31 March 2015

Review, Janine Wedel, Collision and Collusion (1)

Janine Wedel, Collision and Collusion, Palgrave Macmillan (2001) 

Collision & Collusion
This book is extremely important for readers interested in understanding the present crisis in Russian relations with the West. Part of the reason it is valuable is that it was published at the dawn of the Putin Era, in the very year that the United Russia Party was founded. This book therefore is a look at the future from before the later revival of the Cold War.


Still, it's very clearly a polemical book. The author, Janine R. Wedel, soon after became a professor at George Mason University.1 An obvious implication of her subsequent books was that market economies represent an ideal of fairness, that can be achieved (and usually has been in the past). The author's critique of collusion in Central/Eastern Europe (CEE) was a prologue to her own private campaign against collusion in the West--where government officials retire to seven-figure salaries at the firms they erst regulated.2 Whereas her early work on USAID/HIID scandals in CEE focused on unethical/illegal collusion by Americans on foreign soil, her later work acknowledged this as a problem afflicting the West as well--indeed, the problem of the modern West.

As a consequence, while the book delves into sordid details about the administration of US aid to to CEE, there's no effort at balance: every decision made by US administrators of the aid is alleged to be wrong. I was struck by the spectacular one-sidedness: several times, comparing US assistance to EU assistance, she describes USAID programs with quotes from a partisan critic, while describing European programs in the words of the ministries that conceived them.3  More confusingly, the difference between USAID and the EU member states was not quite as cut-and-dried as she says. A lot of overseas development aid (ODA) was multilateral, flowing through institutions like the World Bank Group, the IMF, and the EBRD. Bilateral aid from Europe was more likely to take the form of trade credits rather than grants. Once one sorts out all this, the main difference was that the US government sought to bypass governments, and the European governments (in Central Europe, especially) did not (p.37). A logical problem with this is that European governments were relying on internal structures (their own finance ministries) to manage aid programs in support of governments directly--an intrinsically opaque system, which explicitly pursued close personal ties between the donor government and the officials of the government that was supposed to be reformed.

The obvious objection that Prof. Wedel ignores with this harmonious approach was that, in reforming governments like that of, say, Russia or Romania, the Western governments had an inherently adversarial relationship with the officials--their performance had to be monitored for compliance with reform objectives, on which the aid itself was conditioned. It's not a trivial objection because Prof. Wedel's criticisms focus almost exclusively on the flawed administrative process of guided reforms. What was the likely effect of US-led reforms on the economy of Russia or Ukraine? Readers may already believe, with good reason, that the transformation of the former USSR was so complicated that it's impossible to answer that, and that the flaws in the process are the only basis for judgment available (I hope I'll be able to respond to this argument later on). But in the meantime, she does mention that most EU/EU member state (EU/EUMS) assistance was directed to future EU members like Poland and Hungary, and assistance to CIS states tended to take the form of technical assistance.

There's no question she has an excellent point about the attitude of foreign governments providing transition assistance: the recipients wanted, and probably needed, actual material support, but what they got was a massive amount of "technical advice" and a rather small amount of material aid. In fact, this was a missionary enterprise in the sense that extreme purists of neoliberalism were sent to the ex-Warsaw Pact nations to remake them; any regard for local sensibilities was regarded as backsliding by the missionaries. Another aspect was that the money that supposedly went to CEE was very frequently a subsidy for market fundamentalist think tanks in the donor countries themselves. Economics is an inherently polemical, sectarian field of "research"; if the government funds a large number of hardline Thatcherites at universities in the USA, as missionaries to CEE, then economics overall will likely become more hardline and Thatcherite regardless of the policy outcomes.4

As an aside: Prof. Wedel and may of her sources were anthropologists, not economists. While they share the general Western enthusiasm for genuinely free markets (with unfree markets being evidence of corruption), they have a strong sympathy for the emotion trauma of the CEE officials and general public, for whom receipt of aid was inherently degrading. Several times Wedel mentions (e.g., pp.33-34) the humiliating parallels between Western aid for the Third World and aid for CEE; the distinguishing feature of Third World countries, of course, being the dependence of their governments on foreign aid (p.11). Wedel in this case hits at aid programs for both CEE and the rest of the world.


Most of my research for this review was focused on Russia.  For various reasons, the integration of Central European countries into the Western European economy was (a) well under way long before the collapse of the USSR, (b) tied to massive direct infrastructure investment in those countries by the EU/EUMS, and (c) facilitated by the small, segmented industrial systems of Visegrad nations (for market reforms, this is favorable).  However, there are a few points about Wedel's narrative on PHARE recipients I want to make.

(PHARE was the main EU program of aid to Central Europe; it excluded East Germany and the former USSR for various reasons. SEED was the main program from the USA for this region, and it was administered by the State Department.)

Zygmunt Wrzodaks, Polish rightist

Vaclav Klaus, Czech Republic
Outside of Russia, the main episode described is the privatization of the Ursus Tractor Factory, which had been one of the largest industrial facilities in Poland (pp.67-72).  Wedel's narrative of this is murky; we learn that the (Polish) management of Ursus chose (and foreigners paid for) a group of consultants, and the consultants advised the management to downsize staff and make some other changes.  Meanwhile, markets for the tractors collapsed and Ursus would prove to be un-privatizable. Also, there was some evidence that the Ursus employees, facing layoffs in a brutal recession, somehow blamed "foreigners."  This chews up a lot of time, but nothing meaningful is revealed.5

In regards to the failures at Ursus-Warsaw, Wedel quotes Deputy Manager Andzrej Polakowski, who complains that he didn't understand what the foreign consultants were doing at Ursus and thought they were answering mainly to foreign donors anyway.  Most readers may fail to understand from the telling that the management of Ursus was tunneling assets from the company.6  She also neglects to mention that Ursus Solidarity (the crucial factory's local branch of the labor movement) was at this time led by Zygmunt Wrzodak, a violently antisemitic vendor of conspiracy theories.7 The role of explosive political partisanship in CEE is never mentioned.

Turning to the Czech Republic (briefly), Prof. Wedel proudly mentions PM Vaclav Klaus, the first PM of the post-1993 state; he is described as rejecting foreign aid in a speech to the World Bank in 1993 (p.40). No doubts are ever cast on the impression of Klaus as having wisely turned his back on aid, with resultant success for the Czech economy.

Vaclav Klaus is actually a rather peculiar political figure in the Czech milieu: a combination of hardline economic liberalism (Austrian economics, actually) with very intensely conservative, anti-EU ideology.8  In his first term, he ardently sought EU and NATO membership, while keeping those institutions at arm's length. His term in office was accompanied by mediocre-to-poor performance for the Czech economy and ended in a severe crisis.9 The Czech Republic did in fact receive significant amounts of aid (see tables in back of book), although mostly from the American SEED program.

(Part 2:  The Chubais Clan)


Alexander Kura, Russia's Transition: International Help Or Meddling? Nova Publishers (2001)

Ioannis Glinavos, Neoliberalism and the Law in Post Communist Transition: The Evolving Role of Law in Russia’s Transition to Capitalism, Routledge (2010)

Milada Anna Vachudova "The Czech Republic: the Unexpected Force of Institutional Constraints", in Jan Zielonka, Alex Pravda, editors, Democratic Consolidation in Eastern Europe: Volume 2: International and Transnational Factors,  Oxford University Press (2001)

  1. Some of Prof. Wedel's other books include Shadow Elite: How the World’s New Power Brokers Undermine Democracy, Government, and the Free Market Basic Books (2009), a book which describes the modern world as qualitatively and massively more corrupt than in the past. Note her university is named for George Mason, a slaveowner who once wrote, "[Slavery] is daily contaminating the Minds and Morals of our People" (Kate Mason Rowland, ed., The Papers of George Mason, G.P. Putnam's Sons (1892), p.403.

    For the record, Prof. Wedel and I happen to (almost without exception) dislike the same things. However, she feels the need to insist everything is new; that "in the past," there was a sharp and reliable division of domain between different forms of power (military, commerce, and politics), and now there isn't. There is no way I can paraphrase this without sounding sarcastic, at least to myself. Part of the reason why I'm not repressing this petty objection is that GMU is about 95% anarcho-capitalist thinktank and 5% accredited university; like many anarcho-capitalist entities, it harbors a natural antagonism towards neoconservatives that it happens to share with the political left. See Stephen M. Feldman, Neoconservative Politics and the Supreme Court: Law, Power, and Democracy, NYU Press, (2012), p.3, or (from the opposite direction), Adam Wolfson, "Conservatives and Neoconservatives," in Irwin M. Stelzer (editor), The Neocon Reader, Grove Press (2004), p.223. Anarcho-capitalism is usually associated with "libertarianism" (in the USA); one of the most well-known partisans is Congressman Ron Paul (TX-14th district, s.1997-2013), whose criticisms of US foreign policy often sound remarkably like those of Noam Chomsky or Howard Zinn.

    The object is to woo mainstream liberals or leftists (readers of The Nation, for instance, which has published Wedel's work) to the cause of anarcho-capitalism. Most of Wedel's critics are targets of her books, like [neo]conservative economist Andrei Schleifer and Lawrence Summers.

  2. The most egregious example of this that I can think of is Commissioner Meredith Baker, lately of the Fderal Communications Commission, who ruled in favor of Comcast's acquisition of NBC and changed jobs four months later to Sr. VP for Governmental Affairs (i.e., in-house lobbyist) at Comcast (2011). It needs to be emphasized that there are a very large number of possible examples of this. See Robbie Feinberg, "The Comcast-FCC Revolving Door," Open Secrets Blog (18 April 2014).

  3. Programs developed by EU (or its member states) are described with the logical rationale, and no criticism of that rationale. Programs developed by the US are described without the rationale, or any explanation for their design; in fact, most descriptions are wholly in the form of criticisms by interested parties (i.e., members of CEE governments who needed to shift blame to the US government). See, for example, p.36.  An exception is the US Treasury Department's Financial Sector Technical Assistance Program (p.78) and the US Senate-initiated "Gift of Democracy" program (p.80) for parliamentary institutions.

  4. An example of this is Anders Aslund, the oft-mentioned Swedish economist who was funded to advise the government of Russia. A lot of Swedish and US "aid" to CEE consisted of paying Prof. Aslund to dispense his Thatcherism. Aslund had acquired prominence in Sweden because of the historic electoral victory of Christian Democrat Carl Bildt (1991); he received funding through HIID via the Russian Privatization Center (RPC), and his appointment as one of Washington's gurus undoubtedly gave him immense prestige (despite the extremely embarrassing trail he left behind in Russia, Ukraine, and Kyrgyzstan). In 2006, the austerity enthusiasts at the Peterson Institute took him on as a fellow; what was a lobbying agency and publisher of neoliberal apologia got a healthy injection of intellectual respectibility. On p.153, endnote154 discusses exactly who paid for Jeffrey Sachs and Aslund's work in Russia. Sachs claimed in a letter to Wedel he was mostly paid by the Ford Foundation (the Russian government denied he was ever an advisor; see end note 159). The sequence of end notes 153-159 is extremely interesting, and quite valuable.

  5. The problem of large, but economically unviable firms limping along in various forms of state receivership is not confined to the former Communist bloc. See the case of LTV Steel, in the United States; Riva D. Atlas, "LTV seems on the Verge of a Shutdown," New York Times (19 Dec 2001), read into the Congressional Record, V. 147, PT. 20, (19 Dec 2001-3 Jan 2002), pp.26887-26888.  Or see Stanley H. Brown, Ling: The Rise, Fall, and Return of a Texas Titan, Beard Books (1999).  Ling is the "L" in LTV, one of the most bizarre and tragic concoctions in US industrial history

  6. Patrick Heenan, Monique Lamontagne, Central and Eastern Europe Handbook, Routledge (2014), p.7.  The passage also explains why this happened just then.  It's easy to see why the management of Ursus might want to attack the foreign interlopers; they likely felt that the consultants were treating them and the local establishment as suspects in a crime, which in fact they were. "Tunneling" is a type of white collar crime in which a manager uses his position to transfer assets of the firm to another business entity he controls. 

  7. See Rafal Pankowski, The Populist Radical Right in Poland: The Patriots, Routledge (2010), p.71.  At this time, the Ursus local of Solidarity was particularly important in compelling (through strikes and marches) the Polish authorities to continue subsidizing Ursus.  Prof. Wedel does mention Solidarity Ursus as a major factor in the ouster of PM Hanna Suchocka (1993), but not Zygmunt Wrzodaks. Another point: none of this pertains to the national organization of Solidarity.

  8. For a brief summary of Austrian economics and Vaclav Klaus's adherence to this doctrine, see  Werner Wüthrich, "About the Austrian School of Economics," Current Concerns (2010).  Online records of PM Klaus's views are quite numerous.  The European Center of Austrian Economics Foundation (ECAEF) posts his speeches, in which he rails against,
    ...[T]he gradual replacement of traditional European and Western values with politically correct norms based on new “isms” — cultural relativism, human rightsism, multiculturalism, NGO-ism, feminism, homosexualism, environmentalism, juristocracy and mediacracy.
    He is ferociously antagonistic to the EU regulation of greenhouse gases and other ecological constraints.

  9. For Vaclav Klaus's since-lapsed enthusiasm for the EU and NATO, see Vachudova  (2001), p.325; this fascinating essay also notes how Klaus's economic nationalism informed policies despite his avowed Austrian ideology; and describes (briefly) the scandal which contributed to his downfall.  For his opposition to actually carrying out economic reforms despite his free market rhetoric, see An Evaluation of Phare SME programmes: Czech Republic, Final Report (PDF), RDH/LDK consortium for Evaluation Unit of Directorate General 1A (External Relations: Europe and NIS) of the European Commission. (Dec 1999), pp.2-3.  While the CzR enjoyed high GDP growth for the first four full years of Klaus's term in office, the last year was a debacle; the current account balance veered from bad to horrid; and small-medium enterprise (SME) formation was no better than before he took office. 

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At 3:24 PM, October 18, 2016, Anonymous pogohere said...

I'm looking for useful, reliable research on the social and economic effects, e.g., demographics, longevity, poverty, etc. of the collapse of the Soviet Union in the 1990s. I saw your review of Wedel's book on Amazon and followed it to your blog. If you know of any such research I'd appreciate it if you could post it or reply to me by email.

At 2:36 AM, October 20, 2016, Blogger James R MacLean said...

Thank you for reading and commenting.

This is a large topic and you will naturally need to look at several works, I should expect. One study from that period (c.1997) is "Russia's Demographic "Crisis": How Real Is It?" RAND Issue Paper #162. Another (c.2000) is Timothy Heleniak's "Migration and Restructuring in Post-Soviet Russia" (PDF), Demokratizatsiya, vol. 9, no. 4 (Fall 2001).pp.531-549. In fact, Heleniak is one of the leading experts in English on Russia's demographic conditions. He revisited the subject many times since.

See also Filip Mazurczak, "Averting a Demographic Nightmare in Russia and Eastern Europe," New Eastern Europe 21:02 (2 June 2013).

Please let me know if this is what you needed.


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