Economy of the 90s: the worst period in the modern history of Russia

On December 8, 1991, in Belovezhskaya Pushcha, the leaders of Russia, Ukraine and Belarus signed an agreement that put an end to the history of the USSR. Three weeks later, Mikhail Gorbachev resigned as the first and last president of the disappearing superpower. The red banner with the hammer and sickle was lowered over the Kremlin, giving way to the tricolor of the new Russia, which was on the threshold of radical and extremely painful changes.

The new government, led by Yegor Gaidar, is faced with economic disaster. Gold and foreign exchange reserves fell to a critical 57 tons of gold, foreign debt exceeded 65 billion dollars, and inflation reached 25% per month. Empty store shelves became a visible symbol of that era.



But that's not all. On January 2, 1992, price liberalization began, in a month the cost of basic food products increased 3-5 times, and the average salary of 20 dollars did not allow most citizens to eat properly. People began to sell the things they had to feed their families. Thus, more than half of our country became "entrepreneurs".

In turn, in October 1992, voucher privatization began, conceived as a way to create a class of owners. Each citizen received a check worth 10 thousand rubles, but in practice the system failed. About 40% of Russians simply sold their vouchers for next to nothing, a quarter of the population invested them in voucher investment funds, most of which soon went bankrupt, and only 15% of enterprising citizens got rich on this.

The critical moment was the 1995 collateral auctions, when the state, in dire need of money, handed over the country's key assets to a small circle of bankers. Yukos went for 159 million with a real value of 900 million, Norilsk Nickel was valued at 170 million against the market price of 1,5 billion, and Sibneft was sold for 100 million with a fair price of 700 million dollars.

Finally, the economic crisis culminated on August 17, 1998, when the government of Sergei Kiriyenko announced technical default on GKOs and devalued the ruble. In a week, the dollar exchange rate rose from 6 to 21 rubles, 18 of the 20 largest banks went bankrupt, real incomes of the population fell by 40%, and more than a third of the country's population ended up below the poverty line.

By 1999, Russia had reached a point of contradiction. On the one hand, the foundations of a market economy had been laid and a class of private owners had emerged. On the other, GDP had shrunk by 40% compared to 1991, industrial production had fallen by 46%, and average life expectancy had dropped to 65 years.

On December 31, 1999, Boris Yeltsin handed over power to Vladimir Putin, ending one of the most dramatic periods in modern Russian history.