Gorbachev unmade the USSR and made the modern world
Premium- Collapse of the Soviet Union meant that India had to recalibrate its foreign and industrial policy and open up to foreign capital.
History celebrates those who build, but forgets or even reviles those who deconstruct familiar structures. Mikhail Gorbachev deconstructed the Second World, the so-called Soviet Bloc, or the Warsaw Pact. This had obvious geopolitical implications—implications for the principal successor state to the Soviet Union, Russia, and implications for economic and development strategies open to developing countries around the world.
Russia’s current president, Vladimir Putin, calls the collapse of the Soviet Union the 20th Century’s biggest geopolitical tragedy. It led to the unipolar dominance of the world by the United States, destroyed any illusion of a non-capitalist development paradigm, gave impetus to the forces of globalization, the successful creation of the World Trade Organisation (WTO). It dismantled the Warsaw Pact; dismembered the Soviet Union itself into 14 new nations besides Russia; liberated Estonia, Latvia and Lithuania; allowed East European countries to determine their own fate; and removed the Berlin Wall leading to the unification of Germany. Clearly, it was a tragedy for Russia, which lost its superpower status, coequal to the US, but for few others.
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Collapse of the Soviet Union meant that India had to recalibrate its foreign policy—one of the two poles to which it had been non-aligned had gone up in smoke. It fell to PV Narasimha Rao’s government to carry out that recalibration, along with a paradigm shift in economic policies, to embrace liberal, globalized growth. It sought to look east in foreign policy, ending India’s earlier westward bias, and to strengthen neighbourhood engagement.
In industrial policy, the Narasimha Rao government went beyond what the International Monetary Fund (IMF) conditionality for the loan India had taken demanded, and did away with licensing and the need to get clearance from the Monopolies and Restrictive Trade Practices Commission. In the late 1980s, western economies had undertaken the Big Bang in finance, allowing way freer cross-border movement of capital than in the past. The post-Gorbachev world, dominated by US-led institutional advice and ideology, favoured freer capital flows into countries like India, too.
India opened up to overseas capital mobilization—issuance of GDRs and ADRs, as well as inflows of foreign portfolio investment. The current account was liberalized and the capital account opened up. The rupee’s exchange rate was allowed to float, within a range, and determined, essentially by market forces. Monetary and fiscal policy had to shift as well, to accommodate freer capital flows.
Gorbachev’s fundamental contribution to the Soviet Union’s strategic stance, after he became party secretary, succeeding Chernenko, a short-lived replacement for the reformer ex-KGB chief Yuri Andropov, was to abandon unaffordable confrontation with the West. The Soviet production methods led to shortages and shoddy products and the US was forcing the Soviets to spend ever more on an escalating arms race in theatres around the world. Gorbachev put in place assorted nuclear treaties with the US and both sides reduced the number of strategic missiles, and agreed to restraint on and mutual inspections of intermediate range nuclear forces.
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This could have led the way to internal reform of production and realignment of political equations with the West. But power-hungry politicians inside Russia scuppered that evolution, a coup was staged against Gorbachev and soon, he was deposed and the Soviet Union itself, disbanded. Yeltsin presided over state dissolution, massive giveaways of national assets to a bunch of kleptocrats, whom the media called oligarchs, and Russia went into economic dysfunction. It was only when Putin took over as president in 2000 that the Russian state reasserted order and the economy began to grow again.
The leadership of the Chinese Communist Party learned from what it saw as Gorbachev’s mistakes. Internal economic reform to unleash the power of the market economy was deemed most important, while political reform could wait. The Tiananmen Square protests were suppressed with ruthless efficiency. China joined the WTO in 2000 and soon became the world’s manufacturing hub.
The short point is that what Gorbachev accomplished in the Soviet Union had an impact on political and economic forces far beyond Russia, in both time and space. Gorbachev is a maker of the modern world by his unmaking of the Soviet Union.
Elsewhere in Mint
In Opinion, Amit Kapoor & Bibek Debroy write on how to make India better at competitiveness. Was Gorbachev a traitor, misfit or Soviet visionary? Sreeram Chaulia answers. Anurag Beher argues the state can run schools well. Long Story tells how the frustrating IBC process is driving away investors and funds.
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