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Johnson's Russia List


October 27, 1999     
This Date's Issues: 3587 3588 3589

Johnson's Russia List
27 October 1999

[Note from David Johnson:
1. James Millar: re D'Amato/3570. (Agriculture)
2. NYT letter: Sarah Mendelson, Russian Student Visas.
3. Moscow Times: Brian Whitmore, Liberals Support Chechen Campaign.
4. Reuters: U.S. ``troubled'' by Russia views on arms treaty.
5. St. Petersburg Times: Tim Russo, Who Lost Russia? Just Ask The Man in Lenin's Tomb.
6. Michael Hudson: Announcement of Duma meeting.
7. Central Europe Review: David Kotz, More Aid, Fewer Strings. A new Western aid policy toward Russia.
8. PBS NewsHour: RUSSIA BOMBS CHECHNYA. (With Michael McFaul and
William Ury)] 


Date: Tue, 26 Oct 1999 
From: "James R. Millar" <>
Subject: millar re D'Amato/3570

Dear David:

I am puzzled by Antony D'Amato's response to my article in the October
Current History which you reproduced for the list. I am not concerned by
his criticism of the level of sophistication of the piece. It seemed to me
and the editors of Current History appropriate for the audience in
question. What puzzles me is that D'Amato states that the "overwhelming"
reason for the failure of the Russian economy was "the decision to
privatize the means of production while keeping farmlands under state
ownership. The exact opposite was necessary to put Russia on its feet."

If taken literally, this is nonsense. Perhaps he is claiming that Russia
should have followed the Chinese model of reform: agriculture first.
However, as many scholars have argued, it was not appropriate for Russia.
The Russian agricultural sector was much smaller relatively than the
Chinese. Russia was a developed industrial economy and highly urbanized.
Industry had to be attacked first or at least simultaneously in Russia.
What's more, the Russian farm population was too far removed from private
farming to make a return to single-household farming feasible. And, if one
takes the scale of the rural capital stock into account, private farming
(apart from the existing garden plots) would have to be large-scale
enterprise for most crops. Finally, surveys of popular opinion still
reveal that the rural population (once called the peasantry) is itself
about private ownership of land. Only the urban intelligentsia is
committed to private ownership of land. Lenin's slogan of "all land to
the peasantry" would fall on deaf ears today.

I agree that privatization of land is a necessary agenda item if reform is
to succeed. Carl Polanyi, reinterpreting Marx, spoke of the two great
transformations in economic history that led to the market economy
("price-making markets"): the commodification of land and labor. In Soviet
Russia only the first has taken place. Resistance to privatization of
farmland is partly historical and partly ideological. Resistance to
privatization of urban land would jeapordize the economic and political
power of mayors such as Luzhkov. Neither is likely to happen soon. The
point is that one of my main arguments for the failure of reform in Russia
included the failure to privatize the land: the ambivalence of both the
elite and the population regarding many inherited Soviet institutions.

James R. Millar
Director, Institute for European, Russian and Eurasian Studies
The George Washington University
2013 G Street, NW, #401
Washington, DC 20052
Telephone: 202 994 6342 Fax 202 994 5436


New York Times
October 26, 1999
Russian Student Visas

To the Editor: 
The high number of Russian students refused visas by the United States may be 
a result of overzealous consular officials (front page, Oct. 24). However, it 
fits a larger pattern of policy toward Russia for which both the 
Administration and Congress are to blame: words about the importance of 
democracy in Russia are not in sync with actions. 

Policy makers and many in Congress emphasize the importance of helping Russia 
build democratic institutions and the rule of law, about supporting 
elections, a free press, civic advocacy groups and an independent judiciary. 
Democracy assistance programs, however, don't get adequate financing. 
Bringing Russian students here to study is an excellent way of exposing 
Russia's next generation to democracy. Here again, the numbers should be 
going up, not down. 

Medford, Mass., Oct. 24, 1999 
The writer is an assistant professor of international politics, Tufts 


Moscow Times
October 27, 1999 
Liberals Support Chechen Campaign 
By Brian Whitmore
Staff Writer

Asked about Yabloko's position on an explosion last week in a Grozny 
marketplace that killed more than 100 people, a spokesman for the party said 
Yabloko simply has no position. 

How about Yabloko's stand on Russia's decision this week to close off the 
Chechen border with Ingushetia, turning back thousands of refugees trying to 
flee the fighting? Yabloko's press secretary, Vladimir Broginsky, said this 
is a "security measure" that is "probably just temporary." Pressed further, 
Broginsky dismissed the border closing as a "detail." 

Press reports of thousands of civilian casualties? Western propaganda, 
Broginsky said. 

"The West is not objective, they are paying attention only to one side and 
not the other," Broginsky said. "There was aggression against Russia and 
Russia is answering that aggression." 

Yabloko was a harsh critic of Russia's 1994-96 war in Chechnya. This time 
around, like the rest of the elite, they are on board with the Kremlin. 

"Our goal is not to fight Chechnya, not to conquer it, not to kill everybody 
there," Yabloko leader Grigory Yavlinsky said in an interview on ORT 
television Sunday. "Our goal is to defend the security of Russian citizens in 
Chechnya and the Chechen border." 

That seems to mean that Yabloko is willing to accept an unspecified number of 
civilian deaths as the means to that end. And Yabloko is not alone. Liberals 
who opposed the first Chechen war have swallowed several mass civilian 
killings with quiet equanimity. 

Back in 1996, then Nizhny Novgorod Governor Boris Nemtsov gathered signatures 
on a petition to end the war and gave them to President Boris Yeltsin. Today, 
Nemtsov's opposition is less fiery. He has floated the somewhat odd idea that 
no conscripts should be sent to Chechnya without their parents' permission; 
otherwise, he and his other allies in the Union of Right-Wing Forces, led by 
Nemtsov and former Prime Minister Sergei Kiriyenko, support the war. 

Unlike Yabloko, Nemtsov and Kiriyenko have decried last week's explosion in 
the Grozny market. 

But in an interview on NTV television Sunday, Kiriyenko's outrage was 
directed not at the unnecessary civilian deaths, but at how the blast might 
embarrass Prime Minister Vladimir Putin, who was in Helsinki, Finland, trying 
to spin the war to the European Union leaders. 

"It was, in all likelihood, a provocation that cost Putin very dearly," 
Kiriyenko told NTV television Sunday. "It was an attack on Putin in the first 
instance. It happened at a time when Putin was negotiating with the world 
community. It was an attack, if not on Russia's prestige, then definitely on 

Like Yabloko's Broginsky, Kiriyenko also said the West was treating Russia 
unfairly by playing up civilian casualties and the plight of refugees. 

"They don't understand us in the West. There, they have different pictures on 
their television screens," Kiriyenko said. "We see pictures of blown-up 
buildings in Moscow, while they see refugees and are only talking about a 
humanitarian catastrophe." 

Over the past week, everyone from the Taliban to the United States to Iran to 
the European Union and the UN High Commissioner for Refugees has criticized 
Moscow's conduct in Chechnya. The Russian elite responds with comparisons to 
NATO's air war against the civilian infrastructure of Yugoslavia. 

On Sunday, Fatherland-All Russia released a statement accusing the West of 
employing a "double standard." The statement called it "strange" that the 
West is demanding that "the counterterrorist operation in Chechnya be stopped 
and negotiations begun with a partner that does not exist." 

"These demands are interference in Russia's internal affairs and seem 
particularly cynical against the backdrop of NATO's recent actions in 
Kosovo," the Fatherland-All Russia statement said. 

Likewise, Gennady Seleznyov, the Communist speaker of the State Duma, said no 
NATO country has the right to criticize Russia over the war in Chechnya, 
after the alliance's actions in Yugoslavia. 

In a recent interview in the newspaper Vremya MN, human rights activist and 
Duma Deputy Sergei Kovalyov turned this logic on its head. 

"In Chechnya, Russia is using NATO's methods to achieve Milosevic's ends," 
Kovalyov said. 

Others, like Vladimir Zhirinovsky's Liberal Democratic Party of Russia, turn 
reality on its head. LDPR spokesman Oleg Yakhimov said there were no civilian 
casualties in Chechnya because Russia is only destroying terrorists. 


U.S. ``troubled'' by Russia views on arms treaty
By Randall Mikkelsen

WASHINGTON (Reuters) - The United States said Tuesday it was ``troubled'' by 
Russian warnings over development of a U.S. missile defense system, as a 
dilemma facing President Clinton over whether to build the system 

``I was troubled by the reports today of some statements by the Russian 
military,'' Secretary of State Madeleine Albright said, referring to a top 
Russian defense official's statement that Russia could deploy more nuclear 
warheads to counter a U.S. ballistic missile defense system. 

She told a news conference that First Deputy Defense Minister Nikolai 
Mikhailov's warning was an ``overreaction'' to Washington's interest in 
developing a system to defend against attacks from ``rogue states.'' 

``We have a joint interest ... in dealing with that problem, and so I don't 
want anyone, whether here or in Russia, to be reviving old problems,'' 
Albright said. 

Clinton is to decide by next June on whether to go ahead with the system, 
which is under development. 

Congress in March overwhelmingly backed deployment. The United States is 
trying to negotiate amendments to the 1972 Anti-Ballistic Missile (ABM) 
treaty, which bans missile defense systems, to allow what it says is its 
``limited'' system. 

Clinton's dilemma is that Russia remains opposed to any changes in the treaty 
to permit the deployment of the system. 

Arms control experts said Tuesday that Clinton was unlikely to win Russian 
agreement to change the ABM treaty and would most likely defer a decision on 
deploying the missile defense system until after his successor takes office 
in 2001. 


Mikhailov was quoted in the Washington Post Tuesday as telling reporters that 
Russia was technically able to overcome antimissile defenses and was able to 
deploy more warheads than the United States could defend against. 

``This technology can realistically be used and will be used if the United 
States pushes us toward it,'' Mikhailov said. 

The White House played down the comments and said it remained optimistic of 
reaching an understanding with Russia. ''I think those comments missed the 
point,'' White House spokesman Joe Lockhart said. 

Washington says the system is meant to protect against missile launches from 
potential nuclear states such as North Korea, rather than a nuclear giant 
such as Russia. 

``We believe that we're moving forward in a constructive way,'' Lockhart 


Some arms control experts said the Russian government, under pressure from a 
parliament opposed to arms concessions and facing elections in December, had 
little incentive to go along with the United States. 

``The Russians have no strategic and certainly no financial interest in 
helping the U.S. solve its ABM problem,'' said Dan Goure, an arms control 
scholar at the Center for Strategic and International Studies. 

Washington has offered to help Russia complete a missile-tracking radar 
system. A better inducement would be financial aid, such as forgiving debt, 
said Goure, a former U.S. Defense Department and arms control official. 

``If you're going to bribe the Russians, then you at least ought to offer 
them a decent bribe,'' he said. 

Furthermore, the U.S. negotiating position is weakened by Clinton's departure 
from office in 2001 and the U.S. Senate's rejection of the nuclear test ban 
treaty, experts said. Some Russian politicians are still steaming over the 
expansion of NATO, and the NATO air war against Yugoslavia. 

``They (the Russians) are not impressed by our past record on this whole 
business, that we will necessarily do in a few years what this president says 
now that he intends to do,'' said former arms negotiator Raymond Garthoff, a 
scholar at the Brookings Institution think tank. 

But Garthoff said it was still possible Clinton could negotiate an acceptable 
amendment to the ABM treaty. 

Experts were broadly in agreement that Clinton would find a way to buy time 
for further negotiations with Russia, perhaps by proceeding with deployment 
next June but setting a later date for a final decision, or by simply saying 
the system's development was not far enough along. 

``I suspect it will be some decision that maybe still kicks the can further 
down the road,'' Garthoff said. 


St. Petersburg Times
October 26, 1999 
Who Lost Russia? Just Ask The Man in Lenin's Tomb 
By Tim Russo 
Tim Russo is a field representative at the National Democratic Institute in
St. Petersburg. He contributed this comment to The St. Petersburg Times. 

REMEMBER 10 years ago? November, 1989. The Berlin Wall, the Iron Curtain -
gone. Remember Christmas Day, 1991? The hammer and sickle comes down from
the Kremlin for the last time; Soviet Union - gone. A dozen or so new
countries. Ten years pass; the century draws to a close. One morning the
editor of The New York Times wakes up, and suddenly it appears that Russia
has become a kleptocracy. Billions stolen. Shock. Horror. We've been had.
And it all seemed to be going so well. Send a team of reporters to find out
who lost Russia, who lost Ukraine, who lost all the rest of it. Perhaps
this is what they might find. 

A former Ukrainian prime minister is arrested at the Swiss-German border in
a car, carrying a Panamanian passport. His driver is the former head of the
state property fund of Russia. Hmm. His travels take him home for a
triumphant return. Then the triumph fades, he develops a "heart problem,"
goes to Greece, then to New York on a fake visa. Now he sits in America
under house arrest awaiting extradition for money laundering. He claims
political persecution on his asylum application; rejected. Millions of
dollars of assets under his name are frozen in Swiss accounts, money
leeched from Ukraine while the editors of Western newspapers weren't looking. 

A president is forced from office in Armenia, resigning under threat from
military leaders. His puppet replacement isn't even a citizen of the
country; a passport is printed for him. He faces defeat at the polls; no
matter - simply stuff the ballot boxes. Some holes in the ballot boxes are
too thin to accommodate the folded stacks; enlarge the slot with a saw.
Victory. One year later, repeat the process to "elect" a suitable
parliament. A candidate, an obese "businessman" in an $8,000 suit, steals
the wealth of the country on one mobile phone, hangs up, steals his seat in
the new parliament on another mobile phone; a seat which gives him immunity
from prosecution for the crimes he just committed in both conversations.
Someone should ask him who lost Armenia. 

The governor of St. Petersburg wants to move the date of the next election,
but no one else does. Votes get bought, but not enough. No matter - change
the quorum rules; remove journalists from the room; vote for absent members
with the master set of keys. Sign the bill; celebrate the rule of law. 

Bombs exploding in Moscow. Hundreds dead. Find the culprits; but tear down
the blown up buildings first - quickly. Done? Okay, now get the bandits.
Where are they? In Chechnya, of course. All the bandits are in Chechnya.
While you're at it, ask them who lost Russia. Putin tells Reno he'll stop
all the "dirty money"... bill the investigation to Yeltsin's Swiss credit

A woman in Tbilisi owns a bed-and-breakfast; it is her own home. She caters
to international consultants, NGOs, and businessmen. Recently she
celebrated her 1,000th customer. Hers is one of the few homes in the whole
of Georgia that has reliable water and electricity; 24 hours a day. Mostly.
In winter, outages are more regular. The government providing this level of
service takes 22 percent of her gross income in taxes; after she calculates
her profit, it takes another 22 percent of that. She pays it, she says,
because Shevardnadze has brought stability to Georgia. Meanwhile, every so
often a breakaway Georgian republic (Abkhazia, Adjara, Ossetia, whatever)
"elects" its leader with 99.8 percent of the vote. Is this why she pays

It is an odd question to ask who has "lost" or is currently losing these
places. Various answers are submitted, from "it was never anyone's to
lose," to "it's not actually lost," to "a vast western conspiracy led by
the CIA, NATO, UN, IMF, World Bank, Chechen bandits, blah blah blah." The
most appropriate answer, it seems, when the collapsed former Soviet
republics look for the causes of their misery, is the old adage, "We have
met the enemy, and it is us." 

When Lenin's grand experiment began to disintegrate, the seeds of today's
billion-dollar boondoggles took root, and did so in every corner of his
vast empire. Moreover, this collapse did not begin, nor did it end, on Nov.
9, 1989, or Christmas Day, 1991. It is ongoing, constant, often
accelerating. It has not hit bottom, and it won't for some time. What this
means for the future is a frighteningly open question; however, let us
dispense with the notion that this is somehow breaking news. 

Of course, hope springs eternal; it's at a local Internet service provider
in St. Petersburg, where a dozen young entrepreneurs race about an office
filled with computers, phones, wires, and the intoxicating smell of wealth
being created. Or in the thousands of kids working at, of all places,
McDonald's, learning lessons about work, capital, and economics that no
school, university, or book can teach them. Or the football pitch, where a
team from a country that never was plays a team from a country just
re-born, and it all seems so normal. Or in a jazz club where a kid who
can't recall Brezhnev can play guitar like he was born with one in his
hands, and the audience of Russians knows it. Not all of these new states
have been "lost." The new Europe is filled with new democracies pushing
forward rather than sliding back. 

But the ruin that a century of tyranny, oppression, mass murder, war,
corruption, and decay leaves behind for a people to clean up is staggering.
Lenin's grand experiment failed - miserably. It took a century to do so. It
will take decades to undo. The West can help, but in the end the
responsibility lies with those who have the power to choose between moving
their nation forward, or taking from it for themselves; their nations are
theirs alone to lose. 

Perhaps the editors of Western newspapers will find their answer if they go
see Lenin himself on Red Square, surrounded by some of his fellow
experimenters. A more fitting metaphor for Russia at the end of the 20th
century is hard to imagine. What you see in Lenin's tomb appears to be a
peaceful old man, wearing a nice suit and tie, resting in peace, but at
best is in fact a rotting, lifeless, wax covered corpse; at worst it may
not even be Lenin at all. Ask him who lost Russia. 


Date: Tue, 26 Oct 1999 
From: (Michael Hudson)
Subject: Announcement of Duma meeting

This coming Wednesday, Nov. 3, an important State Duma Roundtable on 
Natural Resources & Public Finance will be held in a seminar room on the 8th 
floor of the Duma. The meeting will be chaired by Vyachislav Zvolinsky 
(Agrarian party), who has played a major role in resisting Yeltsin's plans 
for land privatization. His objective is to collect the land-rent (as well as 
the rental value of minerals resources and public utilities) as taxes, in 
place of income and sales taxes.

The meeting also will discuss my proposals to replace US/IMF banking 
philosophy with the creation of a more viable banking system. Instead of 
recycling savings primarily into mortgage lending as occurs in the West 
(where about 70% of the banking system's loans are to real estate), 
Zvolinsky, Dmitri Lvov (head of the Economics Section of the Academy of 
Sciences) and their supporters are urging a German-Japanese-French type of 
industrial banking. The objective is to channel saving into the financing of 
industry and trade, not speculation in ownership of land and natural 
resources or monopolies already in existence.

This is the third Duma meeting on these subjects in recent years. It is 
specifically aimed at a round-table discussion of a pamphlet I was asked by 
the Duma to write (which has been translated into Russian and circulated to 
the Duma members) urging that Russia base its fiscal system on collecting 
natural resource and land rent (along with the surpluses of public utilities) 
rather than income, wage and sales taxes. Obviously, if Russia follows this 
tax system - which seems to me to be the only type of taxes it can collect 
under present conditions - the government will be collecting precisely the 
revenue that stock-holders in the gas, oil, minerals and other industries 
have hoped to obtain as dividends.

Unless already accredited to gain entrance to the building, reporters or 
other interested parties must be invited by a Deputy: their names have to be 
on a list at the entrance. Alternatively, names may be sent to Zvolinsky's 
office by contacting Fred Harrison at

I assume that the event will begin at 10 a.m. Journalists can 
telephone Mr. Zvolinsky's office (292 9382) to confirm the time and room 

I will be staying at the Rossia Hotel, and will be arriving around noon 
next Monday, Nov. 1.


Central Europe Review
25 October 1999 
R U S S I A: 
More Aid, Fewer Strings 
A new Western aid policy toward Russia
By David M Kotz 
The author is Professor of Economics and Research Associate at the
Political Economy Research Institute, University of Massachusetts at Amherst 

Since 1992, some USD 55 billion in international assistance has flowed into
Russia, including USD 8 billion in bilateral aid from the US, USD 14
billion from Germany and USD 23 billion from multilateral
institutions.(<#a1>1) Yet Western aid has not averted the economic disaster
befalling that country. Russia's GDP has nearly halved in seven years of
depression. A small group of fast operators has acquired great wealth,
largely by unsavory means, while 55% of the population has been reduced to
growing half or more of their food in small backyard plots.(<#a2>2) As much
as 80% of transactions are conducted by barter and other money
surrogates.(<#a3>3) The profound trauma that Russian society has gone
through has produced over two million premature deaths since 1992 from
elevated rates of alcoholism, suicide, homicide, infectious diseases and
stress-related ailments.(<#a4>4) 

Recently, some have suggested that, had the West been more generous with
its aid, the outcome might have been different. Others argue that giving
more would only allow more to be siphoned off by corrupt officials, shady
financial operators and organized crime figures. While the West could
afford to give more, doing so is not the key to a successful aid policy.
Neither does the solution to the aid problem lie in the design of more
effective control methods to ward off the theft of aid dollars.
Paradoxically, despite the probable theft of some international assistance
funds in the 1990s, the means to a successful aid policy toward Russia lies
with fewer, not more, restrictions on its use. 

Western aid and the "Washington Consensus" 

The problem with Western aid to Russia has been the tying of such aid to an
unworkable economic policy. In order to get Western assistance, Russia has
been required to follow a transition strategy, known as the "Washington
Consensus," which means adherence to the trilogy of immediate
liberalization, privatization and stabilization (the latter meaning
contractionary fiscal and monetary policies).(<#a5>5) While Russia's
adherence to this strategy has been imperfect, it has hewed closer to the
strategy, for a longer period of time, than most observers had expected,
particularly with respect to privatization policy. 

The resistance in some quarters to the possibility that the Washington
Consensus policies might bear some responsibility for Russia's economic
disaster calls to mind a time-honored tradition in American Presidential
politics. When the presidency shifts from Democratic to Republican hands or
vice versa, the new occupant of that office traditionally blames any
economic troubles that emerge during his term on the misdeeds of his
predecessor. However, by the end of the second four-year term, such excuses
tend to wear thin. It has now been nearly eight years since the demise of
the Soviet Union, and it is time to admit that the Western-inspired
policies followed by Russia bear responsibility for what has happened
there. It will no longer suffice to keep saying, "We didn't realize how
rotten the Soviet economy was." 

The idea underlying the Washington Consensus was that a publicly owned,
centrally planned economy could be rapidly converted into a capitalist
market system by privatizing enterprises and freeing them from state
support and control. However, Russia's enterprises, designed as cogs in a
central planning mechanism and saddled with many social welfare
responsibilities, are not easy to turn into profitable capitalist firms.
Rapidly privatizing state assets in Russia, with its vast wealth in natural
materials and with no legitimate wealthy class to buy them, was bound to
set off a brutal and corrupt scramble for that wealth. It is not surprising
that the winners of this sordid competition are figures more interested in
sending their assets abroad than in developing productive economic activity
at home. Sudden liberalization brought high inflation that distorted
economic incentives while opening the economy to foreign competitors before
Russian enterprises had a chance to restructure and reform. Contractionary
monetary and fiscal policies assured a deep depression and deprived
enterprises of funds necessary for modernization and restructuring.(<#a6>6) 

Russia's transition polices have stimulated an outflow of capital estimated
at USD 140 billion since the beginning of 1992.(<#a7>7) The inflow of
Western aid pales beside the flood of capital leaving the country. Russia
would have been better off with no Western aid at all if, in the absence of
the policy strictures that accompanied aid, it would have been able to
prevent the flight of capital. 

The West did not just insist that Russia follow particular economic
policies. It also sought, rather openly, to pick the officials to carry out
those policies. The West backed a small group of ardently pro-Western, and
pro-American, figures who earned the Western media title of "economic
reformers." This group has not aged well, picking up more than its share of
corruption charges. They are widely viewed in Russia as not just corrupt
but incompetent. However, whatever the merit of the former charge, the
latter one is misplaced, in that no amount of competence could have
produced good results with a policy unsuited to the conditions of the
country to which it is applied. 

Lessons from history 

The West in general, and the United States in particular, has made the
classic mistake of seeking to impose a particular economic model, believed
to be successful at home, on a country with a greatly different history,
culture and pre-existing economic structure. A brief look at history holds
a useful lesson in this regard. 

After World War II, the Soviet Union imposed its own economic (and
political) model on the states which it controlled in Eastern and Central
Europe. The problems and distortions resulting from this eventually
undermined the Soviet Bloc. By contrast, the United States, despite
possessing enormous influence over its allies (and defeated former
adversaries) in 1945, took the route of providing generous economic aid to
them with few policy strings attached. Britain nationalized industries
right and left. Germany developed its "social market" model with a generous
welfare state. Japan pioneered industrial policy including strict controls
on domestic and international capital flows. Somewhat later, South Korea,
despite being totally dependent on the US for its survival, was allowed to
develop its own variant of the Japanese model. 

All of the above countries, except perhaps Britain, experienced significant
economic success in the postwar decades. Each country followed an economic
strategy developed by indigenous leaders who understood the relevant
features of the country's history and culture. In each case, a reasonable
economic strategy emerged out of the political process of the country

One cannot claim that a hands-off approach to aid-giving always succeeds.
But one can argue that a hands-on approach - that is, aid conditioned on
the acceptance of a foreign economic model - is virtually guaranteed to fail. 

China: a contrasting example 

It is notable that, in the recent experience with economic transition from
state socialism to a market system, the only clear success to date - China
- is based on a home-grown model of transition. Not requiring outside
financial or political support, China has been free to devise its own
eccentric path to a market economy. Nearly directly opposite to the
Washington Consensus wisdom, China retained state controls on the economy
for decades, loosening them only gradually; privatized few enterprises,
instead encouraging the development of new, nonstate, market-oriented
enterprises; and followed generally expansionary fiscal and monetary
policies, including large public investments in state enterprises and in
infrastructure. This path has produced rapid economic growth every single
year since it was launched twenty year ago. China's GDP grew at an average
annual rate of 9.5% from 1978 to 1998 (increasing more than six-fold),
perhaps the best macro performance of any country in that period.(<#a8>8)
By contrast, the supposed success stories of the Washington Consensus, such
as Poland and the Czech Republic, can only boast that the deep depression
did not last so long and was eventually followed by a recovery. 

A new aid policy 

It is not too late for the West to be helpful in solving the devastating
economic problems facing Russia. The best way to help would be to make a
fundamental change in Western aid policy toward that country. Instead of
requiring adherence to any particular economic model, the West should offer
generous economic aid with very limited strings attached. 

The choice of a strategy for economic recovery and transformation should be
left up to the Russian political process to determine. Elections to the
Duma are coming in December with the Presidential election to follow six
months later. The unfortunate spectacle in 1996, when the West intervened
in Russia's presidential election to favor one candidate, should not be

An indigenously developed economic strategy is not guaranteed to succeed in
Russia, but at least there is a chance that it will. Russia has many able
economists, who may not speak English, but who know something about the
Russian economy and society. It is time to stop blessing "our man in
Moscow" and let the Russians solve their own problems. Not only is this far
more likely to succeed, it would avoid the blame for any further failure
being laid at our doorstep, with all the political dangers that entails. 

Few strings attached does not mean no strings attached. It is entirely
reasonable to require as a condition of aid that the Russian government
respect the human rights of its people. It is also reasonable to receive an
accounting of the use of aid funds to ensure that they are employed in the
manner intended. However, adherence to a particular economic model should
not be required. Russia should have the right to make its own choices -
between laissez faire and state guidance of the economy, between private
charity and a welfare state, between an export-oriented development
strategy and one based on its internal market, between private business and
public enterprise. These are not matters of human rights, and countries
should be free to make their own choices. 

Russia would benefit greatly from two specific types of aid. One is relief
from its crippling foreign debt, much of which was inherited from the
Soviet Union. The West should be willing, at the least, to postpone
repayment on a large part of that debt for a transitional period of five or
ten years, allowing Russia to apply its export earnings to other purposes
in the interim. Second, the West should provide more technical assistance
to aid in the modernization of the Russian economy. 

It is sometimes forgotten that Russia should not need a large quantity of
international aid. This is a country that usually runs a trade surplus, due
to its raw materials exports. It should be able to purchase most of what it
needs from abroad. It could do so if the outflow of capital were stanched.
The West should not complain if Russia takes strong steps to accomplish
that end. Perhaps the current Russian money laundering scandal will prepare
the way for Western acceptance of, and cooperation with, some kind of
capital export controls by Russia. 

Russia should be no less free to choose its path of recovery and
redevelopment than was Britain, Germany or Japan fifty years ago. What has
changed is the absence of a common enemy - the USSR - that once compelled
American leaders to see the wisdom of accepting different economic models
among its friends and allies. Standing now as the lone superpower, the US
suffers from a tendency to feel omnipotent and to imagine an ability to
shape other countries in one's own image. This temptation should be
resisted and wisdom reasserted in Western aid policy. 

1 US Central Intelligence Agency, Handbook of International Economic
Statistics (Washington, DC), 1998, Table 77, and 1996, Table 128. The data
cited cover 1992-97. Figures for aid disbursed for 1998 were not available 
at the time of this writing. 
2 The figure for self-provision of food is from a survey reported in RFE/RL
Newsline, vol 3, No 28, Part I, February 10, 1999. 
3 This estimate was for the fall of 1998, reported in Stanislav Menshikov,
Eurasian Commonwealth and Eastern Europe: Monthly Report, November, 1998. 
4 Mark G Field, David M Kotz, and Gene Bukhman, "Neoliberal Economic
Policy, State Desertion, and the Russian Health Crisis," in Dying for
Growth: Global Restructuring and the Health of the Poor, Institute for
Health and Social Justice, Monroe, ME: Common Courage Press, forthcoming
5 Other names for this transition strategy, each conveying a slightly
different meaning, include shock therapy and neoliberalism. 
6 A more thorough critique of the Washington Consensus as applied to Russia
can be found in David M Kotz with Fred Weir, Revolution from Above: The
Demise of the Soviet System (Routledge, 1997), chapters 9-10. 
7 Institute of International Finance, Capital Flows to Emerging Market
Economies, September 25, 1999, p. 10. 
8 International Monetary Fund, World Economic Outlook Database, September


PSB NewsHour
October 25, 1999

Heavy fighting between Russian military forces and rebels in the breakaway
republic of Chechnya escalated Monday as Russian troops advanced toward
Chechnya's capital city. 

JIM LEHRER: Russia bombs Chechnya. We start with this report from Mark
Webster of Independent Television News. 

MARK WEBSTER: Massive Russian troop reinforcements continue to pour into
the area around Chechnya. Some 100,000 men have now been sent giving the
Russians and overwhelming superiority of forces. Yet as the last road out
of the breakaway republic was closed off, Moscow was clearly still nervous
about launching an all-out assault on the rebels' remaining strongholds.
Instead, Russia has continued to pound villages with their heavy guns,
attacks which the Chechens say have caused numerous civilian casualties.

Here President Yeltsin's meeting with Prime Minister Putin was called to
discuss the next phase in the conflict. The prime minister's popularity in
Russia has soared since the military action began, because it followed a
spate of apartment bombings in Russian cities which Moscow linked to
Chechen militants. Now that the break-away republic has been completely
sealed off from the outside walls, the stage does seem set for an all-out
attack on the Chechen capital, Grozny. Meanwhile Russian soldiers have been
putting on demonstrations to encouragement young Russian conscripts. If
Russia is not to suffer another humiliating reverse in Chechnya, the morale
of its troops will be crucial.

JIM LEHRER: Gwen Ifill takes it from there.

The war in Chechnya 

GWEN IFILL: For more on the war in Chechnya we turn to MICHAEL McFAUL, a
senior associate at the Carnegie Endowment for International Peace and
Assistant Professor of Political Science at Stanford University -- he
returned from Moscow last month; and William Ury, Associate Director of
Harvard University's program on negotiation and author of "Getting to
Peace;" he participated in negotiations between Russia and Chechnya in
1997. Mr. McFaul, there are a hundred thousand Russian troops at last count
in Chechnya, many of them surrounding Grozny sort of like a noose, the
capital city. What's going on, and what happens next? 

MICHAEL McFAUL, Carnegie Endowment: Well, what's going on is Russia is
reinvading Chechnya. This is a frontal assault; it's a full conventional
war. They are poised to take Grozny again. In my opinion, they are
repeating the mistakes of the last Chechen war from 1994 to 1996, but most
Russians don't see it that way; they want to carry this war out to the end,
and they look poised to do it.

GWEN IFILL: Mr. Ury, is that true? Are they repeating the mistake that they
made before, is there some other ending in sight for this?

WILLIAM URY: No. I think actually what's going to happen is again there is
going to be a lose/lose outcome here, where it's an eye for an eye and we
all go blind. The Russians look -- they look poised to win; they're
confident of victory, but I think, as before, they're going to find that
they wouldn't be surprised if there are spectacular acts of terrorism; as
soon as they pause, as winter sets in, if they go into the mountains, or if
they make the mistake of going into Grozny, I think they're going to find a
very determined resistance that will punish them, will leave all sides losers.

A political advantage to war? 

GWEN IFILL: Mr. Ury, we just saw that morale building exercise going on,
with Russian troops. Is that to build up the morale of the Russian troops,
or to send a good message to Russian folks at home?
WILLIAM URY, Harvard University: Probably both, but the last war showed
that, in fact, the morale went down sharply among Russian troops as the war
prolonged. You saw Russian mothers coming down to negotiate directly with
Chechens to free their sons, and, in the end, a battered Russian army chose
to withdraw.

GWEN IFILL: Mr. McFaul, Vladimir Putin, obviously, is a politician in all
this. He's seen his popularity rise. He was someone no one had ever heard
of last August when Boris Yeltsin appointed him. Is there a political part
of this as well?

MICHAEL McFAUL: There's no doubt in my mind that there's a political part.
The people in the Kremlin today, people that served Mr. Yeltsin, before Mr.
Putin, did not have a presidential candidate. Elections are going to be
held next summer; they searched around; they did not -- they went through
several prime ministers to find one. They arrived at Mr. Putin, and, like
you said, two months ago, he had a 4 percent approval rating; nobody even
knew who he was. This war has put him on the map; he's shown himself to be
a hard-liner; he wants victory, and the majority of people in Russia,
unfortunately, I believe, support him in that.

GWEN IFILL: Does that put him in position to be the likely successor to
Boris Yeltsin?

MICHAEL McFAUL: That all depends on how the war goes. Right now, they
haven't had very many casualties; they are about to take Grozny. But,
remember, they took Grozny last time; it didn't mean anything. They were
there for two more years after taking the capital. The Chechens are going
to fight a guerrilla war, not a conventional war. And the longer the war
goes on, the more casualties there are, and the more likely his numbers
will start to fall.

The international community responds 

GWEN IFILL: And the more likely a quagmire develops.

MICHAEL McFAUL: Well, there's no doubt in my mind there's going to be a
quagmire no matter what. This is not going to be a short operation. If the
Russians decide to stay, the Chechens are going to fight not years, perhaps

GWEN IFILL: Mr. Ury, Boris Yeltsin, he is -- we've been watching his health
go up, go down, and we can't tell whether he's in the middle of this or on
the sidelines. What is his role?

WILLIAM URY: I don't think he's that much involved in this. I think he's
frail and ill, and I think he's leaving this to Mr. Putin, who's advancing
his political prospects by trying to show an iron fist here, and I do think
that in the end, as Mr. McFaul indicated, it will be a quagmire. And the
only -- the parties, themselves, can't get themselves out of this. I think
it's going to be up to the surrounding community, to the third side, as it
were, which is people like President Auchepa in Gusetia, President Chiniav
of Tatarstan, backed by the international community, including ourselves,
if there's ever going to be a peaceful way out.

GWEN IFILL: Well, you talk about the international community. You just
heard Madeleine Albright's words somewhat tougher than they were even a
week ago. Is that just talk, or is there a role for the United States in this?

WILLIAM URY: Well, I think there is a real role for the United States. One
is to show our disapproval, but more constructively, it's to get the United
Nations or the OSCE, the Organization for Security & Cooperation in Europe,
involved to convene an ongoing conference on the Caucasus, not just on
Chechnya, because all these issues are interrelated, and this war could
very likely lead to unrest in Dagestan, in Gusetia, and even in the heart
of Russia.

The causes behind the conflict 

GWEN IFILL: Mr. McFaul, what do we really know about what caused this
conflict? We understand from the Russians, which is where we're getting
most of our information from, that their feeling is they're going and
they're putting down terrorism right now in Chechnya. It's retaliation for
the -- bombings which happened in Moscow and other places, who state they
are being caused by a band of Islamic militant terrorists. Is that true,
and, if it's not, is there any other way of knowing what the truth is?

MICHAEL McFAUL: Well, I think there were two precipitants; one was the
bombing that you just mentioned in Moscow, where 300 innocent Russians were
killed and terrorized the city of Moscow for the first time really in this
century. The second was when Jamael Basaef and a group of so-called Islamic
militants invaded Dagestan, the republic that borders Chechnya, with the
intention to liberate Dagestan and to create a greater Islamic republic in
the Caucasus. Mr. Putin then, I think, was right to respond. That was a
terrorist act; there's no other way to describe it. And he counterattacked
with a Russian military offensive; however, then they got cocky; then --
they had a few victories; it was easier than they thought; and they decided
let's go for broke, let's take back Chechnya full stop.

GWEN IFILL: Are the Chechens fighting back, Mr. McFaul, or are they pretty
much just sitting back and digging their heels in?

MICHAEL McFAUL: So far, we've seen little resistance to the Russian
military moving in, and that's to be expected. They're guerrilla fighters;
they're not conventional fighters. They're going to wait till the Russians
come in; they're going to settle in for a long, long fight, and I mean
years, not just months, and terrorize through guerrilla attacks the Russian
occupying force in Chechnya.

GWEN IFILL: Mr. Ury, as you know, the international community mostly gets
involved when they feel that there's a strategic interest at stake.
Obviously, in the Caucasus region there's access there is access to oil.
This is a nuclear-capable region. Are these enough reasons to spur other
people to the bargaining or to make the two combatants feel that they have
to sit down to work out some sort of deal? 

Mr. Putin's possible strategy 

WILLIAM URY: I think so. I mean, after all, you're talking about the
possibility of severe instability if this spreads -- in a nuclear-armed
federation that has its nuclear weapons aimed at us, actually -- can land a
nuclear warhead within 30 minutes of us right now. You're talking about an
area, which is not just a remote part of the area. This is right next to,
you know, the next Middle East, the single greatest, biggest source of oil
where there are oil pipelines... a lot depends on if you have terrorism
there, it's going to affect all of us. And that's not to speak of the moral
issue here which is you have close to 200,000 refugees, you have thousands
of people dying again, you have 60,000 people who died in the first round.
And I think we have an interest, a strategic interest and a moral
obligation to intervene constructively to try to produce a more peaceful

GWEN IFILL: Mr. McFaul, it sounds like Mr. Putin is interested very much
in splitting up, playing, dividing and conquering among Chechens
themselves. Is that something which might be able to work for him
politically as well as militarily? 

MICHAEL McFAUL: Well, so far it's definitely the strategy. What they want
to do is the following: They want to occupy as much Chechnya as they can,
hold parliamentary elections in December of this year and then say those
that win from the parliamentary elections, they now can constitute the new
representatives of Chechnya and those will likely to be pro-Moscow forces.
It's definitely what he's trying to do now, and it's very, very popular. I
think it's important for our viewers to understand that the vast majority
of Russian citizens now support this operation. That was not the case in
1994. Most dramatically in my opinion are Russian liberals, those that were
out there demonstrating against the war back in December of 1994 are now
supporting Mr. Putin. 

GWEN IFILL: But, does that begin to turn once the first body bags come back
with actual Russian soldiers in them? 

MICHAEL McFAUL: Well, I think it does over time but there's another missing
element in comparing the first Chechen war with this one and that's the
independent media. In December of '94 and throughout the war we had
independent coverage that brought home those pictures of body bags to the
Russian people. That's absent today in Chechnya. 

The outlook for peace and stability 

GWEN IFILL: So what do you think will happen, Mr. Ury? Do you think there
will actually... do you think they're going to invade Grozny proper, or do
you think they are pretty much going to stay outside wait and see what
happens and try and make this work? 

WILLIAM URY: Well, I don't have a crystal ball. They'd be sadly mistaken if
they invaded Grozny again because they did this twice before and were
knocked out twice before so I think they're probably going to... they will
invade Grozny but only on an opportunistic basis, if they really see it as
an opportunity. I think they probably pretty much learned their lesson
there. I do think that it's going to grind on, and I do think that morale
will start to plunge as winter starts. And I do think that it's really up
to us in the surrounding third side, as it were, to really get involved to
do three things. One is to contain the violence by trying to negotiate some
kind of ceasefire, by putting in international observers, possibly even
international peacekeepers if the parties consent. The second is to try to
resolve the outstanding issues, and that's not going to be easy. But
through organized negotiations, through a conference of the Caucasus I
mentioned, through a council of the elders - which is an old Caucasian
tradition for settling disputes -- they might be able to make progress.
And, thirdly, very importantly is long-term prevention. I mean, the economy
has been devastated. That's what's providing the recruits for these raids
on Dagestan and for terrorism. And I think - you know -- the outside world
can do a great deal to help rebuild the Chechen and in general the economy
of the Caucasus and to rebuild a shattered society to make sure that war
doesn't happen again. 

GWEN IFILL: Is that a short term or a long term or even a possible
solution? Mr. McFaul? 

MICHAEL McFAUL: It's definitely a solution and I agree with all the points,
but I would also point out that right now the Russian government and the
Russian people are not prepared to do those sorts of negotiations. The one
thing they say time and again, driving over here I was having a debate with
my Russian colleague on the phone, a liberal, a close friend of mine. And I
was shocked by what he was saying in terms of the support. And he said one
thing to me, he said, listen, Michael, there's a fascist regime in
Chechnya; we are liberating the Chechens as much as we're fighting
terrorism. And while that's the mindset I don't think you're going to see

GWEN IFILL: Gentlemen, thank you both very much. 



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