Blame the Know-It-All West

Russia today is mired in a crisis much deeper and more destructive than the Great Depression of 1929-1932. The Russian people have placed the blame where it belongs: on their own leader, Boris Yeltsin, and his first-name-basis Western allies--Bill and Helmut--who, under the rubric of “reform,” pushed market shock therapy on them.

In particular, the present crisis signifies such a complete failure of American policy toward Russia that, given the right spark, relations could rapidly deteriorate or even fall into the pattern of a new Cold War. Anti-American sentiment is already higher now than at any time since 1991. Calls for the resignation of Yeltsin are mounting.

To avert a replay of the bitter times of tension, we need to start over at the beginning, reconstructing on a new footing the relations established so hopefully with the end of the Cold War and the demise of the Soviet Union.

The financial panic caused by the incompetent Kiriyenko government, with Viktor Chernomyrdin standing in the background, made the situation critical. But Sergei V. Kiriyenko’s default and devaluation only threw a burning match into a vast pool of gasoline. The Russian economy was already in a highly flammable state due to the years of shock therapy initiated by former Prime Minister Yegor Gaidar in the early 1990s that elicited so much enthusiasm in the West. As I and others warned as early as 1992, this kind of “reform” would only deliver the final blow to an economy that had been ailing from the time of the Brezhnev stagnation.

Gaidar and his young team had no practical experience in free markets when they were put in charge of wrecking what was left of the Russian economy. Unknown economists, they had industriously studied and practiced Marxist economics. Then, having read Friedrich von Hayek and Milton Friedman, they immediately became zealous economic liberals. In the space of several months, they wanted to wipe away the social, financial and industrial infrastructure of 70 years of centralized socialism and put in its place the kind of free markets that took centuries to develop in the West. If people suffered inordinately, it was only proof of just how bad the old system really was.

Of course, these market extremists would not have been able to change anything without a president who transformed their ideas into government policy, the International Monetary Fund that financed those policies and the Western leaders who embraced them.

President Yeltsin has only a very vague understanding of macroeconomics. Thus, a very important role was played in the destruction of the Russian economy by outside advice, above all from Western leaders, the IMF and Harvard economic specialists. Their advice to stick with shock therapy at all costs was as unanimous as it was wrong. As a result, today the Russian gross domestic product has fallen by 50% from the time of perestroika. The standard of living has plummeted, the mortality rate is up and the birth rate is down. Education, health care, science and culture have tragically deteriorated. Crime and corruption are rampant.

Despite the obvious fact of its total failure, the West still clings to the same idea of “reform,” first initiated by Gaidar, promising aid in return. This was Clinton’s warmed-over message at the last Russian-American summit.

The West, it seems, fails to understand that the financial collapse of Russia was not an unfortunate incident, but the inevitable outcome of the economic reforms pursued since 1992. It is this predicament that presents the new prime minister, Yevgeny M. Primakov, with such a formidable task. It helps to explain why he has been so slow in forming a cabinet and working out a clear and plausible economic program.

In the eyes of the Russian people, all the men who have been in charge have become a joke. The myth that the Western leaders would save their friend Boris from himself and Russia from his failed policies has been shattered. The Russian people now suffer because of that friendship, and they know it. The idea of the market economy as the best way to go has also been discredited. Why, we ask, is the way we organize our economy the condition of our friendship with the West? Why is it even the business of the West? We want to continue on the course of democratic development. Ought that not be the foundation of our relations?