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Who Lost Russian Reform
By Grigory Yavlinsky

With the adoption of the “anti-crisis program of the government” made up of 60 items, the world “crisis” became official in Russia. But the authorities are moving very slowly toward an understanding of the fundamental reasons for this crisis.

For months they spoke of the “consequences of the crisis in Southeast Asia”. Lately they have been talking about a “plot of stock-market speculators who are trying to empty our pockets”. Strangely enough, Central Bank chairman Sergei Dubinin, in particular, has taken great pains to develop this theme. But if he complains about a plot of some successful speculators, then he is complaining about his own unprofessionalism.

If we want to be cured, it’s high time to make a proper diagnosis. We must determine whether we are suffering from Asian flu or some more serious decease - Russian pneumonia?

An attempt to make this diagnosis was made by Leon Aron in his article “What stalled Russian Reform”. (Washington Post, June 12). The author justly points out that by blocking necessary legislation (land privatization, and tax code) the leftist majority in the Duma negatively affects the course of the reform in Russia.

But focusing exclusively on this only factor he gives, in my view, a misleading perspective on the current Russian social and economic scene. He depicts it as an almost Manichaean struggle between Communist Evil and Democratic Goodness, embodied by President B. Yeltsin and his regime. I am not going to elaborate here on performance of Democratic Goodness in Chechnya where tens of thousands civilians were killed. What I would argue here is that the ruling regime is even more responsible for Russian current predicament than the communist opposition.

This is becoming evidently clear to many top Western officials who have been working closely with the Russian government for many years. Among them are IMF Managing Director Michel Camdessus, who warned Yeltsin of the “dangerous similarities between the chaebols, Korea’s closely held family conglomerates, and the prevailing relation among oligarchy members in Russia”, and U.S. Treasury Secretary Lawrence Summers, who said that “one of the real dangers Russia now faces is the same kind of crony capitalism that helped cause the Asian financial crisis”.

Russia’s fundamental problem is not communist hard-liners in the Duma but its oligarchic system of incestuous collusion between Power and Money. This system indeed presents more dangers than Korean chaebols or the Indonesian chuko.

Before it became evident that the system of chaebols was detrimental to further development of the Korean economy, the chaebols had created modern branches of industry that won a place on the world markets for automobiles, electronics and shipbuilding.

But what has the chaebol of the speculator in automobiles, Boris Berezovsky, or the chaebol of Vladimir Potanin, a private banker inclined to suck the state budget dry, created in Russia? Where are the industries and technologies created by them or highways and scientific cities built by them as is the case with Tegjon or Kwangiu in Korea?

The leaders of the economy in Korea and Indonesia turned out to be people not without vices. But they created modern economies in their countries from nothing. Our oligarchs turned out to be capable only of stuffing their pockets with the riches of a former superpower.

The government now speak for the first time of bankruptcies and the sale of debt. In practice this would mean a new redistribution of property on a large scale throughout the country. There would be a need to remove all the thieving directors who were appointed by the authorities themselves and give the companies over to effective managers. But, first of all, where are you going to get these effective managers? Second, the current masters of the Russian economy - from the oligarchs to the so-called red directors - would not await their lot passively.

A year ago then First Deputy Prime Minister Anatoly Chubais got convinced of this. After creating a system of corporate capitalism and personally appointing superwealthy people who got rich at the expense of the state budget, he naively supposed that starting from any moment he could introduce a new system of honest and transparent rules of the game. The oligarchs who, like drug addicts, could no longer kick the state budget habit, started a war of moral destruction against Chubais. Among other things, they informed us about the interest-free credit he received in 1996 and about his stormy writing activities in 1997 and 1998.

The current young and not-very-young reformers will undergo a no-less-concentrated attack if they try to establish order in the economy. And they will turn out to be no less vulnerable than Chubais. Russia’s Power and Business have long befouled themselves together in the carnal sin of corruption and theft.

And it is quite natural that the only Democratic Opposition left in the country - Grigory Yavlinsky’s Yabloko faction denounces the crony capitalism system, that Yeltsyn’s successive governments have been building on in the country. But it is unjust and hypocritical to put Yabloko on the same footing with the communist for this reason as Mr. L. Aron does in his article. And it is merely untrue to state that “in virtually every vote on economic matters, the Communist were joined by Grigory Yavlinsky’s Yabloko faction”. This statement is refuted by every Duma voting protocol. Yabloko’s staunch support for private property on land is well known. A new tax code which “would have reduced the number of taxes from more than 300 to no more than 5 and would have significantly lowered the rate for both individuals and business” was actually introduced not by the government but by the Yabloko faction. And the of vote on “a Duma low that limited to 25 percent (from the current 30 percent) foreign ownership of the state operated Unified Energy System electric monopoly”is as follows: Communist - 92% for; Yabloko - 0% for. It seems that Mr. L. Aron both in his conceptual perceptions and factual data fall victim to misinformation by his Russian sources.


ei Stepashin on Grigory Yavlinsky's proposals