Poltergeist Economics

June 1, 2001 Topics: Economics Regions: RussiaEurasia Tags: Bosnian WarYugoslavia

Poltergeist Economics

Mini Teaser: The Russian revolution of the nineties brought economic phantasmagoria, not reform. The leadership's hands are dirty, and so are the West's.

by Author(s): Anatol Lieven

In that sense, at least, the Clintonites may have been "realists" despite themselves. It is true that they were unable to see the difference between U.S. interests and Russian ones and thus deluded themselves into thinking that Yeltsin was good for both. Unlike some of their self-styled realist critics, however, they recognized that it was not possible to gain Russian subservience to U.S. policies without having to pay for it.

There has also been an ugly aspect to some of the endless complaints about the theft of U.S. aid to Russia. This aid was small not only in comparison to the financial gain to the United States from the end of the Cold War, but also to the flight of stolen capital from Russia in the Yeltsin years. And where, pray, did this stolen money go? Pluto? Alpha Centauri? As Paul Klebnikov brings out, the looting of the Russian economy would not have been possible without the enthusiastic collaboration of Western banks and trading houses, and the money went to fuel Western stock market and real estate booms from which the West in general has benefited. If the Yeltsinite elite had the morals of whores, then the West certainly provided their pimps.

Instead of conducting what is in the end a sterile party debate on U.S. policy in the 1990s, Americans would do better to concentrate on some deeper lessons of the Russian debacle. Chief among these is the proof that markets are not "self-regulating." The creation of a "civilized" free-market state requires not only strong institutions but also ethical traditions that go beyond the search for personal gain and are credibly embodied in at least some public figures and other symbols. From this point of view, the analysts who seek comforting parallels for Russian developments in nineteenth-century America could hardly be more mistaken: Abraham Lincoln was not an idle drunkard whose family became obscenely rich at the expense of the state; Andrew Carnegie did not steal existing state industries at gunpoint and then consistently fail to invest in them, while moving most of the profits into foreign bank accounts and spending the rest on luxuries and sex.

This is where Clinton's pardon of Marc Rich is so damaging. As Klebnikov demonstrates, Rich's crimes against the American taxpayer are dwarfed by his role in the criminal plundering of Russia. The pardon is being portrayed in Russia as additional evidence that U.S. moralizing advice is deliberate hypocrisy. But that is far from being the worst of it. In Yeltsin's Russia, ordinary people saw their savings and living standards destroyed even as their rulers openly looted the country. As a result, for Russian leaders to ask ordinary people not to steal or take bribes is not just fatuous, it is downright immoral. A disastrous cycle of omnipresent corruption has been created with no evident way out.

Essay Types: Book Review