western experts believed that Andropov was grooming Gorbachev as his successor. However, although Gorbachev acted as a deputy to the general secretary throughout Andropov's illness, Gorbachev's time had not yet arrived when his patron died early in 1984.
At 71, Konstantin Chernenko was in poor health, suffering from emphysema, and unable to play an active role in policy making when he was chosen, after lengthy discussion, to succeed Andropov. But Chernenko's short time in office did bring some significant policy changes. The personnel changes and investigations into corruption undertaken under Andropov's tutelage came to an end. Chernenko advocated more investment in consumer goods and services and in agriculture. He also called for a reduction in the CPSU's micromanagement of the economy and greater attention to public opinion. However, KGB repression of Soviet dissidents also increased. In February 1983, Soviet representatives withdrew from the World Psychiatric Organization in protest of that group's continued complaints about the use of psychiatry to suppress dissent. This policy was underlined in June when Vladimir Danchev, a broadcaster for Radio Moscow, referred to the Soviet troops in Afghanistan as "invaders" while conducting English-language broadcasts. After refusing to retract this statement, he was sent to a mental institution for several months. Valery Senderov, a leader of an unofficial union of professional workers, was sentenced to seven years in a labor camp early in the year for speaking out on discrimination practiced against Jews in education and the professions.
Although Chernenko had called for renewed détente with the West, little progress was made towards closing the rift in East−West relations during his rule. The Soviet Union boycotted the 1984 Summer Olympics in Los Angeles, retaliating for the United States-led boycott of the 1980 Summer Olympics in Moscow. In the late summer of 1984, the Soviet Union also prevented a visit to West Germany by East German leader Erich Honecker. Fighting in Afghanistan also intensified, but in the late autumn of 1984 the United States and the Soviet Union did agree to resume arms control talks in early 1985.
The war in Afghanistan, often referred to as the Soviet Union's "Vietnam War", led to increased public dissatisfaction with the Communist regime. Also, the Chernobyl disaster in 1986 added motive force to Gorbachev's glasnost and perestroika reforms, which eventually spiraled out of control and caused the Soviet system to collapse.
After years of stagnation, the "new thinking" (Anatoli Cherniaev, 2008: 131) of younger Communist apparatchik began to emerge. Following the death of terminally ill Konstantin Chernenko, the Politburo elected Mikhail Gorbachev to the position of General Secretary of the Communist Party of the Soviet Union (CPSU) in March 1985. At 54, Gorbachev was the youngest person since Joseph Stalin to become General Secretary and the country's first head of state born a Soviet citizen instead of a subject of the tsar. During his official confirmation on March 11, Foreign Minister Andrei Gromyko spoke of how the new Soviet leader had filled in for Chernenko as CC Secretariat, and praised his intelligence and flexible, pragmatic ideas instead of rigid adherence to party ideology. Gorbachev was aided by a lack of serious competition in the Politburo. He immediately began appointing younger men of his generation to important party posts, including Nikolai Ryzhkov, Secretary of Economics, Viktor Cherbrikov, KGB Chief, Foreign Minister Eduard Shevardnadze (replacing the 75-year-old Gromyko), Secretary of Defense Industries Lev Zaikov, and Secretary of Construction Boris Yeltsin. Removed from the Politburo and Secretariat was Grigory Romanov, who had been Gorbachev's most significant rival for the position of General Secretary. Gromyko's removal as Foreign Minister was the most unexpected change given his decades of unflinching, faithful service compared to the unknown, inexperienced Shevardnadze.
More predictably, the 80-year-old Nikolai Tikhonov, the Chairman of the Council of Ministers, was succeeded by Nikolai Ryzhkov, and Vasili Kuznetsov, the acting Chairman of the Presidium of the Supreme Soviet, was succeeded by Andrei Gromyko, the former Minister of Foreign Affairs.
Further down the chain, up to 40% of the first secretaries of the oblasts (provinces) were replaced with younger, better educated, and more competent men. The defense establishment was also given a thorough shakeup with the commanders of all 16 military districts replaced along with all theaters of military operation, as well as the three Soviet fleets. Not since World War II had the Soviet military had such a rapid turnover of officers. Sixty-eight-year-old Marshal Nikolai Ogarkov was fully rehabilitated after having fallen from favor in 1983-84 due to his handling of the KAL 007 shootdown and his ideas about improving Soviet strategic and tactical doctrines were made into an official part of defense policy, although some of his other ambitions such as developing the military into a smaller, tighter force based on advanced technology were not considered feasible for the time being. Many, but not all, of the younger army officers appointed during 1985 were proteges of Ogarkov.
Gorbachev got off to an excellent start during his first months in power. He projected an aura of youth and dynamism compared to his aged predecessors and made frequent walks in the streets of the major cities answering questions from ordinary citizens. He became the first leader that spoke with the Soviet people in person. When he made public speeches, he made clear that he was interested in constructive exchanges of ideas instead of merely reciting lengthy platitudes about the excellence of the Soviet system. He also spoke candidly about the slackness and run-down condition of Soviet society in recent years, blaming alcohol abuse, poor workplace discipline, and other factors for these situations. Alcohol was a particular nag of Gorbachev's, especially as he himself did not drink, and he made one of his major policy aims curbing the consumption of it.
In terms of foreign policy, the most important one, relations with the United States, remained twitchy through 1985. In October, Gorbachev made his first visit to a non-communist country when he traveled to France and was warmly received. The fashion-conscious French were also captivated by his wife Raisa and political pundits widely believed that the comparatively young Soviet leader would have a PR advantage over President Reagan, who was 20 years his senior.
Reagan and Gorbachev met for the first time in Geneva in November. The three weeks preceding the summit meeting were marked by an unprecedented Soviet media campaign against the Strategic Defense Initiative (SDI), taking advantage of opposition at home in the US to the program. When it finally took place, the two superpower leaders established a solid rapport that boded well for the future despite Reagan's refusal to compromise on abandonment of SDI. A joint communique by both parties stated that they were in agreement that nuclear war could not be won by either side and must never be allowed to happen. It was also agreed that Reagan and Gorbachev would carry out two more summit meetings in 1986-87.
Jimmy Carter had officially ended the policy of détente, by financially aiding the Mujahideen movement in neighboring Afghanistan, which served as a pretext for the Soviet intervention in Afghanistan six months later, with the aims of supporting the Afghan government, controlled by the People's Democratic Party of Afghanistan. Tensions between the superpowers increased during this time, when Carter placed trade embargoes on the Soviet Union and stated that the Soviet invasion of Afghanistan was "the most serious threat to the peace since the Second World War."
East-West tensions increased during the first term of U.S. President Ronald Reagan (1981–85), reaching levels not seen since the Cuban Missile Crisis as Reagan increased US military spending to 7% of the GDP. To match the USA's military buildup, the Soviet Union increased its own military spending to 27% of its GDP and froze production of civilian goods at 1980 levels, causing a sharp economic decline in the already failing Soviet economy. However, it is not clear where the number 27% of the GDP came from. This thesis is not confirmed by the extensive study on the causes of the dissolution of the Soviet Union by two prominent economists from the World Bank—William Easterly and Stanley Fischer from the Massachusetts Institute of Technology. “… the study concludes that the increased Soviet defense spending provoked by Mr. Reagan's policies was not the straw that broke the back of the Empire. The Afghan war and the Soviet response to Mr. Reagan's Star Wars program caused only a relatively small rise in defense costs. And the defense effort throughout the period from 1960 to 1987 contributed only marginally to economic decline."
If economic premises are taken into account, it is not clear why the Soviet leaders did not adopt the Chinese option—economic liberalization with preservation of political system. Instead Gorbachev chose political liberalization during the years leading to the collapse of the USSR, while not implementing any significant economic reforms.
The US financed the training for the Mujahideen warlords such as Jalaluddin Haqqani, Gulbudin Hekmatyar and Burhanuddin Rabbani eventually culminated to the fall of the Soviet satellite the Democratic Republic of Afghanistan. While the CIA and MI6 and the People's Liberation Army of China financed the operation along with the Pakistan government against the Soviet Union, eventually the Soviet Union began looking for a withdrawal route and in 1988 the Geneva Accords were signed between Communist-Afghanistan and the Islamic Republic of Pakistan; under the terms Soviet troops were to withdraw. Once the withdrawal was complete the Pakistan ISI continued to support the Mujahideen against the Communist Government and by 1992, the government collapsed. US President Reagan also actively hindered the Soviet Union's ability to sell natural gas to Europe whilst simultaneously actively working to keep gas prices low, which kept the price of Soviet oil low and further starved the Soviet Union of foreign capital. This "long-term strategic offensive," which "contrasts with the essentially reactive and defensive strategy of "containment", accelerated the fall of the Soviet Union by encouraging it to overextend its economic base. The proposition that special operations by the CIA in Saudi Arabia affected the prices of Soviet oil was refuted by Marshall Goldman—one of the leading experts on the economy of the Soviet Union—in his latest book. He pointed out that the Saudis decreased their production of oil in 1985 (it reached a 16-year low), whereas the peak of oil production was reached in 1980. They increased the production of oil in 1986, reduced it in 1987 with a subsequent increase in 1988, but not to the levels of 1980 when production reached its highest level. The real increase happened in 1990, by which time the Cold War was almost over. In his book he asked why, if Saudi Arabia had such an effect on Soviet oil prices, did prices not fall in 1980 when the production of oil by Saudi Arabia reached its highest level—three times as much oil as in the mid-eighties—and why did the Saudis wait till 1990 to increase their production, five years after the CIA's supposed intervention? Why didn't the Soviet Union collapse in 1980 then?
However, this theory ignores the fact that the Soviet Union had already suffered several important setbacks during “reactive and defensive strategy” of “containment”. In 1972, Nixon normalized US relations with China, thus creating pressure on the Soviet Union. In 1979, Egyptian president Anwar Sadat severed military and economic relations with the USSR after signing the Camp David Accords (by that time the USSR provided a lot of assistance to Egypt and supported it in all its military operations against Israel).
By the time Gorbachev ushered in the process that would lead to the dismantling of the Soviet administrative planned economy through his programs of glasnost (political openness), uskoreniye (speed-up of economic development) and perestroika (political and economic restructuring) announced in 1986, the Soviet economy suffered from both hidden inflation and pervasive supply shortages aggravated by an increasingly open black market that undermined the official economy. Additionally, the costs of superpower status—the military, space program, subsidies to client states—were out of proportion to the Soviet economy. The new wave of industrialization based upon information technology had left the Soviet Union desperate for Western technology and credits in order to counter its increasing backwardness.
The Law on Cooperatives enacted in May 1989 was perhaps the most radical of the economic reforms during the early part of the Gorbachev era. For the first time since Vladimir Lenin's New Economic Policy, the law permitted private ownership of businesses in the services, manufacturing, and foreign-trade sectors. Under this provision, cooperative restaurants, shops, and manufacturers became part of the Soviet scene.
Glasnost resulted in greater freedom of speech and the press becoming far less controlled. Thousands of political prisoners and many dissidents were also released. Soviet social science became free to explore and publish on many subjects that had previously been off limits, including conducting public opinion polls. The All−Union Center for Public Opinion Research (VCIOM)—the most prominent of several polling organizations that were started then— was opened. State archives became more accessible, and some social statistics that had been kept secret became open for research and publication on sensitive subjects such as income disparities, crime, suicide, abortion, and infant mortality. The first center for gender studies was opened within a newly formed Institute for the Socio−Economic Study of Human Population.
In January 1987, Gorbachev called for democratization: the infusion of democratic elements such as multi-candidate elections into the Soviet political process. A 1987 conference convened by Soviet economist and Gorbachev adviser Leonid Abalkin, concluded: "Deep transformations in the management of the economy cannot be realized without corresponding changes in the political system."
In June 1988, at the CPSU's Nineteenth Party Conference, Gorbachev launched radical reforms meant to reduce party control of the government apparatus. On 1 December 1988, the Supreme Soviet amended the Soviet constitution to allow for the establishment of a Congress of People's Deputies as the Soviet Union's new supreme legislative body.
Elections to the new Congress of People's Deputies were held throughout the USSR in March and April 1989. Gorbachev, as General Secretary of the Communist Party, could be forced to resign at any moment if the communist elite became dissatisfied with him. To proceed with reforms opposed by the majority of the communist party, Gorbachev aimed to consolidate power in a new position, President of the Soviet Union, which was independent from the CPSU and the soviets (councils) and whose holder could be impeached only in case of direct violation of the law. On 15 March 1990, Gorbachev was elected as the first executive president. At the same time, Article 6 of the constitution was changed to deprive the CPSU of a monopoly on political power.
Gorbachev's efforts to streamline the Communist system offered promise, but ultimately proved uncontrollable and resulted in a cascade of events that eventually concluded with the dissolution of the Soviet Union. Initially intended as tools to bolster the Soviet economy, the policies of perestroika and glasnost soon led to unintended consequences.
Relaxation under glasnost resulted in the Communist Party losing its absolute grip on the media. Before long, and much to the embarrassment of the authorities, the media began to expose severe social and economic problems the Soviet government had long denied and actively concealed. Problems receiving increased attention included poor housing, alcoholism, drug abuse, pollution, outdated Stalin-era factories, and petty to large-scale corruption, all of which the official media had ignored. Media reports also exposed crimes committed by Joseph Stalin and the Soviet regime, such as the gulags, his treaty with Adolf Hitler, and the Great Purges, which had been ignored by the official media. Moreover, the ongoing war in Afghanistan, and the mishandling of the 1986 Chernobyl disaster, further damaged the credibility of the Soviet government at a time when dissatisfaction was increasing.
In all, the positive view of Soviet life long presented to the public by the official media was rapidly fading, and the negative aspects of life in the Soviet Union were brought into the spotlight. This undermined the faith of the public in the Soviet system and eroded the Communist Party's social power base, threatening the identity and integrity of the Soviet Union itself.
Fraying amongst the members of the Warsaw Pact countries and instability of its western allies, first indicated by Lech Wałęsa's 1980 rise to leadership of the trade union Solidarity, accelerated, leaving the Soviet Union unable to depend upon its Eastern European satellite states for protection as a buffer zone. By 1989, Moscow had repudiated the Brezhnev Doctrine in favor of non-intervention in the internal affairs of its Warsaw Pact allies. Gradually, each of the Warsaw Pact countries saw their communist governments fall to popular elections and, in the case of Romania, a violent uprising. By 1990, the governments of Bulgaria, Czechoslovakia, East Germany, Hungary, Poland and Romania, all of which had been imposed after World War II, were brought down as revolutions swept Eastern Europe.
The Soviet Union also began experiencing upheaval as the political consequences of glasnost reverberated throughout the country. Despite efforts at containment, the upheaval in Eastern Europe inevitably spread to nationalities within the USSR. In elections to the regional assemblies of the Soviet Union's constituent republics, nationalists as well as radical reformers swept the board. As Gorbachev had weakened the system of internal political repression, the ability of the USSR's central Moscow government to impose its will on the USSR's constituent republics had been largely undermined. Massive peaceful protests in the Baltic republics such as the Baltic Way and the Singing Revolution drew international attention and bolstered independence movements in various other regions.
The rise of nationalism under freedom of speech soon re-awakened simmering ethnic tensions in various Soviet republics, further discrediting the ideal of a unified Soviet people. One instance occurred in February 1988, when the government in Nagorno-Karabakh, a predominantly ethnic Armenian region in the Azerbaijan SSR, passed a resolution calling for unification with the Armenian SSR. Violence against local Azerbaijanis was reported on Soviet television, provoking massacres of Armenians in the Azerbaijani city of Sumgait.
Emboldened by the liberalized atmosphere of glasnost, public dissatisfaction with economic conditions was much more overt than ever before in the Soviet period. Although perestroika was considered bold in the context of Soviet history, Gorbachev's attempts at economic reform were not radical enough to restart the country's chronically sluggish economy in the late 1980s. The reforms made some inroads in decentralization, but Gorbachev and his team left intact most of the fundamental elements of the Stalinist system, including price controls, inconvertibility of the ruble, exclusion of private property ownership, and the government monopoly over most means of production.
The value of all consumer goods manufactured in 1990 in retail prices was about 459 billion rubles ($2.1 trillion). Nevertheless, the Soviet government had lost control over economic conditions. Government spending increased sharply as an increasing number of unprofitable enterprises required state support and consumer price subsidies to continue. Tax revenues declined as republic and local governments withheld tax revenues from the central government under the growing spirit of regional autonomy. The anti−alcohol campaign reduced tax revenues as well, which in 1982 accounted for about 12% of all state revenue. The elimination of central control over production decisions, especially in the consumer goods sector, led to the breakdown in traditional supplier−producer relationships without contributing to the formation of new ones. Thus, instead of streamlining the system, Gorbachev's decentralization caused new production bottlenecks.
The dissolution of the Soviet Union was a process of systematic disintegration, which occurred in the economy, social structure and political structure. It resulted in the abolition of the Soviet Federal Government ("the Union center") and independence of the USSR's republics on 25 December 1991. The process was caused by a weakening of the Soviet government, which led to disintegration and took place from about 19 January 1990 to 31 December 1991. The process was characterized by many of the republics of the Soviet Union declaring their independence and being recognized as sovereign nation-states.
Andrei Grachev, the Deputy Head of the Intelligence Department of the Central Committee, summed up the denouement of the downfall quite cogently:
"Gorbachev actually put the sort of final blow to the resistance of the Soviet Union by killing the fear of the people. It was still that this country was governed and kept together, as a structure, as a government structure, by the fear from Stalinist times."
The principal elements of the old Soviet political system were Communist Party dominance, the hierarchy of soviets, state socialism, and ethnic federalism. Gorbachev's programs of perestroika (restructuring) and glasnost (openness) produced radical unforeseen effects that brought that system down. As a means of reviving the Soviet state, Gorbachev repeatedly attempted to build a coalition of political leaders supportive of reform and created new arenas and bases of power. He implemented these measures because he wanted to resolve serious economic problems and political inertia that clearly threatened to put the Soviet Union into a state of long-term stagnation.
But by using structural reforms to widen opportunities for leaders and popular movements in the union republics to gain influence, Gorbachev also made it possible for nationalist, orthodox communist, and populist forces to oppose his attempts to liberalize and revitalize Soviet communism. Although some of the new movements aspired to replace the Soviet system altogether with a liberal democratic one, others demanded independence for the national republics. Still others insisted on the restoration of the old Soviet ways. Ultimately, Gorbachev could not forge a compromise among these forces and the consequence was the dissolution of the Soviet Union.
To restructure the Soviet administrative command system and implement a transition to a market economy, Yeltsin's shock program was employed within days of the dissolution of the Soviet Union. The subsidies to money-losing farms and industries were cut, price controls abolished, and the ruble moved towards convertibility. New opportunities for Yeltsin's circle and other entrepreneurs to seize former state property were created, thus restructuring the old state-owned economy within a few months.
After obtaining power, the vast majority of "idealistic" reformers gained huge possessions of state property using their positions in the government and became business oligarchs in a manner that appeared antithetical to an emerging democracy. Existing institutions were conspicuously abandoned prior to the establishment of new legal structures of the market economy such as those governing private property, overseeing financial markets, and enforcing taxation.
Market economists believed that the dismantling of the administrative command system in Russia would raise GDP and living standards by allocating resources more efficiently. They also thought the collapse would create new production possibilities by eliminating central planning, substituting a decentralized market system, eliminating huge macroeconomic and structural distortions through liberalization, and providing incentives through privatization.
Since the USSR's collapse, Russia faced many problems that free market proponents in 1992 did not expect. Among other things, 25% of the population lived below the poverty line, life expectancy had fallen, birthrates were low, and the GDP was halved. There was a sharp increase in economic inequality: between 1988/1989 and 1993/1995, the Gini ratio increased by an average of 9 points for all former socialist countries. These problems led to a series of crises in the 1990s, which nearly led to the election of Yeltsin's Communist challenger, Gennady Zyuganov, in the 1996 presidential election. In recent years, the economy of Russia has begun to improve greatly, due to major investments and business development and also due to high prices of natural resources.
|date=(help) (Edited version of a speech given November **, **** at the American Enterprise Institute.)