Home » Politics & Society » International Trade » Russia's Search for Liberty: Part VI. Conclusions

Russia's Search for Liberty: Part VI. Conclusions

© Carey Goodman

Many hardships place Russia at the brink of reversing its new course. When some state-owned companies were privatized, various financial schemes emerged that risked renewing the tainted image of free market systems. Organized crime is rampant. Financial "advisers" who supervised the "check option project (a program that allows employees to buy shares of denationalized firms) allegedly falsified documents and collected immense profits intended as stock payments. Get-rich-quick schemes and pyramid investment companies such as the infamous MMM proliferate. After MMM president Sergei Mavrodi was arrested for tax evasion, his financial empire crumbled. It is estimated that at least ten million Russians lost their savings to Mr. Mavrodi. His scheme depended on encouraging investors to contribute to MMM. The pyramid investment technique is a commonly used fraud tactic or Ponzi scheme by which (for example) one person convinces three people to invest in a fund. Those three people each bring in three more people so they can make good on their investment. The nine new investors must then persuade twenty-seven people to invest to secure a small return on their contribution. When no new investors contribute, those at the bottom of the pyramid lose their money. Such was the case of MMM. Thousands of Russians protested the arrest of Mr. Mavrodi. President Yeltsin refused to intervene because it was "a case for the courts, not the government".

The departure of Sergei Shakharai and Yegor Ghaidar from the cabinet was another sign of the unfortunate progress of reforms. Mr. Shakharai (who received quite favorable Western press during the December 1993 elections) revealed that his philosophical differences with Mr. Yeltsin would hinder the already turbulent workings of the government. The "darling of the World Bank and IMF" Yegor Ghaidar cited the apparent reluctance of Mr. Yeltsin and his advisers to proceed with privatization. The reshuffle came only weeks after the Liberal Democratic Party (LDP) - described by its leader Vladimir Zhiranovsky as "neither liberal nor democratic" - won 25.5% of the vote at elections for the Duma. Enter here the question of whether Russia will survive as a democracy.

The Law of 12 June 1990 (which lingers in the statute book despite Russian claims of democracy) illegalizes open criticism of the government and the President. In his statement of resignation from the cabinet, Sergei Shakharai declared that the role of the opposition was "not to oppose, but to kindly suggest alternatives". Russia retains its status as world leader in the number of capital crimes, and a system of judicial appeal is still in the inchoate stages. Strong state involvement in economic affairs and a general presence of valueless currency impeed property rights. Wages remain low and goods are very costly. This inequity will persist into the foreseeable future.