In the past 11 years, notwithstanding some elements of progress, the economy has shrunk by about 40 percent (according to many careful estimates) and operates in a business, legal, and political environment permeated by corruption and crime. It is not clear if Russia’s GDP will be able to sustain its recent return to growth. Meanwhile, society is profoundly divided along class lines, with a small and extremely wealthy elite, a struggling middle class that was hit hard by the financial crash of 1998, and some three-quarters of the population—including many well-educated people—trapped in poverty.

Market Bolshevism represents the latest of a series of major reform programs carried out by Russian governments since the 16th century. These programs have featured prominently in successive cycles of state repression and instability. In cases like the programs of Alexander II in the 1860s and 1870s and Mikhail Gorbachev in the late 1980s, leaders have promoted reforms designed to take effect at least in part from below. More often, though, as under Alexander III in the late 19th century, Vladimir Lenin in 1917-21, and Joseph Stalin in the 1930s, change has been imposed from above. The resulting alienation of most Russians from the political system eventually led to the wholesale collapse first of the Tsarist state in 1917, then of the Soviet Union in 1991.

Tragically enough, both these collapses produced revolutionary change that was based on a false and simplistic economic determinism. First, Lenin’s Bolsheviks held that nationalizing the entire economy was the key policy that would open the door to social justice and prosperity. Then, 74 years later, Yeltsin’s market Bolsheviks proclaimed that denationalizing most of the economy overnight was the key to achieving the same goals. In the first case, democracy was explicitly rejected in favor of a bloody, self-proclaimed communist dictatorship that killed, imprisoned, or forced to flee abroad at least 20 million people. In the second, the promising emergence and growth of democracy in1987-91 was deliberately if surreptitiously halted by Yeltsin—and then, with his destruction of the popularly elected (though irresponsibly led) Parliament by tank fire in 1993, reversed.

From that time on, it was clear that Yeltsin’s main goal was to stay in power at any cost. To that end, he had to keep market Bolshevism as his central strategy even though it was producing profoundly negative social, economic, and political consequences. To acknowledge its failure and change course would have risked the coming to power of opposition groups. Moreover, market Bolshevism justified authoritarianism. The government claimed, in effect: "We know better than the people’s representatives what is good for the people, so we’ll use whatever methods we want."

What, then, was the economic medicine that Yeltsin, his key "shock therapists" Yegor Gaidar and Anatoly Chubais, and the West were so sure would be therapeutic? Their program had several elements:

But performing these daunting tasks—creating capitalism almost from scratch in a few years—was, first and foremost, culturally impossible. The process had taken two centuries in Western countries. It was also politically impossible. In 1992 Russia possessed a rudimentary democracy. If Yeltsin had followed the urgings of Western advisers like Jeffrey Sachs and Anders Åslund and tried to use "iron political will" to force his utopian program on Russia wholesale, he would quickly have been impeached and ousted from power. So he compromised. For eight years he tried to impose his program piecemeal. This approach enabled some observers to claim that shock therapy was never seriously tried in Russia.

Politically, Yeltsin’s market Bolshevism required the subversion of democracy. Because the majority in successive Parliaments opposed the Kremlin’s economic strategy, Yeltsin often, in effect, ruled by decree. His team either got around or ignored the rather weak constitutional barriers to such authoritarianism. They manipulated elections, threatened to dissolve Parliament again, co-opted members of the opposition by bribing them with privileges and money, and bought the support of super-wealthy oligarchs by letting them use endless ingenious schemes to plunder the state treasury. As a result, by 1998 Yeltsin’s regime and the Russian state had become not just terribly weak and corrupt, but also—to an alarming extent—financially and politically dependent on Russia’s wealthy elite and the West.

The economic and social outcome of market Bolshevism was that, along with a restored supply of goods and most people being able to privatize their apartments for free, came wildly fluctuating inflation, frequent nonpayment of wages and pensions, a steady fraying of the social safety net, widespread impoverishment, a massive brain drain of talented professionals going abroad, seriously declining demographic and health indicators, plunging investment, the de-industrialization of much of the economy, a major loss of research capacity, the stagnation of agriculture, and a growing mountain of debt to Western creditors.

The West bears much of the responsibility for these outcomes. It pushed Russia to pursue the inappropriate "one size fits all" strategy of shock therapy. Moreover, it continued to do so way past the point where the resulting policies had contributed mightily to the criminalization of the economy, the corruption of democracy, and the alienation of most Russians from the state.

This daunting legacy is not, in my view, one that Putin, a product of the Yeltsin years, really intends to change much. Worse still, even if he suddenly craved real reform, he would probably just end up confirming his own apparent suspicion that he is a prisoner of the system. Thus a sustained improvement in Russia’s plight is not, alas, in sight for the time being.

Åslund has nothing but praise for the effects of the rapid privatization carried out by his associate Anatoly Chubais (at a time when Åslund was an official adviser to the Russian government). Thus he ignores well-documented studies showing that privatization had some deeply negative effects on the Russian economy and polity. In particular, it resulted in a rather small number of bankers and businessmen acquiring valuable state assets at little or no cost and then, as noted, being allowed to plunder the state treasury in partnership with ministers and bureaucrats. The Kremlin did all this first because it wanted to buy these people’s political support and second because some of the top tycoons had skillfully corrupted Yeltsin’s family and so could pressure the president.

In the process, of course, the Kremlin revealed its contempt for the rule of law. Moreover, since the authorities were not applying the law to the rich and powerful, and since they needed the political support of the bureaucracy as well, they did nothing to stop poorly paid officials from extracting ever more bribes from ordinary businessmen and citizens. Åslund rightly deplores this phenomenon but does not consider its root causes. In this environment occasional weak efforts by the government to create a level playing field—that is, to establish the rule of law—stood no chance of success. As the banker and oligarch Aleksandr Smolensky said, "Unfortunately, the only lawyer in this country is the Kalashnikov."

Another negative effect of Chubais’s privatization that Åslund does not mention is the fact that most Russian businessmen are, as might be expected, opposed to market competition. This was made clear at the June 2001 congress of the top Russian association of business leaders—on whose support Putin relies—when many spoke out against Russia joining the World Trade Organization, at least for several years.

Åslund also fails to note, in discussing the Kremlin’s default of August 1998, that in addition to its salutary effects, it generated some heavy costs. To mention just two, Western confidence in the Russian economy plummeted and, with the ruble losing three-quarters of its value against the dollar, foreign travel became out of reach for most Russians unless they had a foreign sponsor.

Åslund also makes an odd argument that IMF and World Bank loans of $27 billion to Russia did not constitute aid because the loans had to be repaid. Clearly, though, the Kremlin saw these low-interest loans with extended repayment schedules as a highly desirable form of aid, or it would not have solicited them. The value of this aid is underscored by the fact that at the time when many of the loans were being made, the government was having to pay sky-high interest rates on its own treasury bonds—up to150 percent a year.

Åslund is even more puzzling on the question of health care. Ignoring the findings of the most reputable Russian and Western experts on the subject, he baldly asserts: "Nothing suggests that health care standards in Russia have fallen." He also claims that "public and private spending on health has risen sharply as a share of GDP." But he does not consider whether the system’s pervasive corruption, which he notes, might have preempted potential improvements in health care.

Numerous studies show that not only has health care not improved in Russia (except for the rich), it has gotten much worse. A recent report by Judyth Twigg of Virginia Commonwealth University and Kate Schecter, a consultant to the World Bank, is partly based on extensive consultations with Russian doctors and health officials. The report concludes that the state system provides a "dreadful quality of medical care."

While Åslund claims that "hospital equipment has greatly improved" and "capitalism has made medicines widely available that were unknown during the Soviet era," the study presents a different picture. It says that "a shockingly high percentage of health facilities have no hot water or sewage systems, and most still use glass syringes and reusable needles.…Patients suffer long waits even for urgently needed care. A long list of medicines is not only unaffordable, but unavailable….The most vulnerable parts of the population" are now "unprotected….Universal access to some level of free medical care has been destroyed."