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

CHAPTER 22

Russian Crisis of 1998

After the collapse of the Soviet Union, the capitalist world viewed Russia not as a defeated enemy but instead as a potentially powerful partner in business. The Asian miracle (such as in Japan) as well as the European miracle (such as in Germany) had created widespread prosperity from the ashes of World War II, so it was likewise hoped that a Russian miracle of some kind might emerge from the cessation of the Cold War.

The core difference between the robust economies of Japan, Germany, South Korea, Singapore, and all of the rest of them versus Russia was this: Russia was not starting with a clean slate. Instead, it faced the challenge not of building something from scratch, but trying to alter the nature of a deeply entrenched economic failure. The industries that had lumbered and groaned from year to year in the time of communism were still there, and a path had to be laid out to shape the Russian economy into something that could in the world’s playing field based on free enterprise instead of central planning.

■ After the Fall

The disintegration of the Soviet Union was chaotic and confusing for its former member-states. The countries of the former Union of Soviet Socialist Republics (USSR) outside of Russia were exhilarated at their new freedom, and these satellite nations were in many cases small and nimble enough to carve out a place for themselves in the global economy. Their fortunes ­varied based on their own natural resources, their ...