Boris Yeltsin

Context: Boris Yeltsin was born in the village of Butka, Talitsky District, Sverdlovsk, USSR, on 1 February 1931. In 1932 after the state took away the entire harvest from the recently collectivised Butka peasants, the Yeltsin family moved as far away as they could, to Kazan, more than 1,100 kilometres from Butka, where Boris' father, Nikolai, found work on a construction site. Growing up in rural Sverdlovsk, he studied at the Ural State Technical University (now Urals Polytechnic Institute), and began his career in the construction industry. In 1934 Nikolai Yeltsin was convicted of anti-Soviet agitation and sentenced to hard labour in a gulag for three years. Following his release in 1936 after serving two years, Nikolai took his family to live in Berezniki in Perm Krai, where his brother Ivan, a blacksmith, had been exiled the year before for failing to deliver his grain quota. Nikolai remained unemployed for a period of time and then worked again in construction. His mother, Klavdiya Vasilyevna Yeltsina, worked as a seamstress. Boris studied at Pushkin High School in Berezniki. He was fond of sports (in particular skiing, gymnastics, volleyball, track and field, boxing and wrestling) despite losing the thumb and index finger of his left hand when he and some friends furtively entered a Red Army supply depot, stole several grenades, and tried to disassemble them. In 1949 he was admitted to the Ural Polytechnic Institute in Sverdlovsk, majoring in construction, and he graduated in 1955. The subject of his degree paper was "Construction of a Mine Shaft". From 1955 to 1957 he worked as a foreman with the building trust Uraltyazhtrubstroy. From 1957 to 1963 he worked in Sverdlovsk, and was promoted from construction site superintendent to chief of the Construction Directorate with the Yuzhgorstroy Trust. In 1963 he became chief engineer, and in 1965 head of the Sverdlovsk House-Building Combine, responsible for sewerage and technical plumbing. He joined the ranks of the CPSU nomenklatura in 1968 when he was appointed head of construction with the Sverdlovsk Regional Party Committee. In 1975 he became secretary of the regional committee in charge of the region's industrial development. In 1976 the Politburo of the CPSU promoted him to the post of the first secretary of the CPSU Committee of Sverdlovsk Oblast (effectively he became the head of one of the most important industrial regions in the USSR); he remained in this position until 1985. Just days after the dissolution of the Soviet Union, Boris Yeltsin resolved to embark on a program of radical economic reform. Unlike Gorbachev's reforms, which sought to expand democracy in the socialist system, the new regime aimed to completely dismantle socialism and fully implement capitalism--converting the world's largest command economy into a free-market one. During early discussions of this transition, Yeltsin's advisers debated issues of speed and sequencing, with an apparent division between those favoring a rapid approach and those favoring a gradual or slower approach. On 2 January 1992, Yeltsin, acting as his own prime minister, ordered the liberalization of foreign trade, prices, and currency. At the same time, Yeltsin followed a policy of 'macroeconomic stabilization,' a harsh austerity regime designed to control inflation. Under Yeltsin's stabilization program, interest rates were raised to extremely high levels to tighten money and restrict credit. To bring state spending and revenues into balance, Yeltsin raised new taxes heavily, cut back sharply on government subsidies to industry and construction, and made steep cuts to state welfare spending. In early 1992, prices skyrocketed throughout Russia, and a deep credit crunch shut down many industries and brought about a protracted depression. The reforms devastated the living standards of much of the population, especially the groups dependent on Soviet-era state subsidies and welfare entitlement programs. Through the 1990s, Russia's GDP fell by 50 percent, vast sectors of the economy were wiped out, inequality and unemployment grew dramatically, while incomes fell. Hyperinflation, caused by the Central Bank of Russia's loose monetary policy, wiped out a lot of personal savings, and tens of millions of Russians were plunged into poverty. Some economists argue that in the 1990s Russia suffered an economic downturn more severe than the United States or Germany had undergone six decades earlier in the Great Depression. Russian commentators and even some Western economists, such as Marshall Goldman, widely blamed Yeltsin's economic program for the country's disastrous economic performance in the 1990s. Many politicians began to quickly distance themselves from the program. In February 1992, Russia's vice president, Alexander Rutskoy denounced the Yeltsin program as "economic genocide." By 1993 conflict over the reform direction escalated between Yeltsin on the one side, and the opposition to radical economic reform in Russia's parliament on the other. Following the dissolution of the Soviet Union, Yeltsin promoted privatization as a way of spreading ownership of shares in former state enterprises as widely as possible to create political support for his economic reforms. In the West, privatization was viewed as the key to the transition from Communism in Eastern Europe, ensuring a quick dismantling of the Soviet-era command economy to make way for 'free market reforms.' In the early 1990s, Anatoly Chubais, Yeltsin's deputy for economic policy, emerged as a leading advocate of privatization in Russia. In late 1992, Yeltsin launched a program of free vouchers as a way to give mass privatization a jump-start. Under the program, all Russian citizens were issued vouchers, each with a nominal value of around 10,000 rubles, for purchase of shares of select state enterprises. Although each citizen initially received a voucher of equal face value, within months most of them converged in the hands of intermediaries who were ready to buy them for cash right away. In 1995, as Yeltsin struggled to finance Russia's growing foreign debt and gain support from the Russian business elite for his bid in the early-1996 presidential elections, the Russian president prepared for a new wave of privatization offering stock shares in some of Russia's most valuable state enterprises in exchange for bank loans. The program was promoted as a way of simultaneously speeding up privatization and ensuring the government a cash infusion to cover its operating needs.' However, the deals were effectively giveaways of valuable state assets to a small group of tycoons in finance, industry, energy, telecommunications, and the media who came to be known as "oligarchs" in the mid-1990s. This was due to the fact that ordinary people sold their vouchers for cash. The vouchers were bought out by a small group of investors. By mid-1996, substantial ownership shares over major firms were acquired at very low prices by a handful of people. Boris Berezovsky, who controlled major stakes in several banks and the national media, emerged as one of Yeltsin's most prominent backers. Along with Berezovsky, Mikhail Khodorkovsky, Vladimir Potanin, Vladimir Bogdanov, Rem Viakhirev, Vagit Alekperov, Alexander Smolensky, Victor Vekselberg, Mikhail Fridman and a few years later Roman Abramovich, were habitually mentioned in the media as Russia's oligarchs. CANNOTANSWER

Question: What did privatization have to do with the rise of the Oligarchs under Boris Yeltsin?
Answer: Yeltsin promoted privatization as a way of spreading ownership of shares in former state enterprises as widely as possible to create political support for his economic reforms.