kagarlitsky testimoney

Michael Pollak mpollak at panix.com
Sun Sep 20 22:25:29 PDT 1998

> From: Brad De Long <delong at econ.Berkeley.EDU>
> Subject: Re: kagarlitsky testimony
> I do have some marginal notes on Paul Krugman's diagnosis of Russia's
> current crisis, which runs:
> The most striking thing about this story is how self-destructive the
> behavior of the oligarchs seems to have been. It is very much in their
> collective interest to have the current regime survive, so that they can
> continue to profit from their ill-gotten empires. Why couldn't they get
> together and agree to pay enough taxes to keep their rackets going?
> Krugman is puzzled that Russia's robber barons appear to be acting much
> more like short-term loot-and-run plunderers than like people who are in
> it for the long haul. This surprises Krugman. This surprises the U.S.
> government--which thought by now to see a lot more people willing to pay
> taxes to the regime than we now see--and it surprises me.

A possible answer was sketched out in _The Economist_ a few weeks ago (the September 5-11 issue, with the melting world on the cover). There, in the Europe section, beneath the heading "Now For the Bad News," they said

"The oligarchs' origins were well caught in a paper written by Thomas Graham, an American diplomat, in 1995. He argued that power in Russia had been captured by a sytem of "clans" -- loose-knit groupings of industrial and financial interests, each with a clique of politicians at its head, a mass-media outlet under its control, and strong-arm men at its disposal. The clans competed to carve up the wealth and power of the state. They acquired state assets cheaply thorugh rigged privatisations. Their banks grew fat on free floats of state money. It was a splendid system for all within it. But to remain stable, it required all the clans to accept the authority of Mr. Yeltsin as an independent arbiter. By sacking political leaders he could knock down clans that grew too ambitious; and it was in his own interest to protect essentail functions of government, such as monetary policy, from direct clan control."

And, the argument implies, when Yeltsin became too weak to be the imperial flywheel, the grandees tore the system apart, as grandees have ever been wont to do. It's not only that short term interest is opposed to long term (although that's been enough to bring down many a system.) It's that the short term interests are so rapacious, that if you don't climb to the top and screw the others, they will try to wipe you out. So there isn't any basis for a compact wherein each of them to makes a sacrifice to keep the whole system going. There's no trust. War of all 7 against all 7.

But then, I don't know anything about Russia except 9th hand. I can only say this sounds coherent.


__________________________________________________________________________ Michael Pollak................New York City..............mpollak at panix.com

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