Moscow, December 25, 1991

Gaidar had converted readily to liberal democratic ideology after a spell as an economics writer for Pravda. The son of a celebrated Pravda military correspondent and the grandson of a famous children’s author, Arkady Gaidar, he is strongly in favor of Russia breaking with the other republics so that he can experiment with the “free market” libertarianism principles advocated by Milton Friedman. Friedman is known in Russia for his record on engineering a transformation from communism to capitalism on another continent. In the 1970s the economic guru trained a group of Chilean economists in the University of Chicago—who became known as the Chicago Boys—to help President Pinochet undo the Marxist economy of Salvador Allende. A Russian version of the Chicago Boys has now emerged from the ranks of the young radical economists around Boris Yeltsin.

Yeltsin’s mandate to Gaidar is to abolish the centralized economy, and Gaidar believes the conditions are ideal for what he refers to as major surgery on the economy without an anesthetic. The country is relatively tranquil; the military is demoralized; the hard-line communist opposition has been defanged. But speed is important. He needs to make the reforms irreversible by wrecking the old system. Then, the reformers assume, goods will quickly appear on the shelves when the market rather than the government sets the prices. His fellow deputy prime minister Anatoly Chubais has been given the task of privatizing state assets—in a country where practically everything, from bread shops to automobile plants, is owned by the government. Chubais predicts to Gaidar that whatever the result, he will be hated as the person who sold off Russia. Gaidar knows that he too will have to drink from that poisoned chalice. As Burbulis warns, they belong to a kamikaze government whose members will be discarded by the public after they have rammed through necessary but unpopular measures.

The Russian reformers fret that when goods reappear in the regular stores, there will be serious inflation. But the American advisers are sanguine. Thomas Wolf of the IMF assures Russian economics minister Andrey Nechayev, during a meeting on the afternoon of December 25, that prices on most important consumer items will only rise by 70 percent in the first month of free pricing.⁶ (Nechayev is skeptical—with good reason: Prices soar in January by 245 percent and keep rising after that to 2,500 percent.)

A contemporary IMF working paper admits, “There remains some suspicion of foreign advisers, together with a reluctance, natural in a former superpower, to admit there are things to be learned.”

One of those who has cooled on the American-inspired therapy is Alexander Rutskoy. Even as Yeltsin is trying to work out a deal with Luzhkov to keep Popov on board, his vice president is holding forth to journalists in an office nearby about how “we now have anarchy instead of democracy.” Rutskoy is in favor of Russian “sovereignty” within the Union but is against breaking up the USSR, and he has hung a map of the Soviet Union behind his desk to make the point. The Russian president and vice president are no longer on good terms, partly because Yeltsin refused to make him prime minister, a position he has kept for himself in addition to the Russian presidency.

Rutskoy once told Yeltsin, according to Korzhakov, “Boris Nikolayevich, I will never let you down. I will be the guard dog at your throne.” To Yeltsin his vice president has become just a “loud-mouthed soldier.” Rutskoy has a particular aversion to Gaidar and his team, whom he describes as “boys in pink shorts, red shirts and yellow boots who had decided to run Russia.” He complains that the conditions are not right for the gigantic experiment they are conducting with the country. A free market can only be introduced in a legal, democratic state, he tells the reporters, but “today, there is neither power nor democracy in Russia.”

The vice president insists he doesn’t want confrontation with Yeltsin—“Why, that’s not logical!”—but things must be put in order first and privatization must not be carried out by robbery and cheating. Gaidar for his part has only contempt for Rutskoy, commenting that behind the “dashing facade of the mustachioed man-at-arms” lies a vacillating and insecure personality intent on avoiding responsibility for unpopular decisions.

The speaker of the Russian parliament, Ruslan Khasbulatov, is also sliding back to the old Soviet way of thinking, in line with the many conservative deputies. He feels “it might be time to propose that the president dismiss his virtually ineffective government.”

Already Yeltsin’s hold on power is becoming tenuous, and divisions are deepening in the Russian parliament that in less than two years will lead to a bloody showdown.