Yeltsin: Domestic Policies

Boris Nikolayevich Yeltsin was the first elected President of the Russian Federation following the fall of the Soviet Union. He came to power in 1991 amid high expectations but his rule was plagued by a number of crisis in the political and economic front. He was succeeded by Vladimir Putin in 2000. So what were his domestic policies?

Yeltsin became President of Russia and faced challenge of creating a new economic and political system after collapse of USSR. On January 1992, Russia was plunged into “shock therapy”, designed to.... transform the country rapidly into a market economy within a year instead of gradual changes. First stage of it involved the removal of price controls, ending of government subsidies to industries, reducing government deficit and making industries profitable and competitive. It was unsuccessful, resulting in massive inflation, unemployment and poverty. Prices of goods and services even shot up 900%. State welfare was drastically cut. Second stage of “shock therapy” involved privatization of state property, factories and farms. There was opposition from managers and subsidies were removed. Government deficit remained to keep industries competitive. System of vouchers was introduced to give citizens equal shares of state property. Only managers could accumulate enough vouchers to take over companies. Workers had even lesser influence than before. 1/3 of population lived below subsistence level. Poverty and crime rates increased. These led to increasing opposition to Yeltsin’s policies and demands for gradual changes. Government lacked experience to operate a democratic system. Elections, immediately choosing to undertake economic reforms through presidential decrees, were not conducted. The Duma opposed and tried to impede to endorse his policies in April 1933. Yeltsin won referendum as other contenders were less attractive. Yeltsin drew up a new constitution in September 1993, where parliament and bureaucracy were subordinate to him to secure power. He annulled powers of Parliament and ordered elections to be held for new assembly. Yeltsin ordered troops to surround Parliament when oppositional leaders tried to oppose him. He took White House by force saying that it was an armed insurrection. He then held referendum to endorse his new constitution and marginally won with 14% of votes. Yeltsin could appoint his own prime minister, conduct foreign policy, and dismiss parliament and rule by decree. There were elections, new political parties, press and media freedom and greater civil freedom compared to Soviet era. More moderate economic policies were introduced. 80% of state enterprises were privatized by 1995. Treasury benefited little as they were under priced. New wealthy property owning class, made of state managers, officials, bankers and politicians, emerged. Yeltsin was intolerant of separatist movements in Chechenya and brought it under control by military force, claiming that Chechenya was a base for criminal gangs in Russia. On 11th December 1994, 40000 troops invaded the state. Fierce fighting ensued as guerilla fighters refused to surrender. By1996, 20000 troops died and Yeltsin’s popularity dropped. In the midst of election campaigns for his 2nd term, he ended war and troops were withdrawn. Demands for complete independence did not die off and fighting started soon after. Yeltsin formed a new party, NDR. Despite hard campaigning, NDR only won 65 out of 450 seats. Communists did the best, indicative of residual support for them and unpopularity of Yeltsin’s policies. During Presidential election in 1996, Yeltsin promised to pay wage arrears and pensions and to invest in science, education and healthcare. Unpopular privatization stopped. Yeltsin was eventually elected as President for the 2nd time. Communists campaigned vigorously but to no avail. Economic conditions continued to worsen and Yeltsin cancelled his election promises as money was unavailable. Russia suffered a financial collapse in August 1998. Rouble was devalued, savings were wiped out and export earnings from oil fell. Yeltsin sacked his Prime Minister and Economics Minister. Primakov, a veteran communist, became new Prime Minister. New policies aimed at making Russian industries competitive on the world market, reduce imports and outflow of capital and to attract investment. Economic situation improved. Devaluation of rouble made imports costly, increasing demands for Russian products. The world oil price recovered and Russian’s exports were profitable. Wage and pension arrears were paid. In May 1999, Yeltsin was pressured to dismiss Primakov, because Primakov’s effort to root out corruption antagonized the dishonest democrats and oligarchs. This led to deep public consternation.

Boris Yeltsin has since passed away on April 23rd 2007 in a hospital due to heart failure..