The next year Gorbachev formally became the head of state of the USSR, completing the transfer of formal power from party to state institutions. It did not help him. In the ensuing months growing nationalism in the Baltic republics and Georgia created a whole new series of problems. In Georgia the colorful dissident writer Zviad Gamsakhurdia was elected president in 1990, leading to an immediate conflict with Abkhazia and South Ossetia. The Georgian government tried to impose Georgian language on the two minorities, banned local parties, and then shortly after abolished their local autonomy. Soviet troops had to come and separate the contending parties. Thus all three Transcaucasian republics were now in turmoil. Gorbachev was losing control over the country. Nationalist ferment in Lithuania led to a violent confrontation with Soviet troops and many deaths in January 1991. In June, Yeltsin won election to the leadership of the Russian republic by a big majority, in large part because there was no real opposition in the field against him.
By 1991 the economy seemed to be reaching a nadir, and the authority of the state was at an all-time low. Yet public politics still revolved around the battle of reform versus retention of the Soviet system. The public advocates of reform were mostly from the intelligentsia, and were increasingly impatient with Gorbachev, whom they saw as too slow and inclined to compromise. Advocates of the old system seemed to come mainly from the ranks of the party elite, increasingly under threat from Gorbachev’s reforms, economic as well as political. In the background and unnoticed by all, new groups were forming and waiting in the wings, political clans and a few new entrepreneurs working largely within the Soviet structure, but using it to form de facto businesses. The Communists intent on preserving the system then unwittingly provided the opportunity to destroy it.
In August of 1991, while Gorbachev was taking a brief vacation in the Crimea, the vice-president, the Ministers of Internal Affairs and of Defense, and several other high officials decided to declare an emergency and take power to reverse the entire process of reform. They brought several regiments of troops into the city, but found little support. Most local governments either rejected their appeals or like the Ukrainian leadership, sat on the fence. The people of Moscow were clearly against them, and Yeltsin as head of the Russian republic government led the opposition, famously standing on a tank to rally the people. The coup leaders kept Gorbachev isolated in the Crimea in his dacha, hoping to hang on, but it was no use. After a few days of almost bloodless confrontation, they surrendered.
The outcome was the collapse of the Soviet Union. Gorbachev returned to Moscow, but the country was in chaos. As he struggled to hold on, Yeltsin met with the leaders of Belorussia and the Ukraine in a hunting lodge in the Belovezha forest in Belorussia. The three of them abolished the Soviet Union. Other republics were not asked: the Baltics and Georgia had already declared independence, but the Central Asian republic leadership groups were aghast at the prospect. The public was not asked either: early in 1991 there had been referenda on the status of the union, and most people, including in the Ukraine, had voted for more autonomy but to also preserve the union. This, of course, had been the desire of the local leadership in Kiev and elsewhere. Now Yeltsin was in power and the leaders had changed their minds. After seventy-four years of existence, the Soviet Union came to an end.
The first result, visible already in the weeks after the coup, was a transformation of the economy unlike anything earlier discussed in public by the main reformist groups. One part of this policy of privatization was already largely complete: the transformation of state production units and banks into private firms. Many or most of these had an effective monopoly over one or another area of the economy, and they constituted the cream of the financial system and the “real” economy. The other part of the policy was “voucher privatization.” In theory everyone would get vouchers for property in the new system, but the vouchers were largely worthless. Some people papered their bathroom walls with them. In fact the state simply turned over its remaining resources to freshly baked “businessmen” at fire sale prices. Real private businesses existed only at the level of small businesses, which were heavily taxed and consequently conducted business to a large extent outside the law.
The central role of the state and connections of the new owners with important figures in the government did not mean that the transformation of power into property was an orderly process. Rival clans of businessmen intrigued with powerful political clans for favor. Gangsters became a regular feature of Russian business, and fought one another other with armed bands. Every week expensive cars turned up in Moscow parks with the cars and their occupants riddled with machine gun bullets. Chechen and other Caucasian gangs controlled the peasant markets and other lucrative sources of profit.
While a new elite of oligarchs came into being, the standard of living of the population collapsed. Hyperinflation wiped out the savings of ordinary people. Doctors, teachers, coal miners, and factory workers were not paid for months or even years at a time. Many people lived on a barter economy, and the formerly better off grew potatoes in the yards of their dachas. An overvalued ruble meant that Russia suddenly became a dumping ground for the world’s goods. Cheap vodka poured into the country from Belgium and Germany with labels picturing Rasputin, and the American Snickers candy bar became so ubiquitous that economists used its price as a benchmark of inflation. The infrastructure, already frail from years of neglect, began to collapse. Culture disappeared. The great theaters and orchestras lived on the proceeds of foreign tours. Few films were made, and movie theaters showed American “action films.” Scientists moved abroad or tried to find foreign grants. The intelligentsia, for the first time since the middle nineteenth century, ceased to play a major role in Russian life. Emigration boomed, not only Jewish emigration but also the departure of other ethnic and religious minorities and many ordinary Russians. Only Moscow and a few other areas maintained a limited prosperity, fuelled by the new businesses and the rapidly expanding state bureaucracy. While the Yeltsin years seemed to the West an era of “democratization” and the transition to a market economy, they seemed to most Russians a dark night of anarchy, poverty, and total unpredictability.