What Follows Chubais?

Rumors about the recent dismissal of Deputy Prime Minister Anatoly Chubais have been circulating almost since he first took office. And now they are vindicated. It's about time, some say. A catastrophe, say others. This sharp division of opinion, which does not allow any room for indifference, is the most convincing evidence of the politician's enormous standing.


The possible consequences of Chubais' dismissal can only be compared to the sacking of Yegor Gaidar in 1992. Moreover, Chubais' case is far more dramatic. Gaidar's exit was an attempt at a compromise, which was made on condition of some kind of agreement with the legislators, although it was never followed through by the Supreme Soviet. At that time, there was still some hope left in Boris Yeltsin. Now, there is none. Chubais was surrendered. Moreover, he was given up not for the sake of compromise; instead he was surrendered to the president's "inner circle," which hated the reformer no less than the most odious Communist and nationalist leaders.


The official reasons for his dismissal are of interest only to future historians. But the sharp decrease in inflation, the stopping of the fall of production, the tenfold growth of hard currency reserves over the year, and the rapid strengthening of the real ruble rate are all measurable results of the 14 months during which Chubais was responsible for the course of economic reform.


The real reasons for his removal lie in the internal logic of the political regime that was established in postcommunist Russia. By the beginning of 1994, there were two ways of consolidating and strengthening the regime. The first was through economic stabilization and strengthening of democratic principles, which would create the basis for economic growth and settle many social problems. The second was through exploiting nationalist and pseudo-democratic rhetoric, establishing a monopolistic economy closed to competition, and marginalizing democratic institutions. Frightened by the 1993 parliamentary election results, Yeltsin chose the second option, which led to the "Black Tuesday" of Oct. 11, the start of the Chechen war, and the squandering of practically all the hard currency reserves toward January 1995. Frightened in turn by these events, Yeltsin turned back to the first option, and during 1995 the longest and most successful attempt at the stabilization of the economy took place. But the elections, which occurred one year after the economy became stabilized, that is, at its most vulnerable point, could not but give sad results. And the frightened president again changed his position. But fear is a poor counsellor, especially in politics.


What are the results of Chubais' dismissal? In the short term, the economic consequences depend on the personal qualities of his successor, the attrition rate of the team, which is especially strong in the Economics Ministry, and the ability of the Central Bank leadership to conduct truly independent, responsible policies. But the 1995 surplus, including hard currency reserves, suggests an improvement in the economy over at least the next few months.


It is more difficult to say what will happen in the long term. It is clear that reform will be carried out much less consistently. The very fact of Chubais' dismissal reflects the growing influence of conservative forces around the president. Nationalistic and populist tendencies in economic policies will mean a strengthening of the role of monopolies in the domestic market, especially among industrial and financial groups, limits on competition, attempts to freeze prices and exhaust the state's hard currency reserves and an increase in state grants and subsidies. The hard currency reserves will be one of the most accurate indicators of the introduction of a new course. There could also be new attempts to reduce the Central Bank's independence. Moreover, there is always the possibility of some attempt at redistributing property in favor of the partly criminal economic and political groups, to which Chubais was an obstacle.


The political consequences of the deputy prime minister's dismissal should be viewed against the background of the coming presidential elections. The chances for Yeltsin's re-election have become minimal. The social characteristics of his electorate are almost impossible to outline.


Even more revealing, although entirely predictable, is the union between Communist Party leader Gennady Zyuganov and Yabloko leader Grigory Yavlinsky. It is possible that these two politicians have already agreed on a division of the posts of president and prime minister between themselves. Finally, the Communist Party simply has no economists to speak of, and the image of Yavlinsky could be useful to the party at first. Afterward, they could part with him.


The other candidates for the presidency are General Alexander Lebed and Liberal Democratic Party leader Vladimir Zhirinovsky. More serious candidates have not emerged. It turns out that among all these candidates, there is simply no one who represents democratic forces.


Thus, much depends now on Prime Minister Viktor Chernomyrdin. The presidential team will most likely try to keep him in the role of prime minister until about the beginning of April, when there will no longer be any time to start his own pre-election campaign. After that time, the prime minister could quite easily be dismissed, for example, for having mismanaged Gazprom. Such a turn of events is almost inevitable.


If, on the contrary, the prime minister resigns in the coming days, even stirring up a minor scandal, he still would have a fair chance of winning. He would be the only candidate of the democratic forces. He would also acquire the image of someone who was offended, which in Russia usually favors politicians. Finally, business and industry could consider him rather reliable and most likely would not later regret having put their confidence in him.





Vladimir Mau is deputy director of Yegor Gaidar's Institute for the Economy in Transition. He contributed this comment to The Moscow Times.