Back in USSR – Merloni Years

Coming back to Russia in the mid-nineties was a very peculiar experience. Everything was different. The country was going through a very painful transition from Socialism to Capitalism.

With the dissolution of the Warsaw Pact and CoMEcon and other treaties that served to bind its satellite states to the Soviet Union, the conversion of the world’s largest state-controlled economy into a market-oriented economy had been extraordinarily difficult regardless of the policies chosen. The policies chosen for this difficult transition were (1) liberalization, (2) stabilization, and (3) privatization. These policies were based on the neoliberal Washington Consensus of the International Monetary Fund (IMF), World Bank, and Treasury Department.

The programs of liberalization and stabilization were designed by Yeltsin’s deputy prime minister Yegor Gaidar, a 35-year-old liberal economist inclined toward radical reform, and widely known as an advocate of “shock therapy”.

Photo Yandex

Shock therapy was originally used in Bolivia by notable economist Jeffery Sachs to combat inflation in the 1980s. Having achieved some major successes in Bolivia, shock therapy was then imported to the Polish context following the dissolution of the Soviet Union, and Russia shortly after.

Russian market bazaar in the 90s
Iliya Pitalev/Sputnik Moscow bazaar in the 90s

The partial results of liberalization (lifting price controls) included worsening already apparent hyperinflation, initially due to monetary overhang and exacerbated after the central bank, an organ under parliament, which was skeptical of Yeltsin’s reforms, was short of revenue and printed money to finance its debt. This resulted in the near bankruptcy of much of the Russian industry.

With the collapse of the USSR in 1991, all legal barriers were removed and yesterday’s spivs became a new class of entrepreneurs. There was a vast Russian market to be filled with imported goods, and fortunes were made at this time.

Лихие 90е
Photo: Yandex

Of course, where there is money there are those who want a cut without working for it.

The Russian economy was passing through a long and wrenching depression. Official Russian economic statistics indicate that from 1990 to the end of 1995, Russian GDP declined by roughly 50%, far greater than the decline that the United States experienced during the Great Depression. This decline eventually led to an explosion in crime all over the former Soviet Union.

The 90s in Russia was an equivalent of Chicago – the prohibition era – on steroids.

In early 1993, the Russian Ministry of Internal Affairs reported over 5,000 organized crime groups operating in Russia. These groups were comprised of an estimated 100,000 members with leadership of 18,000.

The image of a gangster dressed in a black leather jacket remains one of the most enduring symbols of 1990s Russia.
The image of a gangster dressed in a black leather jacket and Adidas athletic suits remains two of the most enduring symbols of 1990s Russia. movie “White Arrow” – Bloody 90s in Russia – Лихие 90е.
Photo: vkontakte

Crime skyrocketed as brigades of thugs ‘patronized’ cafes, outdoor markets, and small businesses of all sorts. Criminal gangs had a hierarchy that they strictly adhered to, and they were often well connected, sharing their illegal earnings with powerful people in state agencies.

It was definitely not the Russia I grew up in…


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