(C) OpenDemocracy This story was originally published by OpenDemocracy and is unaltered. . . . . . . . . . . How US-backed ‘regime change’ in Russia made Ukraine invasion possible [1] [] Date: 2025-07 First, it was reasoned that pro-market reforms had to be introduced very quickly, so that there would be no time for ‘socialist’ forces to regroup and block reform. Second, a more technical premise was that priority had to be given to macro-economic policy, backed by aid conditionality to force the Russian (and Ukrainian) government to adhere to it, over and before micro-economic, or structural reform. The latter might, for instance, have involved restructuring state-owned enterprises, the establishment of market regulations, and institutions for holding people to ethical standards. But the orthodox economic view was that macro-stabilisation was a necessary prior for structural reform. This was the dominant reasoning of the International Monetary Fund. The third premise was that the macro-economic reforms had to be introduced in a particular order: first came a removal of state price controls, then cuts to public spending, and finally privatisation of state property. Price liberalisation came with the removal of price subsidies (except on energy). Bear in mind that production had collapsed, that strict price controls had existed for generations and that the production structure consisted of huge industrial enterprises with monopolistic characteristics, dominating whole sectors and regions. The effect of price liberalisation was thus an extraordinary burst of hyper-inflation. While we were working in Ukraine, in one year inflation was estimated at over 10,000%, and in Russia it was estimated at over 2,300%. The impoverishment was lethal. Millions died prematurely; male life expectancy in Russia fell from 65 to 58 years, female from 74 to 68; the suicide rate jumped to over three times the high level of the USA. In a collective state of denial, the western economic “advisers” were almost Stalinist in their zeal. Their second policy was to slash public spending, with the double objective of squeezing inflationary pressure by curbing monetary demand and weakening the state. This had the immediate consequence of intensifying the rising mortality and morbidity. But it did something else that is still affecting the whole world today. Wages and salaries in the public sector fell so low that the state ceased to function. This created a vacuum in which the kleptocrats thrived. I recall government ministers asking for $50 bribes just so they could feed their family. They were easy prey to ruthless gangsters, who in turn were bedfellows with ex-KGB officers, such as a certain first deputy of the St Petersburg city administration, Vladimir Putin. One cannot overemphasise the folly of the anti-state ideology at a time when what was desperately needed was the nucleus of a professional civil service, backed by a proper legal system. But all the western financial advisers wanted was full-blown capitalism, which they saw as leading to a ‘Russian Boom’, in which ‘democracy and free markets have taken root for good’. The third plank of the shock therapy sequencing was mass privatisation. It began as a bit of a joke, with privatisation ‘shares’ being handed out like confetti. I still have a voucher somewhere, given to me by the mayor of St Petersburg. But privatisation soon became a wild-west plunder. The World Bank, USAID, the new European Bank for Reconstruction and Development (EBRD) in London and other foreign bodies allocated vast amounts to assist in speeding up the transfer to the new ‘entrepreneurs’. Over 15,000 state firms were sold off; kleptocrats became oligarchs overnight; their American and other foreign ‘advisers’ became multi-millionaires. This is when the criminality stretched across the Atlantic. One still has to be circumspect in how one puts this. However, it was widely known that prominent economists among the western financial advisers were linked to the rising oligarchy and making millions of dollars from privatisation. Eventually, one case was brought to the Massachusetts High Court. Those involved paid hefty settlements, but were allowed to continue with their careers. Rest assured, they and others did very well. Meanwhile, there was the awkward onset of the fourth phase of the sequencing, characterised as the ‘therapy’ after the ‘shock’. This was touted as building a new social policy system, based on standard neoliberal lines – that is, a residual welfare state with as much privatisation as possible, beginning with pension systems and education. As some of us had argued from the outset, a universalistic social protection system should have been built before any ‘shock’ policies. Callously, implementing social policies was left to afterwards, and then only done patchily, with interminable delays. [END] --- [1] Url: https://www.opendemocracy.net/en/odr/the-us-and-uk-made-russias-invasion-of-ukraine-possible-i-saw-it-happen/ Published and (C) by OpenDemocracy Content appears here under this condition or license: Creative Commons CC BY-ND 4.0. via Magical.Fish Gopher News Feeds: gopher://magical.fish/1/feeds/news/opendemocracy/