Day before yesterday, I wrote a tweet thread explaining how economy/economic systems function and what happens when it fails.
Today I will write on a live example of what happens when an Economic System fails, for eg. U.S.S.R (1/n)
Today I will write on a live example of what happens when an Economic System fails, for eg. U.S.S.R (1/n)
On 26th December 1991, Union of Soviet Socialist Republic, remember there used to be a country called that, ceased to exist, The last president of Soviet Union, Mikhail Gorbachev who had promised economic reform resigned to make way for Russian President Boris Yelstin. (2/n)
To be fair, this was a political collapse, but Boris Yelstin went into this event without any clear cut plan of how he was going to migrate a state owned country, to a country run by private enterprise.A prolonged period of economic chaos and disruption followed. (3/n)
Prior to the collapse, during the regime of Gorbachev, the Russian GDP had already fallen, the budget deficit had risen (meaning that government had to borrow ever more to carry out its work) and there was large scale printing of currency. In walks a confused Yelstin! (4/n)
With no plan of how to extricate the country out of this, the older practices of price control(rationing) led to a essential commodities becoming scarce in supply. Ordinary Russians now had to stand in mile long queues to get basic supplies. (5/n)
To prevent this scarcity of supply, Boris Yelstin removed price control. The goods became available but now there was inflation. The price of most basic commodities kept on rising. At the same time, the redundant factories fell and govt once again printed money. (6/n)
This cycle of printing money and inflation led to the general collapse of Ruble as people were not sure of its value. With a currency collapse, a barter system of operation emerged. Cash starved factories now paid their employees in utensils, for instance! (7/n)
In 1994-95 the govt tried a new wave of privatization, but the factories and other assets who were earlier state owned, were now sold for pittance to Politically connected, rich individuals. Thus leading to the rise of the infamous Russian Oligarchs. (8/n)
During this period, that is 1992 onwards, while Russia went through cycles of near bankruptcy-currency printing - inflation, organized crime gangs decided to enter into agreements with each other. Ex KGB agents now joined the "Bratva" to control assets in Russia! (9/n)
From 1991 therefore Russia moved from collapse of Political system, to Economic chaos, Runaway inflation, to Rise of oligarchs, to Rise of mafia, thus signaling a Social collapse and completing a cycle!
It has taken Russia over a decade to re-emerge from that. (10/n)
It has taken Russia over a decade to re-emerge from that. (10/n)
I hope my thread here provides a good enough, real life illustration on how closely knit, the political, economic and social situations of a country are.
And how by affecting economic situations, inimical forces try to usurp the political office! (11/n)
And how by affecting economic situations, inimical forces try to usurp the political office! (11/n)
