THE NIGHTMARE THAT WASN'T
The results of Russia's first post-communist election in December 1993 sent a shock wave through the world. Vladimir Zhirinovsky, the nationalist demagogue of the Liberal Democratic Party, captured almost a quarter of the popular vote. The pro-reform bloc, Russia's Choice, came away with only 15 percent. Provoked by this dramatic outcome, Prime Minister Victor Chernomyrdin promised a new economic course, declaring that the election marked "the end to market romanticism." In resigning as finance minister, Boris Fyodorov predicted the new course would result in rampant inflation, the return of price controls, and the arrest of privatization, leading to the collapse of the Russian economy by the end of 1994.
A year later, this nightmarish scenario has yet to unfold. Backing away from earlier threats, Chernomyrdin has refrained from reintroducing price controls. Meanwhile, privatization has marched furiously forward, transferring 100,000 enterprises into private hands by the end of 1994. A booming stock market suggests that not all of these privatizations are mere paper transfers. Perhaps most surprisingly, inflation rates remained in the single digits for most of the year. Admittedly, industrial production continues to decrease, gross domestic production is contracting, and serious enterprise restructuring has just begun. Nonetheless, the performance of the Russian economy in 1994 has exceeded almost everyone's expectations.
What is going on in Russia? How is it that the election of nationalists and communists to the Russian parliament coincided with the beginning of economic stability? Are politics and economics in Russia related at all? Or is this period of stability