Subject: Response Submission for publication on the Johnson List [re: Russia's post-Communist transformation]
Date: Mon, 12 May 2008
From: "Anders Aslund" <aaslund@petersoninstitute.org>
In his comment on my lecture at the Kennan Institute and my book Russia’s Capitalist Revolution (Peterson Institute, 2007), W. George Krasnow (JRL 2008-#89) summarizes some of the most common misperceptions about Russia’s post-communist transformation and then some, so I feel a need to put them right.
1. It was Yeltsin who picked Gaidar through the intermediation of Gennady Burbulis and nobody else.
2. There was never any realistic gradualist alternative in Russia in 1991, because the Soviet economy had collapsed. Yegor Gaidar has clarified that better than anybody else in his recent book The Collapse of Empire (Brookings, 2007). Ukraine suffered far more than Russia because it adopted very slow reforms until late 1994. Belarus never managed to break out of a state-controlled economy and dictatorship because of even less reform. The greatest successes were the radical and comprehensive market reforms in Poland and the three Baltic states. The comparative empirical evidence is extremely strong as I have shown at length in my book How Capitalism Was Built (Cambridge UP, 2007). The problem with Russia’s economic reforms was, first, the total devastation of the economy by the communists and, second, that it was impossible to impose more radical reforms.
3. Joseph Stiglitz started his public criticism of Russia’s reforms at the time of its financial crash of 1998, claiming that they were a total failure just when Russia was turning to a period of a steady economic growth of 7 percent. What kind of foresight is that? The “Washington Consensus” refers to a summary of a broad consensus made by John Williamson in 1990.
4. Krasnow praises Janine Wedel, but her book Collision and Collusion is profoundly flawed, because she is unconcerned with facts. She finds somebody who says anything and treats it as truth. Out of Krasnow’s quotes and citations, I can refute quite a few. First, I never attended the dacha she refers to and I could thus not “offer access to Western money.” Second, it is true that I was on the board of the Russian Privatization Center, but I did not “deliver Swedish government monies” to it. Nor was I ever asked to do so. I simply was and remain a strong supporter of privatization and Anatoly Chubais, who is just completing Russia’s electricity reform, the only great reform in Russia in the last five years. Third, I never worked in the Shleifer team institutionally. Andrei Shleifer ran an advisory group for privatization, while the group Jeffrey Sachs and I led was separate and worked on macroeconomic policy. Our group and I myself were (fortunately) never financed by USAID. The simple truth about Wedel is that she is an untruthful slanderer, best ignored. She started attacking shock therapy in Poland, but after it turned out to be a resounding success, she continued criticizing it in Russia, where the problem was that reforms were not radical enough.
5. In my books Russia’s Capitalist Revolution and How Capitalism Was Built, I point out that Western assistance to Russia was minute. The biggest stream was IMF funds, which were all credits, which have now been paid back. When Western funding of reforms was most needed and could have been effective, in the winter of 1991/92, the West gave nothing, and US assistance has been minuscule. That was the overwhelming scandal in Western aid to Russia. What Wedel focuses on is a tiny point that has not been judged a crime by any court, which suggests that it was very minor indeed. I am at loss why that should be mentioned in a book about Russia’s post-communist transformation. An author needs to distinguish what is significant and what is not.
6. Yes, I take a more positive view of the oligarchs than of Putin because I support democracy and oppose corruption. Most democratic and capitalist societies have started as oligarchies, and gradually competition has evolved as society has grown richer. This is happening in democratic Ukraine, where growth is as solid as in Russia but corruption is declining according to the World Bank and Transparency International. Putin, however, halted this competition and burgeoning democracy. Instead, he and his cronies have captured much of the oil windfall for their personal benefit, and corruption has increased. In all likelihood, nobody has made such large fortunes from corruption in world history as Putin and his cronies. Dictatorship and corruption go together. Among countries richer than Russia, only Equatorial Guinea is considered more corrupt by Transparency International and only eight are also authoritarian (Singapore and seven small petrostates). Ukraine shows where the richer Russia could have gone if not so many oligarchs had not been expropriated and repressed by Putin. Putin has benefited greatly from Yeltsin’s reforms in the 1990s and a huge windfall. He has just been plain lucky and he has done a minimum for his country. The question is only how soon his judgment will arrive.
Anders Aslund, Peterson Institute for International Economics