MOSCOW – By June, 1991 the economy of the Soviet Union was a shambles. Everything from refrigerators to TV antennas to cigarettes was difficult or impossible to obtain. Hard currency was just about gone. A Washington Post correspondent visited a sock factory and found brand new Italian knitting machines sitting silently, for want of needles.
“What do they expect us to do, walk around naked?” asked a disgruntled customer.
Soviet President Mikhail Gorbachev had been zigging and zagging on reform, with results that pleased no one. Some thought he had done just enough to damage the old economic system, but not enough to foster a new one.
In Cambridge, Mass., a group of American and Soviet economists came up with a plan. They called it the “Grand Bargain.” Developed by Graham Allison, of Harvard, and Grigory Yavlinsky, a reform-minded Russian policy advisor, it envisioned a commitment of tens of billions of dollars of aid from Western countries in return for thorough and rapid moves toward a free market by Moscow.
The Grand Bargain had just two problems. One was that Western governments, led by U.S. Treasury Secretary Nicholas Brady, weren’t too keen on spending that kind of money. “We’re not rolling in cash,” said President George H.W. Bush. Critics asked why the West should fork over billions to persuade the Soviets to do what was in their best interest anyway.
The other problem was in Moscow. Hardliners were livid at the idea. First of all, they didn’t like the idea of having to ask the West for help. “A great power has been reduced to the lowly status of a beggar, standing by others’ doors with outstretched hands instead of working on its problems here where they are,” said Yevgeny Kogan, leader of a conservative faction in the Supreme Soviet, the country’s legislature.
More important, they didn’t like the idea of free-market reforms. Prime Minister Valentin Pavlov, whose background was in the defense sector, which had thrived on Soviet economic planning, said he wanted the Supreme Soviet to transfer some of Gorbachev’s powers to him. In a closed-door session, Defense Minister Dmitri Yazov, Interior Minister Boris Pugo, and KGB chief Vladimir Kryuchkov said the country was on the verge of collapse because of Gorbachev’s policies. Kryuchkov said the promise of Western aid was all a plot by the CIA to subvert the Soviet economy.
Liberals accused them at the time of plotting a “constitutional coup d’etat.” Two months later, all four of those men would be leaders of the real thing – an actual, armed coup attempt against Gorbachev.
But at this point – in June – Gorbachev was able to fend off the attacks from the right. “There are absolutely no insurmountable problems,” he said.
Still, the forces driving the Soviet Union apart weren’t getting any weaker. Food was in increasingly short supply. With not enough to go around, Soviet troops began seizing food in Georgia, and bound for Georgia, in part to punish the would-be independent republic. “This is direct state banditry,” Georgia’s president, Zviad Gamsakhurdia, told the Los Angeles Times.
That was the beginning of long decades of hostility between Moscow and Georgia. Various trade embargoes have come and gone over the years—there’s one in place right now—and Russia and Georgia had a shooting war in 2008.
Allison, at Harvard, warned that if the Grand Bargain were not implemented it would probably mean the “disintegration of the Soviet Union.” He was right, though it didn’t come about quite the way he imagined.
He was later to serve as an assistant secretary of defense in the Clinton administration. Yavlinsky helped found the Yabloko Party in Russia, devoted to democratic and economic reform; its standing, never strong, gradually waned over the years. Yavlinsky ran twice for the Russian presidency, in 1996 and 2000, never getting more than 7.3 percent of the vote.
When Pavlov, the hardline prime minister, was released from prison after serving time for his role in the August coup, he became a private banker. Gamsakhurdia was ousted as president of Georgia in early 1992, amid heavy fighting, and replaced by Eduard Shevardnadze, who a year earlier had been the Soviet foreign minister. Gamsakhurdia plotted a return but was found shot to death in 1993; it is unclear who did it.
Socks? Today they’re not a problem.