The Soviet/Russian basis for this strategy dates to the late eighties when Stanislav Shatalin, Gregory Yavlinsky and others developed their infamous 500 Days program, which promised perekhod--transition to competitive free enterprise by the end of 1993. They weren't sincere. Shatalin disclosed his real agenda at Duke University in 1991 when he declared that, "It didn't matter if the transition took 500 days, or 500 hundred years, as long as it destroyed Communism!" The debate between the "shockers" and the "gradualists" was never really about economic "optimality"; it was a rhetorical struggle between a generation of young Turks egged on by Gorbachev, who saw radicalism as a highway to political power, and the old reformist economic guard like academicians Oleg Bogomolov and Yuri Yaremenko, who--like Western Nobel laureates Kenneth Arrow; Paul Samuelson and James Buchanan--understood the necessity of building legal and market structures before leaping into the abyss. The failed putsch in August 1991, and Gor bachev's refusal to allow the military to arrest and execute Yeltsin later that fall when Russia, Belarus and Ukraine seceded from the Soviet Union, enabled the radicals to triumph, as their predecessors had during War Communism and the Stalin era. Their Luddite politics not only instantaneously brought about an economic implosion that has caused 5.4 million premature adult deaths through 1997, but opened the Pandora's box of vicious criminality, just as anyone conversant with the history of Gulag and Soviet mafias would have predicted.
The Western transactors Wedel discusses in her article--the IMF, World Bank, U.S. Treasury, USAID, European Bank for Reconstruction and Development, OECD, EU and the Western private sector--could not have prevented this debacle, even if they hadn't misbehaved in the ways Joseph Stiglitz describes in the April 17 & 24, 2000 issue of the New Republic. Only Chubais, Maxim Boycko and Alfred Kokh--successive chairmen of the Russian State Property Committee and members of the "transactors circle"--could have mitigated the plunder and disorder, had they not been so thoroughly corrupt. From this perspective, it makes little difference whether some Western economic theories were partially or wholly congruent with those of Russia's homegrown radicals. Had Jeffrey Sachs, widely considered an arch advocate of "shock therapy", been a closet conservative, as Joseph Stiglitz now suggests, Yeltsin's vendetta against the Communist Party still would have driven him to recklessly destroy the remnants of central planning and th e ministerial system without first preparing the way for a smooth market transition.
The damage caused by Western proponents of "shock therapy" and others who misunderstood the conditions required for empowering Adam Smith's invisible hand was less than that caused by Yeltsin's rash decrees. It is the sum of the tens of billions of dollars that "transitionists" of all stripes coaxed Western leaders into diverting from America's, Europe's and Japan's deserving poor to Kremlin thieves, plus the negative global welfare costs of consolidating Yeltsin's system of anti-productive elite privilege. The new economic model that has emerged is similar to the regime contrived by Hjalmar Schacht for Hitler: a marketized variant of a command economy that allows leaders to utilize a broad array of regulatory instruments, including direct arms procurement contacting, to enrich a narrow clique and rearm, in whatever mix Putin desires. It is precisely in this sense that Russia has been lost, and that those found guilty by the verdict of history of abetting the process through economic myth-making, politicking and moral turpitude should feel profoundly ashamed.
JEFFREY SACHS' and Anders Aslund's letters contain a series of unsupported counter-assertions. Both deal in significant part with issues that are not addressed in, or material to, my National Interest article. The article presents the theory of transactorship, a mode of organizing relations among nations. Both Sachs and ?slund are stunningly silent on this central issue: neither attempt to refute either the theory or the critical body of facts supporting it. The principal point of the article is that a group of self-interested actors and advocates from both the United States and Russia, supported by Western aid and promoted by high U.S. officials to whom they were closely linked, managed to co-opt U.S.-Russian economic relations and helped to bring about the fiasco that followed. It is not at all "contradictory" to conclude that Western economic advisers in Russia were both "influential" and "ineffective." The Harvard-Chubais transactors, including Sachs and ?slund, were most influential precisely i n recommending and implementing policies that turned out to be highly counterproductive. The outcomes of their activities ran directly counter to the stated aims of the U.S. aid program in Russia.
Sachs seems not to understand that the issue is the multiple and conflicting roles that the transactors assumed (with ambiguous loyalties, ambitions and income sources), not the specific official title they held at any given time. Sachs restates that he advised Yegor Gaidar, which I do not dispute, and does not deny his other roles: his transfer of loyalty from Gaidar to Gaidar's nemesis, Ruslan Khasbulatov who was seen in the West as a retrograde communist; and his offer of access to Western aid to Khasbulatov, while urging, in his role as an American economist, that vast amounts of such aid be sent to Russia. Sachs seems to deny that he was in correspondence with the IMF while at the same time advising Gaidar. However, one memorandum that I have in my possession was written by Sachs and David Lipton (who became a Treasury undersecretary), dated May 11,1992, and directed to key Russian decisionmakers at the IMF. It shows that Sachs and Lipton were privy to internal discussion within the Fund and were proffe ring advice within that context without any mention of their role advising the Russian side.
?slund and Sachs portray me as a conspiracy theorist "going after leading advocates of radical market reform." On the contrary, I have been trying, as an anthropologist, to understand the roles being played by key actors involved in the aid process and in guiding economic transition. If those studies have resulted in uncovering unseemly activities, that is a consequence of what the actors have done, not of any analytical bias. I have no personal antagonism toward any of the key figures involved, nor did I approach the analysis with any ideological agenda.
As a researcher, I have pieced together the story based on hundreds of documents, U.S. General Accounting Office (GAO) reports and interviews. I have been studying Eastern Europe as the centerpiece of my professional work for more than twenty years. As an anthropologist, I am especially aware that people I interview don't always tell the truth--and not only Eastern Europeans. I always cross check critical information and confirm key points with multiple sources.
?slund and Sachs make a number of specific allegations. The facts are as follows:
* Regardless of the percentage of U.S. assistance to Russia flowing directly to the Harvard Institute for International Development, the U.S. government delegated virtually its entire Russian economic aid portfolio--more than $350 million--for management by HIID. Part of this was used to design, implement and promote the disastrous voucher privatization program. In a 1996 report, the GAO found that HIID had "substantial control of the U.S. assistance program." The advisers were also influential under other guises. Project documents submitted by Jeffrey D. Sachs and Associates, Inc. to the Finnish government state: "The [Sachs] team has had an extensive interaction with the [Russian] State Committee on Privatization and has helped in the design of the mass privatization program legislation recently enacted by Parliament."
* ?slund, as I state in the article, has been involved in business activities in countries while consulting with their governments. He says he was an adviser to the Russian government beginning in the early 1990s. He continued to advocate on behalf of that government throughout the decade, during which he was also linked to Brunswick. Brunswick began as a Moscow-based brokerage firm and evolved into an investment bank, the Brunswick Group. While ?slund claims that he only gives "lectures and briefings", he attended an April 1997 banking conference in New York sponsored by Brunswick Securities Ltd. as a representative of Brunswick. He promoted the Russian stock market to institutional investors and money managers, according to Michael Hudson, who also participated in the conference. Hudson adds that the minimum acceptable investment was between $400,000 and $500,000. As to the significance of ?slund's business ventures in Russia, it was the head of the Interior Ministry's Department of Organized Crime that characterized ?slund's investments in Russia as "significant."
* ?slund appears not to understand that the problem of conflict of interest is no less real where an expert works in serial for conflicting interests rather than at the same time. The American investment bankers he refers to could well end up in jail if they were to use their Treasury Department contacts in violation of conflict-of-interest and revolving door laws and rules that limit the free use of connections. Thus, ?slund sees no problem that the two close associates whom he introduced to privatization minister Chubais, and who helped to design and implement voucher privatization, then started Brunswick Brokerage to help sell vouchers and other assets to Western investors. But there is a problem.Essay Types: Essay