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Death by Economic Shock

The Economist is running an article that evaluates a recent study, published in the British journal Lancet, of the sudden drop in the life expectancy of Russian male from 1991 to 1994.  Amazingly, the study blames ‘shock therapy’ – an element of the economic reform package being implemented by the government at the time – for the drop.  The article looks at the feasibility of this claim, as well as the state of the economy during Soviet times.

Why was the Soviet economy in ruins by 1991? Partly because planned economies don’t work (blame Lenin and Stalin for that). Partly because the gerontocratic leadership of Leonid Brezhnev failed to start reforms in the early 1970s, when gradualism might have had a chance of succeeding. By the time Mikhail Gorbachev initiated perestroika and glasnost in the late 1980s, the Soviet Union was all but bust. Worse, by running the printing presses red-hot, his government created a colossal monetary overhang. Russians may have thought that their savings evaporated when prices were liberalised at the start of 1992; in truth, their cash was already worthless.

Read the full article here.