Collapse of an Empire: Lessons for Modern Russia (Hardcover)

~ Yegor Gaidar (Author), Antonina W. Bouis (Translator) "IN THE FIRST CENTURY B.C., the formation of a professional army and the resulting decline of the system of universal military service for free peasants..." (more)
Key Phrases: quarterly changes, hard currency rubles, ruble overhang, Soviet Union, United States, Council of Ministers (more...)

Editorial Reviews

Review

"Yegor Gaidar has written an outstanding book of great importance. With extraordinary erudition, he warns Russia against following the course of Nazi Germany, focusing on the double trap of post-imperial hangover and the oil curse. Professor Gaidar also shows how profound and manifold the Soviet collapse of 1991 really was." --Anders Ã…slund, Senior Fellow, Peterson Institute for International Economics

"Yegor Gaidar will be known to history as the architect of Russia's transition to a market economy. But here he shows his other side, as a brilliant economist and historian presenting a compelling explanation of the Soviet Union's collapse: its financial bankruptcy." --Andrei Schleifer, Harvard University and author of A Normal Country: Russia after Communism

"Yegor Gaidar, a hero of Russian reform, has provided a courageous and clear-headed wakeup call for his own people and the world. He argues persuasively that today s Kremlin leaders are heading down the same economic path that led their Communist predecessors to disaster. Combining personal experience, deep analysis and a rare grasp of facts--including from previously classified documents--Gaidar has produced a book of insight and importance. It is must-reading for anyone trying to comprehend what really happened to the Soviet Union, why its system was inherently instable, and why nostalgia for the days of empire fashionable at the highest levels in Russia today--is wrongheaded and dangerous." --George Soros

Product Description

In today's Russia, nostalgia for the Soviet era is growing. Many Russians reflect wistfully on the passing of an era when the Soviet Union was a superpower, commanding international respect, and they blame its demise on external enemies and foolish changes in policy. In an address to the Russian Federal Assembly, President Vladimir Putin called the breakup of the Soviet Union the greatest geopolitical catastrophe of the 20th century. In Collapse of an Empire: Lessons for Modern Russia, however, economic reformer and former prime minister Yegor Gaidar clearly illustrates why such notions are misguided, ill informed, and dangerous. As he explains in the introduction: "My goal is to show the reader that the Soviet political and economic system was unstable by its very nature. It was just a question of when and how it would collapse."

Although the Soviet Union never referred to itself as an empire, it fit Gaidar's definition: "a powerful multiethnic state formation in which the power (or at least the right to vote) is concentrated in the metropolis and its democratic institutions (if they exist), though the power and those institutions do not extend to the entire territory under its control." The U.S.S.R. sat on a shaky foundation of far-flung lands, conquered peoples, centralized authoritarian government, and a command economy overly reliant on natural resources. Gaidar explains why this once-powerful state was doomed to fail eventually, and why Russians should be looking forward rather than backward in building their nation. He worries that Russia is repeating some of its tragic mistakes, including uneven economic development that leaves the nation vulnerable to fluctuations in the energy market.

Gaidar uses the Soviet case as a device for understanding the life cycle of empires, which found themselves at the wrong end of history in the twentieth century. World War I spelled the end for the Hapsburgs, Ottomans, and Romanoffs, for example, and Europe's overseas empires began breaking apart after World War II. In the 1990s, the final remaining territorially integrated empire-the Soviet Union-fell. This is no mere coincidence: "The dissolution of empires in the twentieth century is a component of the process of global change that is called modern economic growth." To reproduce such a flawed model of governance would be a tragic mistake, yet many Russians still look backward through rose-colored glasses as their government centralizes power again. Such misplaced nostalgia defies reality while it imperils the future of Russia and its people.

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Product Details

• Hardcover: 332 pages
• Publisher: Brookings Institution Press (October 17, 2007)
• Language: English
• ISBN-10: 0815731140
• ISBN-13: 978-0815731146
• Product Dimensions: 9.1 x 6.4 x 1.4 inches
• Shipping Weight: 1.4 pounds (View shipping rates and policies)
• Average Customer Review: 4.8 out of 5 stars  See all reviews (4 customer reviews)
• Amazon.com Sales Rank: #97,825 in Books (See Bestsellers in Books)

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19 of 20 people found the following review helpful:

5.0 out of 5 stars Cassandra Gaidar, December 16, 2007

By	Craig Pirrong "The Streetwise Professor" (Houston, TX/Chicago, IL/St. Louis, MO) - See all my reviews (REAL NAME)

Cassandra was the Trojan woman whom Apollo gave the gift of prophesy-and the curse of never being believed. Yegor Gaidar sees that Russia's future depends crucially on coming to grips with its past, but present events make it clear that his prophesies, like Cassandra's, fall on deaf ears.

In his new book, Collapse of an Empire, Gaidar has a pressing purpose: to alert Russians-and the world-to the dangers denying the real reasons behind the collapse of the USSR. Gaidar has a strong historical sense (which is often absent among economists, alas), and from his understanding of history (most notably, of Weimar Germany and post-Hapsburg Austria-Hungary), he knows that imperial collapse can be disorienting and dispiriting to the empire's subjects, even if the empire brutally repressed them. He also knows that demagogues and revanchists can exploit this disorientation and depression to achieve power. Those suffering from post-empire depression are very susceptible to demagogic myths that imperial glory was destroyed by "stabs in the back" from enemies foreign and domestic, and that restoration of this glory requires the people to unite behind an authoritarian leader who will ruthlessly pursue traitors at home and take revenge on foreign foes.

But he foresees that this is ultimately the road to disaster:

The legend of a flourishing and mighty country destroyed by foreign enemies is a myth dangerous to the country's future. . . . This is the picture that dominates Russian public opinion: (1) twenty years ago there existed a stable, developing and powerful country, the Soviet Union; (2) strange people (perhaps agents of foreign intelligence services) started political and economic reforms within it; (3) the results of these reforms were catastrophic; (4) in 1999-2000 people came to power who were concerned with the country's state interests; (5) life became better after that. This myth is as far from the truth as the one of an unconquerable and loyal Germany that was popular among the Germany that was popular among the Germans in the late 1920s and 1930s.

The goal of this book is to show that picture does not correspond to reality. Believing that myth is dangerous for the country and the world.

As an aside, I can speak to the ubiquity and power of this myth. I have had a couple of Russian students in the United States. Both were intelligent and worldly. One had lived in the United States for 10 years. Both were going to business schools. And each believed that Gorbachev and Yeltsin were American agents, and that the collapse of the USSR was a CIA plot. The first time I heard this I was surprised, but thought it was an aberration. The second time I heard it I was stunned.

But back to Collapse of an Empire. Gaidar's basic thesis is that the economic-and hence political-collapse of the USSR was inevitable:

[The collapse of the USSR] was preordained by the fundamental characteristics of the Soviet economy and political system: the institutions formed in the late 1920s and early 1930s were too rigid and did not permit the country to adapt to the challenges of world development in the late 20th century. The legacy of socialist industrialization, the anomalous defense load, the extreme crisis in agriculture, and the noncompetitive manufacturing sector made the fall of the regime inevitable. In the 1970s and early 1980s these problems could have been managed if oil prices had been high. But that was not a dependable foundation for preserving the last empire.

Gaidar recounts the chronology of collapse in excruciating detail; too much detail at times for my taste, but a choice that Gaidar defends as necessary to overcome the power of the myth.

Gaidar shows that agriculture was the Achilles heel of the Soviet system. Stalin ruthlessly exploited agriculture to fund industrial development. This worked for awhile, but only served to demonstrate that supply curves are much more elastic in the long run than the short run. In the short run, peasants could be forced to turn over the bulk of their harvest in exchange for a pittance. In the long run, however, the attempt to extract surplus from the countryside and the necessity of attracting labor to manufacturing and megaprojects led to a flow of the best and most productive labor out of agriculture and into industry. Soviet agriculture became progressively less efficient as a result. Combine this with assorted insanities, like the virgin lands program, and what was once the world's breadbasket became a farming basketcase.

Forced to import larger and larger quantities of food, but non-competitive in the production of machinery or other manufactured goods, the USSR relied on the export of oil to pay for it. With increasing oil output from rich western Siberian fields, and spiraling prices (courtesy of OPEC and declining US production), for a time the USSR was able to overcome the creeping weakness of its agriculture sector, and even go on an aggressive military and political offensive that spanned the globe. But soon declining oil production (attributable to extremely inefficient Soviet practices) and plummeting prices (courtesy of growing non-OPEC output, burgeoning Saudi production, and more efficient consumption of energy in the West) conspired to create an acute fiscal crisis in the USSR.

Gaidar chronicles the results of this crisis, and the government's (and Party's) incompetence in dealing with it. The rigidity of a centrally planned system, the rudimentary nature of the financial system, the acute political constraints facing the country's leadership, and the geronocratic nature of that leadership, made it impossible to respond. Things spiraled out of control. Price controls prevented smooth adjustment to external shocks. Fear of political unrest prevented the leadership from lifting the controls. Faced with incredible strains on the budget, the government ran the printing press overtime. Partial "reform" measures, and improvident policy choices (such as the anti-alcohol campaign that deprived the government of a large share of its domestic revenues), only made things worse. In the end, everything came tumbling down.

Gaidar's narrative is compelling. To a Chicago-trained economist, it is almost axiomatic that socialist system that suppresses and distorts almost every market signal; deprives individuals of the ability to make coherent economic choices; and resorts to force in an attempt to make its irrational system work; will fail in the end.

To the Russians who grew up in the system, or who grew up in the aftermath of its collapse, alas, it is not so obvious. As Gaidar notes, the fall of an empire seems anything but common sense to those that lived it. Putin and the siloviki are exploiting this to the hilt, and are perpetrating the myth that the collapse of the Soviet Union, and the economic and social chaos that followed this collapse was not due to the inherent defects of the Soviet economic system, but instead resulted from malign external forces. The recent "elections" indicate that large swaths of the Russian populace have fallen for this myth hook, line, and sinker.

So for the present, anyways, Gaidar is doomed to play the role of Cassandra, prophesying that disaster will follow Putin's Plan, but cursed to be disbelieved and ignored. Putin and the siloviki, like the Bourbons, have learned nothing and forgotten nothing. They have not learned from what destroyed the Soviet Union, but have not forgotten that the Soviet Union was once a colossus before which the world trembled. They want to restore this colossus (admittedly, and happily, without all the totalitarian baggage), and are pursuing this goal relentlessly.

I believe that Gaidar is right that down this path lies ruin. I fear, however, that Russia will have to find this out the hard way. So Yegor Gaidar is a prophet without honor in his own country, among his own kin, and in his own house. But I believe he is a prophet nonetheless. And I heartily recommend that you read his excellent book.

8 of 9 people found the following review helpful:

5.0 out of 5 stars An Insider's View of the Collapse of the Soviet Union, May 24, 2008

By	Leonard J. Wilson (VA United States) - See all my reviews (REAL NAME)

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Yegor Gaidar's Collapse of an Empire is an insider's view of the causes and events that led to the collapse of the Soviet Union in 1991. The author is has a fascinating and improbable background. He served as acting Prime Minister, First Deputy Prime Minister, and Economics Minister of Russia under Boris Yeltsin in the early 1990s but is an academic economist rather than a politician or bureaucrat. He received his PhD in economics under the Soviet educational system but, somehow, developed a solid understanding of economics of free markets. In Collapse of an Empire, Gaidar offers his historical and economic perspective on the Soviet collapse as a lesson and caution for today's Russia. It is as close to a definitive work on the Soviet collapse as I have yet read.

Gaidar starts with two general observations, one on empires and one on oil, and then proceeds to describe the Soviet Collapse.

Empires

Empires come in two flavors: Overseas empires (British, French, Dutch) and territorially contiguous empires (Austria-Hungary, Tsarist Russia, Ottoman Turkey, Soviet Union, and, on a smaller scale, Yugoslavia). Of these two types, the overseas empires are the easier to dismantle: The imperial power can simply declare the former colonies free and, possibly, repatriate a limited number of colonists with a claim to citizenship in the mother country. In territorial empires, diverse ethnic, cultural, linguistic, and religious groups usually reside in close proximity to each other and often have longstanding conflicts over rights to land and under the law. Abolishing a territorial empire leaves all these conflicts in place, ready to boil over as soon as imperial control has been lifted. Members of the formerly dominant ethnic group may even find themselves a minority in one of the successor states and subject to the rule of one of their formerly subject people. Many of the troubled areas of the world today (Balkans, Middle East) are parts of former territorial empires where population segments have not succeeded in making peace with their neighbors.

Oil

Countries with significant natural resources, especially oil, have generally not been on the forefront of democracy or economic liberalism. Gaidar attributes this phenomenon to the steady stream of revenues the sale of oil provides the ruling party. Secured by this source of income, the government has no need to reach an accommodation with its people that gives them a voice in how they are governed. In exchange, the tax burden on the population often remains very light. The western democracies grew out of accommodations that essentially gave the people a voice in how their countries were governed in exchange for their acceptance of the government's imposition of taxes.

Soviet Collapse

Prior to WWI, Russia was one of the largest grain exporters in the world. In the West, industrialization followed the production of an agricultural surplus which released excess farm labor for industrial employment. Russia followed a different path after the Bolshevik revolution. Rather than building an agricultural surplus, Lenin and Stalin seized the grain and other agricultural products of the countryside to feed the urban and industrial populations. Simultaneously, they reallocated labor from agriculture to industry to support their goal of rapid industrialization. The result was an economic and human disaster. Soviet agriculture never recovered, never produced a sustained surplus, and the country became dependent on imported grain. (See Robert Conquest's Harvest of Sorrow for details). By the 1970s, the Soviet Union was the world's largest grain importer.

At that time (the 1970s), the Soviets were able to pay for their grain imports by exporting oil. This was the time of high oil prices and the Arab embargo on oil exports to the US. Grain prices were low, so Soviet trade balanced nicely: Expensive exports, inexpensive imports.

In 1979, the Soviets invaded Afghanistan and Ayatollah Khomeini overthrew the Shah of Iran. These events led the Saudis to become concerned about a Soviet drive to the Persian Gulf and a threat to their kingdom. To counter this perceived threat, in the mid 1980s the Saudis greatly expanded their production and export of oil causing the world price to drop from the $30-40/bbl range to about $10/bbl. Obviously, this price change damaged the Soviet balance of trade.

At about the same time (mid 1980s), the world price of grain shot up significantly. This further damaged the Soviet trade balance.

If this wasn't enough, the volume of Soviet oil production declined in the late 1980s for two reasons. First, to generate foreign exchange, oil production had been focused on the most productive fields which were exploited at a rate that was harmful to the long-term productivity of the fields. Second, the reduced availability of foreign exchange and the continuing requirement to import grain led the Soviet government to reduce imports of industrial materials from the West, including equipment for oil drilling, production, and transport.

By 1989, food subsidies constituted a third of the Soviet national budget. Retail prices were fixed at artificially low levels, which was one form of subsidy. At the same time, the Soviet government was subsidizing the import and domestic production of food. The costs of producing or importing food were as much as 70% higher than the retail prices. With a net outflow of hard currency and a grossly imbalanced domestic budget, the only way to "pay" the government's bills was to print more rubles. With prices fixed by the state, the resulting inflation could only result in shortages at the retail level and a huge increase in individual "savings" since there was nothing for the population to buy with its rubles. By 1991, of 1200 officially recognized consumer goods, 1150 were not readily available.

Declining credit-worthiness drove most western commercial banks to refuse to make further loans to the Soviet government, leaving Gorbachev with only the option of begging for foreign aid from the capitalist governments. Gaidar even suggests that he made the following deal with George H. W. Bush at their Malta conference in 1989: In exchange for US financial assistance, the Soviet government will refrain from using force to maintain its control of its Eastern European satellites.

Throughout its 70+ years of existence, the mantra of the Soviet government and the Communist Party had been that The Party had a special role in the Soviet system because of its unique "wisdom", its understanding of communist economics and the Soviet man. By the late 1980s, the Russian people and even the Soviet bureaucracy knew that this was a lie. However, the inertia of the system did not allow The Party to admit it's "wisdom" had been wrong and that a major economic reform based on free markets was desperately needed.

By revealing the true history of the Soviet Union (e.g., the Molotov-Ribbentrop pact), Glasnost destroyed any lingering myth of the legitimacy of the Soviet Empire. In the end, the Empire could only be maintained by force, but the use of that force would have ended any hope for financial aid from the West.

The August 1991 coup was only the farce that followed the tragedy that constituted the history of the Soviet Union.

4 of 5 people found the following review helpful:

5.0 out of 5 stars Another Great Work from Gaidar!, December 28, 2007

By	Ian Mackechnie - See all my reviews (REAL NAME)

Professor Gaidar has done it again! He has given us another thoughtful work on Russia, yet not purely from an economic perspective- although there is lots of that in the book- but in terms of the context of history. Readers new to Gaidar would do well to get hold of his work 'State and Evolution'. This work also brilliantly examines recent of events in Russia in the context of the development of nations.

I look forward to more from this man's pen. And my sincere appreciation to the Brooking Institute for making this work available in English. Possibly, with the level of interest in such a work, its sales may not be high and Broooking may be making a financial loss. But to readers like myself, I feel a great gratitude of debt to both the author and publisher.

Buy this book and enjoy an intellectual feast! It is simply fantastic!