A touchstone time for Russia

For the past 100 years Russia has been a country of extreme ideas, and extreme policies based on those ideas. This has resulted in an overall poor economic performance and immense human suffering. As so often in Russian history, what happens now depends very much on one man and on the attitudes of others to him.

The Bolshevik Revolution of October 1917 was an extreme act - based on extreme ideas - which was almost immediately accompanied by abuse of power. This was to be the pattern for the next 70 years; which reached its apex under Josef Stalin in the late 1930s, and again in the period between the end of World War II and Stalin’s death in 1953.

It was not only Lenin, Stalin, Georgi Malenkov, Nikita Khrushchev and their close associates who abused their powers. They had a great deal of help from many senior communist party officials and the active assistance of many thousands of lesser officials.

And this was all ultimately made possible by the subservience of people in general to whoever seemed most powerful, by the almost passive acceptance of millions of others, and by the readiness of so many to believe that the man-in-power was really working for them (i.e., faith in a “Tsar”) rather than himself and those close to him.

These extreme activities and abuse of power were based on a foreign idea (marxism) and justified as being necessary for the greater good.

Economically, the communist system of command for the economy was not totally unsuited to the times. While government involvement was a disaster for the agriculture sector, large scale industrialisation projects did benefit from government co-ordination (which gave Russia an advantage over the disorganised German economy during World War II) but the world and the needs of the Russian economy changed in the post-war period.

While some attribute the eventual collapse of the Soviet Union to President Ronald Reagan’s willingness to engage the USSR in a military spending competition which would inevitably exhaust it, the Russian economic system was already passé - the need for large-scale industrial projects was past, and the command economy was just not suited to anything like the efficient production of consumer goods and the electronics revolution that so helped Japan recover from the war.

At the time of the start of the collapse of the Berlin Wall in late 1989, my knowledge of Russia was limited to history books and media coverage of the USSR as the enemy of Australia and the West. In 1991, galvanised by a speech by a former Australian trade commissioner to Hungary, I decided - with my interest in both history and economics - that I had to go and see communism before it had completely disappeared.

I was in for a surprise. The ex-trade commissioner had left the impression that the difference between economic systems of Hungary and the USSR was not that great: indeed, he talked mainly in terms of the communist bloc as a whole.

I used whatever contacts I had in the Australian public sector and in financial markets (I was then chief economist of an Australian bank) to arrange appointments with senior officials in Hungary, Poland, Czechoslovakia and Russia.

The surprise in the first three countries was the extent to which markets operated. Much of Poland’s agriculture had remained private under communism, Hungary had been experimenting on-and-off with aspects of a market economy for several decades, and all three had both foreign tourists and shops reasonably well stocked with consumer goods.

Only Russia (Moscow and St Petersburg) conformed to my drab expectations. I was particularly surprised by the poor physical condition of most buildings and facilities, something I put down to a command-economy induced emphasis of production volumes at the expense of quality and subsequent maintenance expenditure.