Throughout the czarist period to the seventy years of …show more content…
After failed attempts at privatization with infamous vouchers and his hollow 500 Day Plan, Yelstin gave it another try with an innovative, yet extremely shady program. The loans for shares program was one of the most infamous of Yeltsin's economic reform policies. The original economic "goal" for the LFS program was to help the government reduce its humongous budget deficit (Goldman, 2003). But instead of helping Russia's horrid economic situation, the LFS program proved to be a great detriment to the achievement of an effective and competitive market in Russia.
The program was actually planned by some of the wealthiest financiers and the present first deputy prime minister Anatoly Chubais in 1995 (Kuchins, 2002). The major scheme of the program centered on loans which the Russian banks would give to the government. The government would place share value on some of the biggest and most important enterprises in Russia. In return, the banks would have the power to manage the state's shares for an allotted term (Kuchins, 2002). At the end of this term, the state was supposed to pay back the loan to the banks (Kuchins, 2002).
Because the Russian economy was in shambles, the state could never actually pay back the banks. This allowed the banks to sell the shares and split the profits between themselves and the state. The Big Seven (the seven strongest oligarchs) lent money to the government for