How to Solve the Economic Crisis in Russia?

Ariel Reinheimer areinh2 at
Mon Oct 19 23:23:08 PDT 1998

America, Please Leave Us Alone To Solve Our Problems

by Boris Kagarlitsky, Senior Research Fellow

at the Institute for Comparative Political Studies

of the Russian Academy of Sciences

[Boris Kagarlitsky's response to Fred Hiatt's "Who Lost Russia?" in

the Washington Post, which the Post declined to run.]

I read Fred Hiatt_s "Who Lost Russia?" [Washington Post, September 20, 1998] with dismay.

Though Mr. Hiatt agrees that the policies of IMF and G7 in Russia failed, he says that "to

acknowledge the failure is not quite the same as saying the policy was wrong." One wonders how

policies are to be judged, if not by their effects.

According to Mr. Hiatt, Russia before the "reforms" had an advanced space and nuclear sector, but

almost everything else was Third World; most of its factories produced goods worth less than the

raw materials that went into them; many cities were built in remote and frozen areas where they

were guaranteed to be forever wards of the state.

Does he really think that Russia was a Third World country? Soviet industry was certainly inefficient

and badly needed technological modernization. However, with all the problems it had Russia

managed to export the products of its manufacturing. Only after the "reformers" came to power did

Russia become totally dependent on the export of raw materials. Not only industrial exports declined

but enterprise performance and ability to compete internationally or on the domestic market

declined after privatization. The Russian economy became technologically even more backward

and the scientific community is in chaos. The Russian companies which are still able to export

anything now are those which were not privatized.

Mr. Hiatt doesn't know or pretends not to know that the Russian population before 1991 had a very

high level of education. That was our main asset and our chance to grow, assimilating modern

technologies. It is Russia that is now "exporting" its specialists to the US, not the other way round.

The people we "imported" from America were exactly those arrogant IMF advisors who new nothing

about Russia and, as it turned out, knew very little about the real workings of financial markets, but

who were willing to teach the Russian "barbarians" about everything.

The educational level of Russian population is now lower than 10 years ago, and our chances to

rebuild the country are also lower. Living standards of the majority of people collapsed, life

expectancy declined, infant mortality increased. We blame Stalin for killing people in the camps.

What about people starving to death in a "liberalized" economy? What about hundreds of thousands

of people who died because in the process of "reform" the health system collapsed? The

communists at least acknowledged their crimes under Khruschev and Gorbachev. The IMF has

never acknowledged the destruction they caused and probably never will.

Now look at the countries where IMF advisors were not allowed to dictate policies. One of them is

China, another is Belarus. China has had one of the largest growth rates in world history over the

last 20 years. Belarus had 10% growth in 1997 (for Russia 1997 was its best year since 1989 with

0% growth). Industry in Belarus had been much the same as we had in Russia, but Belarus had no

oil or gas to get easy money from abroad. Belarus didn't privatize their industry but restructured it

and modernized it. Now they are exporting to the same markets to which the USSR had previously

exported its industrial products. Russia lost these markets. Belarus is exporting to Russia and

competing successfully with Western products.

Of course Belarus is a police state and not a democracy. But there is one problem: its political

system is identical with that of Russia! The only difference is that their police and bureaucracy are

less corrupt. Have you ever heard of "Belarusian mafia"?

Those who blame Russian corruption for the failure of the "reforms" fail to acknowledge that it was

during the process of rapid privatization when corruption started to flourish. The Soviet system had

a lot of corruption as well but this was multiplied by the "liberalization".

The real story of what happened to Russia is very simple. There were tremendous problems and the

Soviet system was in crisis. But the "reforms" did not address the real problems. They actually

made things worse. And that is natural because so called reformers and their Western friends never

intended to rebuild the country or to improve the performance of industry. Nor were they interested in

democracy. What they wanted was just to use the crisis of the Soviet system as an opportunity to

loot the country. In that sense the "reforms" were a total success. Not only did "New Russians" loot

their own country; American companies did so as well. So don't be surprised that after 10 years of

such "friendship" more and more Russians are becoming anti-American (which was never the case

in the years of the "Cold War").

Please, leave us alone and let us resolve our problems ourselves. And stop supporting the

gangsters. Then, sooner or later we will get out of this mess and rebuild our country.

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