What Went Wrong in Russia? The Perils of a Protracted Transition

On 17 August 1998, the Russian government took emergency measures to avert an economic meltdown, but these did little to halt the crisis. A week later, the ruble had lost two-thirds of its value vis-'a-vis the dollar. In one day, the two major economic achievements of the Boris Yeltsin era--control of inflation and a stable, transferable currency--were wiped out. The stock market all but disappeared, the ruble continued to fall, banks closed, prices soared, and stores emptied as people started to stockpile durable goods like cigarettes, sugar, and flour. Responding desperately to a desperate situation, Yeltsin fired Prime Minister Sergei Kirienko and his government and eventually nominated Yevgeny Primakov to head a coalition government of centrists, communists, liberals, and even one member from Vladimir Zhirinovsky's Liberal Democratic Party. Several months after taking power, however, this new government had done little to devise a strategy for halting Russia's economic woes.