Wednesday, August 21, 2002

James Kenneth Galbraith reviews a few books on America's economic policy towards Russia over the past decade or so. His review often echoes other critiques, as when he says:

The preconditions for a successful market economy did not exist, nor could they be created in any reasonable time. Indeed, as Granville and Oppenheimer point out, they were contradictory. Both property rights and competition are necessary in principle, but an antimonopoly policy would, in the specific circumstances, have simply undermined property rights. The result was that monopolization went unchecked, competition could not emerge and private-property rights became merely a cover for asset stripping, looting and capital flight.

and when it stresses the dogmatism of the advocates of radical Russian reform...

Western reform failed in Russia not only because the recommendations were inappropriate to Russia,but also because they were based on a caricature of economic governance in the "free-market" West. It wasn't merely that the outside advisers did not understand Russia; they weren't very good at economics.

... a point not lost on even Michael Gorbachev, who recounts that at the 1990 G-7 meeting:

I was struck in particular by Japanese Prime Minister Toshiki Kaifu. One could have imagined that his remarks were from the representative of a country with no government economic regulation. Similar views were expressed by U.S. President George Bush, Canadian Prime Minister Brian Mulroney, and British Prime Minister John Major. ...

But it adds a glance at the intellectual failures of American political leadership, as seen in, for instance, Clinton's Russia hand, Strobe Talbott:

Talbott shared with Clinton a tendency to view diplomacy in terms of contests and teams. Friends had to be supported, their adversaries opposed. This meant in practice that support for Boris Yeltsin took precedence over policy, time and again. (On one occasion, to make the metaphor explicit, Talbott finds Clinton watching a Yeltsin speech on one television and an Arkansas Razorbacks game on the other. "You know who I'm rooting for, in both cases," the president explains.) When an honest old Soviet, Georgi Arbatov, aligned with Yeltsin's opponent Ruslan Khasbulatov in 1992, "spewing accusations about how the government was bankrupting the state and beggaring the people," Talbott was "saddened." That the accusations had merit did not enter his mind, even though he could see for himself (and says so) that inflation was running 2,500 percent per year, with "devastating" effects on consumers and pensioners (that is, on all ordinary Russians).

As Galbraith goes on to explain, economic "reform" seems to have been actually killing the people --- the death rate shot way up, perhaps due to the collapse of the health care system.

But Talbott was also blindly devoted to the radical reform program, at one point explaining to Viktor Chernomyrdin that the radical reform principles, as reflected in the IMF's lending rules, "were a reflection of the immutable principles of economics, which operated in a way similar to the rules of physics". Physicists wouldn't dream of using their techniques to model the behavior of systems as complicated and unpredictable as people, but economists are just that much smarter... (Update: corrected attribution, to Galbraith fils, not père. Ooops --- thanks to a correspondant).


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