Russians told there is no alternative: Helen Womack in Moscow on the plummeting rouble

RUSSIA'S new Prime Minister, Viktor Chernomyrdin, shocked conservatives in parliament last week by giving an uncompromisingly monetarist speech.

As the ex-Communist deputies, who were hoping to hear him announce plans for increased state spending, gasped in disbelief and disappointment, he declared: 'We cannot spend money that we do not have. The state of our economy leaves us little room for manoeuvre.' It was a speech that could have been made by Yegor Gaidar, the architect of Russia's free market experiment, who was ousted under pressure from conservatives last December.

Mr Chernomyrdin, a former oil industry bureaucrat, gave the impression when taking over that he intended to satisfy Congress by increasing support to ailing industry and beefing up social welfare. His first act was to release millions of roubles from state coffers for the oil industry. And he followed this up with a decree restoring price control, although he later had to rescind it.

So what happened to convert the apparatchik to market reforms? Perhaps he learnt some quick lessons from the rest of his cabinet, almost all young economists who had served Mr Gaidar and who President Boris Yeltsin insisted must stay on to keep reforms on track. More likely, he sobered up when he saw January's inflation figures and realised he had his back to the wall. All he could do was fight to prevent inflation of 50 per cent a month from turning into hyperinflation, and to attack the budget deficit, projected to rise this year to 3.5 trillion roubles (dollars 6.1bn).

Russians already know all about inflation, which has been gathering strength over the past year and threatens to create a platform for fascism, as in pre-war Germany. Millions are living on, or not much above, the official minimum wage of 2,250 roubles (just over dollars 4) a month. It is a struggle for survival: a piece of cheese now costs 600 roubles and a loaf of bread 20 roubles.

At first, inflation rose quite slowly as Mr Gaidar, having freed prices in January 1991, kept a tight rein on state spending. But control was lost in the summer when the Central Bank, which answers to parliament, brought back its old head, Viktor Gerashchenko. When he saw the danger of mass unemployment looming, his response was to issue large credits to lame-duck state industries. From then on, there was nothing to stop inflation, which reached a level of 2,200 per cent for 1992.

Now it is rising at 10 per cent a week and lapping at the threshold of hyperinflation, beyond which, experts say, complete anarchy overcomes the economy. As a hedge against inflation, Russians are desperate for US dollars, and the rouble-dollar exchange rate speaks volumes. Before reform, the rouble was worth dollars 1.67 officially, though less on the more realistic black market. Last August, it was 163 to the dollar, but last week it crashed through the psychological barrier of 500 to the dollar, reaching 572 at Moscow's Interbank Currency Exchange and 650 on the street. It steadied only after Mr Chernomyrdin promised to strengthen the local currency, but without resorting to the artificial exchange rates favoured by the Communists.

One effect (and cause) of the economic nightmare has been a catastrophic flight of capital from Russia. According to Security Ministry estimates, the outflow last year was as much as dollars 26bn: dollars 8bn more than the West sent to help Russia build capitalism. Cyprus and the Bahamas are reported to be popular 'offshore' places for Russian businessmen with illegal funds, and members of the mafia - who easily evade the government's inefficient tax collecters and are conspicuous on the streets of Moscow in new Mercedes and BMW cars - are said to be building villas for themselves abroad. At the same time, leading democratic politicians have discredited themselves by taking bribes from shady entrepreneurs.

Not surprisingly, resentment and disillusionment are growing, playing into the hands of the hardliners whose power struggle with Mr Yeltsin is not yet over. In April, Russians are to vote in a referendum on a new constitution, and that vote will come down, one way or another, to a choice between empowering either the President or the deputies in a Congress created in the Soviet era. Also coming up soon are elections for Moscow mayor, in which at least two openly fascist politicians will be standing.

Opinion polls show that Mr Yeltsin still enjoys more popular trust than any other politician, but the kind of active enthusiasm needed to get people to go out to vote for him is tailing off, compared with the heady days after he defeated the hardline coup attempt in August 1991. People such as Nina, a cleaner, were enamoured of Mr Yeltsin then, but her verdict last week was: 'Russia's in a right mess, and Yeltsin is doing nothing except travelling abroad. I'm not one of those people who say we need a new Stalin, but I won't be bothering to vote in the referendum.'

A few million more like Nina, surrendering to apathy, could open the way for those who argue that what Russia needs is a good dictatorship. But even a dictator would not be in power long before being struck by the economic reality that faced Mr Gaidar and now faces Mr Chernomyrdin: Russia is bankrupt.

(Photograph omitted)

Arts and Entertainment
TVShow's twee, safe facade smashed by ice cream melting scandal
News
newsVideo for No campaign was meant to get women voting
Sport
Wayne Rooney talks to the media during a press conference
sport
Arts and Entertainment
tv
PROMOTED VIDEO
Have you tried new the Independent Digital Edition apps?
News
ebooksAn evocation of the conflict through the eyes of those who lived through it
Sport
Alexis Sanchez celebrates after scoring his first goal for Arsenal in the Champions League qualifier against Besiktas
sportChilean's first goal for the club secures place in draw for Champions League group stages
News
i100
News
Down time: an employee of Google uses the slide to get to the canteen
scienceBosses are inventing surprising ways of making us work harder
Arts and Entertainment
Amis: 'The racial situation in the US is as bad as it’s been since the Civil War'
booksAuthor says he might come back across Atlantic after all
Extras
indybest
Independent
Travel Shop
the manor
Up to 70% off luxury travel
on city breaks Find out more
santorini
Up to 70% off luxury travel
on chic beach resorts Find out more
sardina foodie
Up to 70% off luxury travel
on country retreats Find out more
Latest stories from i100
Have you tried new the Independent Digital Edition apps?
Independent Dating
and  

By clicking 'Search' you
are agreeing to our
Terms of Use.

iJobs Job Widget
iJobs General

Project Manager (infrastructure, upgrades, rollouts)

£38000 - £45000 Per Annum + excellent benefits package: Clearwater People Solu...

MI Analyst and SQL Developer (SQL, SSAS, SSRS)

£28000 - £32500 Per Annum + 28 days holiday, pension, discounts and more: Clea...

Creative Content Executive (writer, social media, website)

£30000 - £35000 Per Annum + 25 days holiday and bonus: Clearwater People Solut...

Reception Teachers needed for September 2014

£110 - £130 per day + Competitive rates of pay: Randstad Education Reading: Re...

Day In a Page

Israel-Gaza conflict: No victory for Israel despite weeks of death and devastation

Robert Fisk: No victory for Israel despite weeks of devastation

Palestinians have won: they are still in Gaza, and Hamas is still there
Mary Beard writes character reference for Twitter troll who called her a 'slut'

Unlikely friends: Mary Beard and the troll who called her a ‘filthy old slut’

The Cambridge University classicist even wrote the student a character reference
America’s new apartheid: Prosperous white districts are choosing to break away from black cities and go it alone

America’s new apartheid

Prosperous white districts are choosing to break away from black cities and go it alone
Amazon is buying Twitch for £600m - but why do people want to watch others playing Xbox?

What is the appeal of Twitch?

Amazon is buying the video-game-themed online streaming site for £600m - but why do people want to watch others playing Xbox?
Tip-tapping typewriters, ripe pongs and slides in the office: Bosses are inventing surprising ways of making us work harder

How bosses are making us work harder

As it is revealed that one newspaper office pumps out the sound of typewriters to increase productivity, Gillian Orr explores the other devices designed to motivate staff
Manufacturers are struggling to keep up with the resurgence in vinyl records

Hard pressed: Resurgence in vinyl records

As the resurgence in vinyl records continues, manufacturers and their outdated machinery are struggling to keep up with the demand
Tony Jordan: 'I turned down the chance to research Charles Dickens for a TV series nine times ... then I found a kindred spirit'

A tale of two writers

Offered the chance to research Charles Dickens for a TV series, Tony Jordan turned it down. Nine times. The man behind EastEnders and Life on Mars didn’t feel right for the job. Finally, he gave in - and found an unexpected kindred spirit
Could a later start to the school day be the most useful educational reform of all?

Should pupils get a lie in?

Doctors want a later start to the school day so that pupils can sleep later. Not because teenagers are lazy, explains Simon Usborne - it's all down to their circadian rhythms
Prepare for Jewish jokes – as Jewish comedians get their own festival

Prepare for Jewish jokes...

... as Jewish comedians get their own festival
SJ Watson: 'I still can't quite believe that Before I Go to Sleep started in my head'

A dream come true for SJ Watson

Watson was working part time in the NHS when his debut novel, Before I Go to Sleep, became a bestseller. Now it's a Hollywood movie, too. Here he recalls the whirlwind journey from children’s ward to A-list film set
10 best cycling bags for commuters

10 best cycling bags for commuters

Gear up for next week’s National Cycle to Work day with one of these practical backpacks and messenger bags
Paul Scholes: Three at the back isn’t working yet but given time I’m hopeful Louis van Gaal can rebuild Manchester United

Paul Scholes column

Three at the back isn’t working yet but given time I’m hopeful Louis van Gaal can rebuild Manchester United
Kate Bush, Hammersmith Apollo music review: A preamble, then a coup de théâtre - and suddenly the long wait felt worth it

Kate Bush shows a voice untroubled by time

A preamble, then a coup de théâtre - and suddenly the long wait felt worth it
Robot sheepdog technology could be used to save people from burning buildings

The science of herding is cracked

Mathematical model would allow robots to be programmed to control crowds and save people from burning buildings
Tyrant: Is the world ready for a Middle Eastern 'Dallas'?

This tyrant doesn’t rule

It’s billed as a Middle Eastern ‘Dallas’, so why does Fox’s new drama have a white British star?