Panic, Prosperity, and Progress: Five Centuries of History and the Markets

CHAPTER 20

Fall of the Soviet Union

The collapse of the Soviet Union in 1991 had almost no effect on financial markets at the time. However, the story of this event is critically important to the years that follow, because no other international event so profoundly changed the landscape of global politics and, parallel to this change, worldwide capitalism.

For 70 years, Russia had been in the grip of a Communist regime, and for nearly half a century, the dominant theme of world affairs was the Cold War between the USSR and the United States. With breathtaking speed, events took place that swept away this old world order in a way that not even prominent experts predicted.

■ Back in the USSR

The Soviet Union had been a looming presence for so much of the twentieth century, that most people in the 1980s had never known a world without it. The USSR enveloped a substantial portion of Earth’s land and population, and for decades it had faced off in a stalemate with the United States as its ideological opposite.

There had, of course, been conflicts during the twentieth century that were proxy wars between the two superpowers, most notably the Korean and Vietnam wars. But the United States and the USSR had never engaged in direct war with one another. The threat of World War III and its “MAD” (mutually assured destruction) outcome prevented the leadership of either superpower from going too far.

The totalitarian regime of the USSR effectively suppressed dissent in Russia and the many ...