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Tainted Transactions: An Exchange

Tainted Transactions: An Exchange

Mini Teaser: Jeffrey Sachs, Anders Aslund, Marek Dabrowski, Peter Reddaway, Igor Aristov, Wayne Merry, Michael Hudson, Daivd Ellerman, Steven Rosefielde, Janine Wedel

by Author(s): Jeffrey D. SachsAnders AslundMarek DabrowskiPeter ReddawayIgor AristovE. Wayne MerryMichael HudsonDavid EllermanSteven RosefieldeJanine R. Wedel

Jeffrey D. Sachs, director of the Center for International
Development, Harvard University:

Janine Wedel, for the umpteenth time, repeats her phony diatribes
against me ("Tainted Transactions: Harvard, the Chubais Clan and
Russia's Ruin", Spring 2000). Please permit me to correct the record.

Despite Dr. Wedel's weird insinuations that I had no advisory role
with the Russian government, I was an official adviser to that
government, but only for two years and two months, from December 1991
to January 1994. I worked closely with Anders ?slund during this
period. President Yeltsin officially designated us as advisers during
a meeting with us on December 13, 1991, and we received offices in
the Council of Ministers during 1992 and in the Ministry of Finance
during 1993. During the period until the end of 1992, Ã…slund and I
mainly advised acting Prime Minister Yegor Gaidar, and in 1993 we led
a unit within the Russian Finance Ministry advising Deputy Prime
Minister Boris Fedorov. (The most bizarre and entertaining fiction is
Dr. Wedel's additional suggestion that I somehow secretly worked with
the IMF during 1992.)

During this entire period, there were notoriously heated divisions
within the Russian government, and between the Russian government on
one side and the Duma and Central Bank on the other. The reformers,
led by Gaidar and Fedorov, did what they could to pursue needed
reforms, but very often they were blocked. Unlike my experience in
many other countries, such as Poland, little of what I recommended
was actually enacted. It wasn't pleasant being blamed for high
inflation and other ills that resulted from the very opposite of the
advice that ?slund and I were giving (such as when the Central Bank
ran a disastrous hyperinflationary monetary policy in 1992 and 1993),
but it was still worth the effort of supporting the brave reformers
fighting an uphill battle. ?slund and I publicly resigned in January
1994, days after Gaidar and Fedorov left the government. We were
concerned about the takeover of the government by the "industrial
lobby", with a foreshadowing of the mega-corruption that was to
follow, especially in the disgraceful state giveaways of the
lucrative natural resource enterprises, mainly during 1994-96. I was
also particularly distressed by the lack of appropriate Western
advice and assistance, a point that I made repeatedly in writings and
speeches at that time and afterward.

Somehow in this maelstrom some people came to assume (or at least
claimed to assume) that whatever happened was what I had recommended,
even though I was publicly and privately critical of the lawlessness
and lack of reform progress. For a few people this has continued
despite the fact that I have not advised the Russian government for
six years or even been to Russia for five years. Wedel writes in just
this nonsensical vein. For many years I have publicly and repeatedly
denounced the scandals of privatization such as the "shares for
loans" deals, and published articles and books describing and
criticizing the lawlessness and corruption in Russia (including The
Rule of Law and Economic Reform in Russia, 1997).

Dr. Wedel deliberately and systematically mixes personal references
to me, the Harvard Institute for International Development (HIID) and
other Western advisers, so that she can rope me into her phony
conspiracy theories. The HIID projects she refers to were directed by
Professor Andrei Shleifer at Harvard, and I had no role in those
projects. She seemingly can't understand that I had a completely
separate project, and that I resigned from advising the Russian
government as of January 1994. One and one half years later, I became
director of HIID in July 1995, and Professor Shleifer's project was
one of sixty or so ongoing HIID projects around the world. During the
period in which I directed HIID (1995-99), I stayed completely away
from any personal involvement in any Russian advisory work,
consistent with my public resignation in 1994. Moreover, when dubious
practices in Professor Shleifer's project came to the attention of
the U.S. Agency for International Development (USAID) and myself in
the spring of 1997, USAID and I worked together to close the project
immediately.

Dr. Wedel writes darkly that "it is unclear who paid Sachs and his
team." As I have explained repeatedly to her, and to anyone else that
had the slightest interest, I received my academic salary for my work
in Russia, with my leave time from Harvard University covered mainly
by the United Nations University in Helsinki in early 1992, and
thereafter by the advisory project supported by the Ford Foundation
and the Swedish government during 1992-93. USAID supported a small
amount of my summer academic salary, probably a total of a month or
two. Of course, I never invested a penny in Russia, or in any other
country in which I have served as an economic adviser. Nor did I
engage in any consulting services for private businesses or investors
involved with the Russian economy.

Dr. Wedel also accuses me of somehow improperly promoting myself to
the Russians as a person "facilitating access to Western money." As
any mildly interested observer of the Russian reforms would know from
my writings and speeches, I strongly believed and publicly argued in
1992 that the West should provide large-scale assistance to Russia to
support the early days of market reforms and stabilization, something
the West manifestly declined to do. There was nothing sinister,
surreptitious or secretive about any of this: I simply believed (and
continue to believe) that timely Western help in 1992 and 1993 could
have played an important role in helping real reforms and
democratization to take hold, but of course it did not come. The
Russian reformers and I knew that the chances for the needed
large-scale support were not high, but we felt the effort was worth
making anyway.

Wedel's twisting of facts and outright misrepresentations go on and
on. What I find hard to understand is how The National Interest could
publish this nonsense without even doing an iota of fact-checking.

Anders ?slund, senior associate, the Carnegie Endowment for
International Peace:

A decade after the collapse of the communist system, history has
demonstrated that those post-communist countries that aggressively
pursued market economic and democratic reforms are rapidly improving
the lives of their citizens. In her article in The National Interest,
Janine Wedel ignores this reality and seems more intent on
denigrating those who have advocated and actively promoted such
radical reform. She appears to lack an analytical framework, and her
assertion of facts is inaccurate.

The stars among the post-communist countries are Poland and Estonia,
which are generally acknowledged as the most radical market
reformers. According to the European Bank for Reconstruction and
Development, they also have the least corruption. Russia attempted a
radical reform, but unfortunately it stumbled. Even so, Russian
citizens are better off than Ukrainians, who saw a much later reform
and less privatization, not to mention the poor Belarusians, who
suffer under a frightful dictatorship in a Soviet theme park. Market
reform and democracy go together in the post-communist world.
Russia's problem is not too radical reform, but too little reform.

For the past decade, Janine Wedel has been going after leading
advocates of radical market economic reform and privatization in
former communist countries. Since the shortcomings of her gossip
journalism are so obvious, nobody seems to have bothered to answer
her as yet, but when a respectable magazine, such as The National
Interest, publishes an article of hers, this mixture of lies,
half-lies, sly allusions and sheer misunderstandings needs to be
exposed.

In 1990 she started pursuing Jeffrey Sachs and David Lipton for
having destroyed the Polish economy through their "ideology . . . of
radical privatization and marketization", which soon turned Poland
into a stunning success. Poland's President Alexander Kwasniewski
recently bestowed a high Polish order on Sachs and on Lipton in
gratitude for their services to Poland.

What is her alternative? In her book, Collision and Collusion: The
Strange Case of Western Aid to Eastern Europe 1989-1998 (1998), she
revealed her ideological preferences by repeatedly citing the
old-style Soviet communist Leonid Abalkin with sympathy in his
criticism of liberal reformers. She seems to advocate U.S. assistance
to such communists: "In short, donors, by equating Western-oriented
Russians with reform agendas and traditionalist or communist Russians
with anti-reform agendas, created stereotypes."

Wedel is patently contradictory. She criticizes Western consultants
for their "[l]ack of the understanding of the Russian cultural
context", but the particular persons she assails know Russia well.
She attacks the major Western economic advisers in Russia for being
both ineffective and too influential. You cannot have it both ways.

Similarly, she regrets large amounts of aid to consultants, but she
has focused on one institution, namely, the Harvard Institute for
International Development, which received less than 1 percent of
total USAID assistance to Russia. She ignores the many other general
contractors for USAID that received much more money.

The major problem, however, is Wedel's inability to evaluate the
accuracy of her sources. She mainly relies on interviews, going
around talking to admittedly many people, but she only records
vicious and tendentious allegations often made by single individuals.
She makes no attempt to check their truthfulness, ulterior motives or
even whether her interviewees can know what they say. The Soviet
Union was an empire of lies, and systematic lying remains common.
Wedel seems unaware of this, revealing her limited understanding of
the Russian cultural context.

Essay Types: Essay