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Few occurrences in recent history have been as stunning as the breakup of the Soviet dictatorship at the turn of the 1990s. Few have raised as many gleaming hopes for bettering the human condition. And few seem to have had their promise so quickly dashed in actuality. Where, then, is the Russian Federation--the largest by far of the post-Soviet states--tending, and what does this mean for it and for the world?

If proof were needed of the problems plaguing Russia's "transition," the news last August of its default on sovereign debt and the massive devaluation of the ruble (to one-third its former standing against the dollar) provided all the confirmation necessary. The economic shock of 1998 was accompanied by a political earthquake, as Boris Yeltsin's newly appointed 35-year-old prime minister, Sergei Kiriyenko, was forced to resign and parliament approved as his replacement Yevgenii Primakov, a former foreign minister and head of espionage operations abroad who is twice Kiriyenko's age and is backed by Communist and nationalist factions in the legislature.

It is all too easy to forget from the vantage point of the late 1990s that when Mikhail Gorbachev's reign yielded to Yeltsin's in 1990-1991 we had good reason to think that we were witnessing a transition of regimes. Not only did the Communist Party of the Soviet Union relinquish its hold on power after more than 70 years. In quitting the scene, it appeared to discredit the socialist model of economic and social organization and, indeed, to pull down in its wake the USSR itself as a multinational state, a regional hegemon lording it over Eastern Europe, and a global superpower. The successor states to the USSR--the rump Russian Federation and 14 smaller independent countries--seemed to many in the West to be destined to reinvent themselves as law-abiding members of the international community, internally democratic and prepared to seek prosperity through market economics. The Clinton administration took precisely that official line: over and over, it reassured us that Russia and the rest were "building" democracy and markets--gamely carpentering away despite a few rough spots here and there--and were constructing a cooperative strategic relationship with the United States. Given Russia's size, huge arsenal of weapons of mass destruction, and mineral and petroleum riches, such an image was reassuring to Western policymakers.

No one--not the Russian people, not Boris Yeltsin and his reshuffled cabinet, and not official Washington--buys this rosy image any longer. Russia, to say nothing of its ex-Soviet neighbors, is struggling with major problems, not minor glitches. At stake in the current malaise are not only the fine points of policy and governmental personnel but Russia's very adherence to a reform course.

Russia's troubles are apparent in every sphere of life. Again and again, bold changes initiated in the early 1990s have floundered and difficulties unanticipated in the original reform vision have come to the forefront. Russia is no longer a multinational empire, but it is not doing particularly well redefining itself as a modern nation state. Most Russian citizens see the dissolution of the USSR as illegitimate, and their government flirts with schemes for reintegrating the post-Soviet republics. At home, tensions among the territories of the federation, and between them and Moscow, have intensified as the economic downturn worsens and the central government's ability to buy support through subsidies and credits dwindles. Some of those tensions feed on distrust between the ethnic Russian majority and the non-Russian and often non-Slavic minorities who make up almost one-fifth of the federation's population and often inhabit compact ethnic homelands.

The federal bargain is but one of several aspects of Russia's political structure where discontent and conflict mount. The ostensibly democratic constitution Yeltsin authored in 1993 stacks the institutional deck in the president's favor, concentrating nearly unlimited decree-making and budgetary powers in his hands and in a prime minister highly dependent on him, while relegating the legislature to an ancillary and purely negative role. But Yeltsin, physically enfeebled and strategically adrift, has accomplished absolutely nothing of significance with this raft of powers since his reelection to a second term in 1996. After watching his economic program unravel in 1998, he had to accept Primakov as prime minister rather than face snap parliamentary elections in which not a single party would have defended his record. He now faces a chorus of demands for amendment of the constitution.

It is in the economic and socioeconomic realm that the signs of crisis are most alarming. Although the liberalization of state controls over economic activity, the privatization of many assets, and the opening up of Russia to the global economy did bring some benefits after 1991--the disappearance for the time being of queues at shops and the free availability of consumer goods in particular--the brave talk of achieving economic efficiency and prosperity within a few months or years has been cruelly disappointed. National output, having contracted every year this decade except 1997, dropped about 7 percent in 1998 and may sag another 5 to 10 percent in 1999. The Russian stock market is today capitalized at about one-tenth of its peak value in October 1997. The nascent business class, many of its profits conveniently deposited in foreign bank accounts, has shunned investment in domestic economic development and has for the most part displayed no sense of civic conscience or fellow feeling for ordinary people. Social services, the civil bureaucracy, and the armed forces have been starved of resources, but otherwise not reformed or improved. The state's inability to collect more than a fraction of the taxes owing gives it an inbuilt budget deficit and thereby exerts constant pressure on the currency.

The reasons for this poor performance are legion. The Soviet legacy is undoubtedly an onerous one: a government of angels would have found it a challenge to deal with. In some respects, the new Russia's inherited problems are more serious than those facing the smaller states that emerged from the wreckage of the USSR. Its economy was more militarized than any other during the Soviet period; it inherited most of the Soviet Union's external debt; its territory is vast and hard to govern; its population is more ethnically diverse than most other post-Soviet countries.

The burden of the past, however, hardly absolves post-Communist rulers from blame for the country's plight. In world perspective, the striking thing about Russia's material and human resources is how abundant they are. That bounty, and the reservoir of domestic and international goodwill created by the initiation of democratization, have been squandered. On key issues, political leadership has been incompetent, corrupt, or simply absent. Yeltsin has set the tone, with a capricious style, organizational chaos within his own presidential household, and a disrespect for law, for procedural regularity, and for the very openness and accessibility in government for which he campaigned so brilliantly as an opposition firebrand a decade ago. Most central ministers and regional governors have been happy to follow suit.

So mismanaged was Russia's economic reform, whose fizzling is at the heart of the present debacle, that it was only a matter of time before its contradictions caught up with it. Insider privatization, overregulation, punitive and arbitrary taxation, an inconsistent legal framework, and lackadaisical prosecution of criminals and gangsters prompted the beneficiaries of the first wave of reform to shelter their winnings offshore and scared away most foreign investors. Three-quarters of all transactions in the industrial economy are conducted in barter, bypassing money and taxes. Wages, pensions, and social allowances arrive months in arrears for tens of millions of Russians. Barely bothering to explain to the mass public the reasons for change or its unpalatable consequences, politicians have found ingenious ways to keep insolvent firms afloat and to delay the restructuring of industry. The dearth of results from reform, and Yeltsin's eagerness to please the electorate in 1995 and 1996, led his government to embark on a ruinous program of issuance of bonds and treasury bills at super-high rates of return, the proceeds from which financed current operations and the ballooning budget deficit. The inability to service that mountain of short-term debt produced the credit flight and financial collapse of August 1998, placing the future of many of Russia's private banks, and the government's creditworthiness, in severe doubt. By some estimates, Russian public and private institutions owe foreign creditors almost $200 billion.

Is it time, then, to pronounce the Russian transition dead? I do not think so. But it is obvious to almost everyone, including most Russians, that the change of economic and political regimes is stalled.

What we expect the future to bring depends to some extent on how we envision the transition process and what we believe the stall to signify. A transition is a thing in motion, a progression from one state of being to another. If we imagine the post-Communist transition to be a unidimensional, backward-or-forward process--like a train gliding along a fixed rail between stations--then the headlines of 1998 should be read as evidence of an indefinite cessation of movement and even as the beginning of the end for the whole journey.

But one can sketch other scenarios with very different implications. If the transitional process, metaphorically speaking, is more like a car or boat trip than a train ride, the stalled machine can go sideways as well as backward or forward. Russia, by this logic, could right now be moving off on a tangent, or maybe circling and drifting haphazardly. Finally, we can think of the transitional situation as more resembling airborne flight. In that situation, of course, a sputtering engine can be calamitous--plunging vehicle, crew, and passengers to the ground with lethal consequences for them and for everyone within reach.

There is thus far little to indicate that Russia will backslide anytime soon toward its authoritarian starting point. Reassembling the Communist system is probably beyond the abilities of any government. The Primakov cabinet, which includes several senior ministers from the KPRF (Communist Party of the Russian Federation), has proceeded cautiously on the economic front, eschewing hasty moves toward reimposition of state controls on production and trade. The KPRF itself is undergoing fierce factional struggles, as radicals within the party push it toward greater confrontation with the authorities and relative moderates resist. And public-opinion surveys suggest no great interest among the population in surrendering their political liberties, even in exchange for economic improvement.

Nor does the other doomsday scenario--a fiery collapse--seem imminent. The government has thus far been able to deal with emergencies in the provision of food and fuel, and challenges from the regions have been muted. "Stabilization" is the watchword in Moscow this winter, and there is every reason to believe that compromises in the interests of stability are attainable.

This is far from saying that the crisis is over, or that Russia is about to resume its halting movement forward. Under the most optimistic of economic conditions, Russians will have to tighten their belts further. The government must appease foreign creditors and aid agencies, arrive at painful choices on bank restructuring, and adopt a sensible and transparent tax code. Even at that, investment in recovery and growth will be negligible for a minimum of two or three years.

Brutal as the economic choices will be in their own right, they will have to be managed against a backdrop of rampant political uncertainty. National parliamentary elections are scheduled for December 1999 and a two-round election to choose a successor to President Yeltsin is slated for the summer of 2000--or sooner, should he die in office or become incapacitated. Given constitutional realities, the more important of the two contests will be over the presidency. A half-dozen major politicians and a sprinkling of nuisance candidates will be in the running. The early favorites in the polls--the mayor of Moscow, Yurii Luzhkov, and the governor of Krasnoyarsk Province in Siberia, General Aleksandr Lebed--are hard-nosed pragmatists who have flourished in the rough-and-tumble of transitional politics.

Neither Luzhkov nor Lebed advocates restoration of the former Communist system. But both are harshly critical of what they describe as the errors and injustices of the Yeltsin period, both favor a larger state role in the economy and a harder line toward crime and corruption than hitherto, and both have nationalistic predilections in foreign policy. The question the Russians and foreign observers will be asking 18 months hence is whether the winner will have the desire and the ability to restart systemic reforms--economic and political--or whether he will try to lead the country neither backward nor forward but laterally, onto a kind of historical spur line where it could be marooned for many years.

Timothy J. Colton, Ph.D. '74, is Feldberg professor of government and Russian studies and director of the Davis Center for Russian Studies.

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