The economic collapse of the 1930s brought down democracies across Europe unleashing fascism across the continent. Other countries, including Canada and the United States, introduced drastic measures to protect the vulnerable which helped save them from the same fate. Capitalism was failing, rescued by the rudiments of the welfare state.

Sensible people realized that while capitalism may be the greatest producer of wealth the world has ever known it had to be kept on a leash to ensure that the wealth was equitably distributed. It was a system very good at creating wealth but very bad at distributing it, an economic system that had to be partnered with a just social system.

Consequently, after the Second World War, Western nations created such a system—the welfare state. It worked superbly. The result was the best society ever developed.

But in the 1970s, nations began to let capitalism off the leash, and a drift back to inequality began. Leaders such as Margaret Thatcher in Britain and Ronald Reagan in the U.S. became free market fundamentalists, advocates of what was called neoliberalism. Free markets, untrammelled by government, would solve all our problems. The welfare state began to unravel.

The results were increasingly unequal societies and ultimately the Great Recession of 2008-09 when unleashed capitalist greed and recklessnesses crashed the U.S. financial market and almost took the world economy down with it. The increasing anger of an alienated population led to Brexit in Britain and Trump in the U.S., the latter a flirtation with fascism.

And what about Russian’s plunge into fascism? As explained in a recent article in The New Yorker, the Russians made the same mistake we did.

When Russia’s stagnant economic and social system collapsed and its empire fragmented at the end of the 20th century, a chance for democracy presented itself. If the economy had been reformed cautiously that opportunity may have been realized. But that was not to be.

Convinced of the virtues of neoliberalism, Western advisers recommended “shock therapy,” free-market reforms delivered brutally and all at once because they would be so unpopular.

Unfortunately by this time Boris Yeltsin was in charge and his prime minister was a radical economist named Yegor Gaidar, like Thatcher and Reagan a free-market fundamentalist. He and Yeltsin enthusiastically embraced the shock therapy.

The result was a free market run rampant, the theft of the country’s industrial base by the “oligarchs” and immense inequality among the people. Many Russians blame the West, but the fact is their own leaders made the decision, as captivated by neoliberalism as we were.

East or West, unbridled capitalism first threatens a society’s health and ultimately its stability. In Russian it set the stage for Putin who, like HItler, straightened out the economy but at the price of democracy.

And the forces of neoliberalism are still very much with us, as are the forces of fascism. As one of the more famous versions of the old quote has it, “Eternal vigilance is the price of liberty; power is ever stealing from the many to the few.” We have seen much of the latter in recent history, so eternal vigilance is indeed well-advised.

And one thing we must be vigilant about is assuring working people a respectful place in society at a time when change is faster than ever. Both Canada and the U.S. are doing this. Examples include Canada’s Sustainable Jobs Act and the U.S.’s Inflation Reduction Act. We have learned from our mistakes and are adapting. Tragically, for Russia it is too late.

4 thoughts on “How neoliberalism brought down Russia … and nearly us”
  1. Tragically, for Russia it is too late

    Why is that? Putin very firmly yanked the chain on the oligarchs. Mikhail Khodorkovsky, a normal corrupt Russian oligarch but with political ambitions did prison time and now lives in exile. Probably a dozen US oligarchs err billionaires, are politically more powerful than those former oligarchs now billionaires, in Russia.

    Russia still has a single-pay health service, I believe education to tertiary level is free. Russia has raised its retirement age but has also increased pensions—which were too low and probably still are. Reminds me of the ODSP programme here.

    It looks like the Russian Gov’t is reining in a lot of neo-liberal ideas planted by the US in the ’90’s. If anything, Russia is slowly shifting away from neo-liberalism though to what I have no idea.

  2. I meant too late for democracy which it clearly is.

    Putin yanked the chain on the political ambitions of the oligarchs, not on their financial ambitions. He and his cronies use them like ATMs.

    1. He and his cronies use them like ATMs.
      Could be but so far I have not seen any really credible evidence of this. There are wild accusations that Putin is the wealthiest man in the world. There is no trace of his name in things like the Panama papers or the Pandora Papers.

      I don’t see that it is too late for democracy in Russia. It is a semi-democracy as it stands. Russia at a national or “provincial” level has never had any tradition of democracy. We would be naive to expect it to look like a full-blown social democratic state this soon.

      The Russian president has way too much power. I believe Yeltsin’s US advisors drafted the constitution this way for him. It may be that for some time an authoritarian presidency is better for Russia than one with too little power such as we see in the USA.

      The Alexi Navalny movie showing Putin’s “palace” on the Black Sea was hilariously bad. At one point it showed the “finished” library. Amazingly enough, it was an exact copy of the Czezh national library.

      I get the impression that Putin is not overly interested in wealth. He might have stashed away a few million for his daughters but as far as I have heard neither’s lifestyles are all out-of-line with what you would expect. One is a bioscience researcher at, IIRC, Moscow State University and I cannot remember what the other one is doing but apparently she in not hanging out on a mega-yacht at Cannes.

      This may very well not hold for other members of the Russian government; some may be stashing away wads of money. There, I believe, have been strong rumours about this concerning some survivors of the Yeltsin years.

  3. Thank you, Bill, for putting into an understandable framework many of these world political events many of us have lived through.

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