who live in specially reserved apartment complexes, and whose children wake up this Christmas morning to find stockings crammed with confectionery and toys. They have purchased turkeys, plum pudding, and other savories for Christmas dinner from stores such as Stockmann’s of Finland, tucked away in a private section of GUM on Red Square. The nine million Muscovites are effectively barred from these hard-currency emporiums, as the ruble is not convertible. The stores discreetly conceal their wares—grapefruits, bananas, flour in several varieties, spaghetti, French wines—behind paint-coated windows, so as not to draw attention to this consumer apartheid, or to agitate the Muscovites hurrying past with empty string bags.
The mayor demanded a week ago that Yeltsin give him special powers to overrule the city soviet so he can take executive action to prevent paralysis. Otherwise he will resign. The Russian president, unwilling to cede any of his powers to rule by decree, has refused. Popov has not yet quit and has sent Luzhkov to break the stalemate. As deputy mayor and city administrator, Luzhkov is the real chief executive of Moscow. The stocky former engineer facilitated the opening of the first private businesses, the cooperatives, in the city under Gorbachev’s reforms, and in August he helped rally ordinary city people against the coup. He tries to persuade Yeltsin that the mayor’s office must be free to take its own initiatives to prevent chaos. Moscow needs control over fuel supplies and power and gas networks, as well as the independent management of food stocks.
After more than an hour of sometimes heated negotiations, Yeltsin signs a series of ten decrees giving Popov more power. Luzhkov returns with his group to the city hall. Popov decides to stay on. The mayor notes that the president has given an assurance that the city will receive “comprehensive assistance” to implement the transition. More importantly, Popov has consolidated mayoral rule.
The shock therapy Yeltsin is applying to the ailing Russian economy was mooted more than a year earlier when Mikhail Gorbachev flirted with, then abandoned, a five-hundred-day plan to convert the floundering command system to a market economy. One of its authors, Grigory Yavlinsky, worked on the reform program with the help of Harvard experts Graham Allison and Robert Blackwill. They also sought advice from Harvard economics professor Jeffrey Sachs, who assisted the Polish government with its shock therapy.[199] Sach’s attitude, according to Chernyaev, was “If you don’t become like us, you’ll get no dollars.” Gorbachev vetoed the plan, and no dollars were forthcoming.
Having persuaded the Russian parliament to give him special powers, Yeltsin is ready to make the leap to capitalism. He has given the task to a small and radical group of young economists, led by Gaidar, a devotee of the Chicago school of monetarist economics.
Short, chubby, intellectually gifted, and nicknamed Guboshlyop because of the way his lips flap when he talks, the thirty-five-year-old Gaidar is to be found on the evening of December 25, 1991, in the long, whitewashed Hall of Meetings, where a drugged and distressed Yeltsin was brought from his hospital bed four years ago to be shamed by party leader Mikhail Gorbachev for daring to challenge his leadership and privileges. He is working there with Jean Foglizzo, who arrived in Moscow shortly before as representative of the International Monetary Fund.
“I had a lot to do,” Gaidar recalled. “The state of the economy was catastrophic.” Imports of sugar, tea, cereals, and soap from the other republics have fallen by more than three-quarters. Machine building and construction has come to a standstill. For some months the Soviet government has been unable to gather taxes. The USSR has exhausted its foreign currency reserves and has debts of $30 billion. “In other words,” said Gaidar, “the Soviet Union was bankrupt.” His problem is that while the old system is broken, there is as yet nothing to replace it.[200]
Gaidar had converted readily to liberal democratic ideology after a spell as an economics writer for
Yeltsin’s mandate to Gaidar is to abolish the centralized economy, and Gaidar believes the conditions are ideal for what he refers to as major surgery on the economy without an anesthetic. The country is relatively tranquil; the military is demoralized; the hard-line communist opposition has been defanged. But speed is important. He needs to make the reforms irreversible by wrecking the old system. Then, the reformers assume, goods will quickly appear on the shelves when the market rather than the government sets the prices. His fellow deputy prime minister Anatoly Chubais has been given the task of privatizing state assets—in a country where practically everything, from bread shops to automobile plants, is owned by the government. Chubais predicts to Gaidar that whatever the result, he will be hated as the person who sold off Russia. Gaidar knows that he too will have to drink from that poisoned chalice. As Burbulis warns, they belong to a kamikaze government whose members will be discarded by the public after they have rammed through necessary but unpopular measures.
The Russian reformers fret that when goods reappear in the regular stores, there will be serious inflation. But the American advisers are sanguine. Thomas Wolf of the IMF assures Russian economics minister Andrey Nechayev, during a meeting on the afternoon of December 25, that prices on most important consumer items will only rise by 70 percent in the first month of free pricing.[201] (Nechayev is skeptical—with good reason: Prices soar in January by 245 percent and keep rising after that to 2,500 percent.)
A contemporary IMF working paper admits, “There remains some suspicion of foreign advisers, together with a reluctance, natural in a former superpower, to admit there are things to be learned.”
One of those who has cooled on the American-inspired therapy is Alexander Rutskoy. Even as Yeltsin is trying to work out a deal with Luzhkov to keep Popov on board, his vice president is holding forth to journalists in an office nearby about how “we now have anarchy instead of democracy.” Rutskoy is in favor of Russian “sovereignty” within the Union but is against breaking up the USSR, and he has hung a map of the Soviet Union behind his desk to make the point. The Russian president and vice president are no longer on good terms, partly because Yeltsin refused to make him prime minister, a position he has kept for himself in addition to the Russian presidency.
Rutskoy once told Yeltsin, according to Korzhakov, “Boris Nikolayevich, I will never let you down. I will be the guard dog at your throne.” To Yeltsin his vice president has become just a “loud-mouthed soldier.” Rutskoy has a particular aversion to Gaidar and his team, whom he describes as “boys in pink shorts, red shirts and yellow boots who had decided to run Russia.” He complains that the conditions are not right for the gigantic experiment they are conducting with the country. A free market can only be introduced in a legal, democratic state, he tells the reporters, but “today, there is neither power nor democracy in Russia.”
The vice president insists he doesn’t want confrontation with Yeltsin—“Why, that’s not logical!”—but things must be put in order first and privatization must not be carried out by robbery and cheating. Gaidar for his part has only contempt for Rutskoy, commenting that behind the “dashing facade of the mustachioed man-at-arms” lies a vacillating and insecure personality intent on avoiding responsibility for unpopular decisions.
The speaker of the Russian parliament, Ruslan Khasbulatov, is also sliding back to the old Soviet way of thinking, in line with the many conservative deputies. He feels “it might be time to propose that the president dismiss his virtually ineffective government.”
Already Yeltsin’s hold on power is becoming tenuous, and divisions are deepening in the Russian parliament that in less than two years will lead to a bloody showdown.
There are also the first stirrings of a popular revolt against price rises. Demonstrations have already begun. On Sunday between 5,000 and 10,000 people carrying portraits of Lenin and Stalin gathered near the Kremlin and banged teaspoons against empty pots and pans as they formed a “hungry line” to represent a queue at a soup kitchen. Coming across the demonstration, Ted Koppel saw how they were already nostalgic for the iron-fisted control of rigid communism and that they had contempt for both Gorbachev and Yeltsin. Koppel tells his ABC viewers, “The teaspoon striking on an empty pot may yet prove to be the most powerful symbol in this new and uneasy commonwealth.”
The leader of the demonstrators is Vladimir Zhirinovsky, head of the neofascist Liberal Democratic Party, who tells his followers that the only reason Americans want to come to Russia to give aid is to scan the territory so they
