Review, Janine Wedel, Collision and Collusion (3)

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

Common acronyms: Harvard Institute for International Development (HIID); United States Agency for International Development (USAID; main distributor of US government aid); Russian Soviet Federation of Socialist Republics (RFSFR, constituent of the USSR)—after 1992, the Russian Federation (RF);

(Part 1; part 2)

SUMMARY

One of the maddening things about this book is that Prof. Wedel seems to have no discernible philosophy.  On the one hand, she objects to the strategy, adopted by USAID, of attempting to bypass existing governments in favor of direct assistance to privatizing firms (praising European programs that did the opposite; see p.36); on the other, she objects to the US government being co-opted by specific politicians (the gist of Chapter 4).¹ On the one hand, she objects to capricious control over funding by bureaucrats in Washington (who did not give field representatives enough autonomy—pp.33-34); on the other hand, region organization of US aid rather than national programs gives program managers too much power to shift funding to politically pliant governments (endnote 74, p.35). On the one hand she objects to the politicization of economic policies, so that consultants took sides in political elections.² On the other hand, she attacks the arrogance and certitude of the (naturalized Russian-)American advisers.

Wedel mentioned³ that much of her research came from Anne Williamson, author of Contagion (unpublished).  Her testimony to Congress⁴ at once struck me as a version of Wedel's own account of events, but without the diffidence. While Wedel's account seems to hover between explicitly blaming USAID for Cold War 2, and backpedaling, Williamson minces no words (there are subtle differences: Wedel is a trained anthropologist, whereas Williamson discusses the Russians as if  they were a challenging breed of horse, bred centuries ago to require a firm guiding hand.). Williamson praises Larisa Pyasheva (or Piasheva), a staff adviser to Moscow Mayor Gavril Popov, as having concocted a plan for privatization that would have totally and suddenly resolved all the country's problems at once; and blames the US for total disaster by failing to seek her out and compel the Russian authorities to implement her plan.⁵ That, and her admiration for Wilhelm Röpke's presumed creation of postwar Germany, suggested that Russia was a totally blank slate on which a cohesive USA could write whatever it wanted—"us," with our global monopoly on agency and our unique potential to know the Truth (if only "we" really wanted to).

Anne Williamson may, or may not, be an avatar of Janine Wedel herself.  Wedel  is the well-nigh Quelle of allegations that the US government, deceived by Harvard, decisively and maliciously intervened to promote fake market liberals like Anatoly Chubais and Yegor Gaidar (instead of real ones like Grigory Yavlinksy or Larisa Pyasheva), thereby turning Russians against the ideals of democracy and free markets.  Even Matt Taibi and Mark Ames (in The Exile, 2000, p.237), distinguished journalists themselves, cite Prof. Wedel's work as evidence of this. Wedel's writing is extremely abstract, focused mainly on expenditures as conclusive evidence of agency; this agency is always decisive,and always misguided (actually, insidious).

Click for larger image Russian Constitutional Crisis,  October 1993

And while most journalists have subtly different narratives and focuses when writing about crises, Wedel's and Williamson's are the same.  In contrast, authors at The Exile (and its successor, Exiled where a lot of archives from The Exile are routinely printed) are generally hostile to capitalism and its ideological hold over the USA; Williamson's (and Wedel's) premise is that the authorities in the USA betrayed capitalism.  No one would think to publish Anne Williamson's views in The Nation; but Janine Wedel?  Perfect fit. 

Anyone with the slightest familiarity with the authors who wrote for Exiled, or friends like Matt Bivens (1997), knows these people are not remotely admirers of USAID.  But they're also not enthusiasts for the ideology of free markets embraced by Janine Wedel. For them, the problem was not that voucherization was adopted (whether under foreign pressure or not), it was that privatization was given top billing.  If I have understood them correctly, the real problem was that actual markets, let alone free markets, simply did not exist in Russia c.1991-1996; so "privatization" would necessarily mean plunder, not competitive management. And arguably radical market reforms really weren't what Russia needed, then or now.


That's a matter of personal outlook, and it does need to be said that good journalists aren't wedded to particular policies, because of they were, they'd fail to acknowledge when that policy was failing. 

However, this brings me to my final point.  Wedel focuses on flaws in the process of privatizing Russia, but not on what these flaws led to (aside from the generally prevailing anomy of Russia today).  She mentions that the Supreme Soviet of the RSFSR had passed a privatization law that would prevent corruption (p.137), but Russian Pres. Yeltsin's appointees pressed for a system that ensured corruption.⁶  How did the first law prevent corruption, and why is Prof. Wedel so certain it would have?  Yes, she's certainly correct that privatization in both Russia and Ukraine occurred in a manifestly corrupt way, and this was a byproduct of the laws, but it's really important for readers to know specifically how it did and what plausible alternatives existed.

For example, Russia was not the first country in Europe to experience a transition to a capitalist economy; and one could argue that, in 1991, the results of "experiments" in Central Europe were far too spotty to draw any valid conclusions. But there had been a widespread consensus among economic historians in the capitalist bloc that the Third Reich had been a command economy—albeit, with notionally private ownership.  One could argue that, in 1992, post-1947 Germany provided a much more convincing case of successful transition to market capitalism than did post-1989 Czechoslovakia—the model that was actually used. More relevant still, after 1945, the business management of the Third Reich was morally discredited but retained vital technical expertise—a conundrum for the Occupation authorities and for Christian Democrats who inherited control of the country.

Did Russian authorities consider postwar Germany as a model for Russian transition to capitalism?  Why or why not? If yes, why was that model rejected so vehemently? Germany was, after all, not only well known to the Russians and Western leaders, it was the supreme economic power in Europe. What lessons could Russians and their Western liaisons have been expected to draw from Germany's impossible-to-ignore success story? Did Germans see their country as a model for Russia?  If they did, what did that model entail?

In the first part of this essay, I mentioned that I hoped to address an objection: that conditions in Russia were too murky as a result of  the bad processes Prof. Wedel is exposing, and that for this reason, analysis of how policies led to bad outcomes (and how these outcomes could have been avoided with different policies) is impossible.  As far as I can remember, Wedel never claims this, and I don't want to put words in her mouth, but it does seem like she felt privatization policies were not worth discussing as policies.  Hence, the process by which political actors got their way is given top billing instead.

This is understandable, especially in so far as it advances her case polemically.  For example, even the most cursory glance at the politics of transition makes it obvious that something was very wrong.  The method by which Yeltsin secured control over the Russian government after the 1993 constitutional crisis, for one thing, cast a pall over whatever happened—or could have happened—afterwards.  Even if enthusiastic support from the US had nothing to do with Yeltsin's conquest of power, it still was morally wrong for Washington to provide it. And so, in the end, Wedel's points are about a morally purblind Washington and its biggest thinktank, Harvard.

That's a fairly weak polemical position to have, because nobody wants to defend the 1990s (except people whose reputation was directly affected, like Prof. Andrei Shleifer; even Prof. Jeffrey Sachs and George Soros have divorced themselves from those events by denouncing them, and here's what that looks like). And saying "we" or "the USA" as if the typical American  reader had the slightest thing to do with it makes one look unhinged. This was a period of total confusion; all of the systems of accountability had broken down, in the sense that everyone was improvising, typically in a fog of ignorance. No one possessed a constitutional mandate to react to what was happening.

This book is like a postmortem of a massive earthquake, heaping scorn on the conduct of officials once the earthquake has begun. The collapse of the USSR was certainly a crisis, but at the time officials in NATO member states did not realize it was, and when they did, they were overruled by their most ruthless, purposeful colleagues—or bosses. Usually, when times are "normal," processes spawn policies: the American electoral system, with its money and corporate-controlled news outlets, for example, help determine the decisions that politicians will make.  But in a revolutionary upheaval, this is backwards: the policies taken long ago, like the Cold War strategies of the rival blocs, determined how leaders would perceive the situation, and what potential disasters they hoped to avoid.  Once the earthquake of August 1991 hit, no human planner had the ability to master to the situation. No one even knew what it was.

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NOTES

1. Readers may not realize how hard, if not impossible, it is to make such a distinction; and perhaps I'm totally wrong, and it is. But Wedel specifically praises PHARE thus:

   Many of the EU's PHARE programs were administered through Program Management Units (PMUs), which were set up either inside the government ministries or in parallel with them.  Although EU representatives typically were assigned as advisers to PMUs, the PMUs were staffed and directed by recipients, who naturally had access to local contacts.

   But in the case of a transitional economy, the object of assistance is to build up a viable market based economy, not revise modalities of central planning!  In a sweeping transition, the object is to restructure the entire system of government and business management, and this is (a) an intensely political decision, albeit on a small scale, and (b) it means interaction with the government cannot occur through civil servants (who will necessarily resist the sort of drastic changes transition requires of governments); it must occur through democratically accountable figures like cabinet ministers and their deputies. 


2. This may be a misunderstanding on my part of what Prof. Wedel is trying to say.  An alternative interpretation may be that, yes, Prof. Wedel knows that economic policy involves political judgments, but policy advice should be neutral with respect to political factions. If Ruslan Khasbulatov were to support privatization as well (and she says he did) then it was the responsibility of Washington to remain steadfastly neutral in the March 1993 Constitutional Crisis.  I would certainly approve of this as an ideal, but it's not very realistic. 


3. In an exchange in The Nation, "The Nation: Exchange of letters between George Soros and Janine Wedel," Janine Wedel mentioned that she was relying on research by Anne Williamson.  Williamson's view of the 1990s in Russia is that the situation could have emerged perfectly if the Administration had embraced conservative orthodoxy and imposed it on the Russian authorities; and the reason it did not, is some mysterious conspiracy of Pres. Clinton to discredit capitalism and bring about a return of Communism.


4. Anne Williamson's Testimony before the Committee on Banking and Financial Services of the U.S. House of Representatives, presented Sept. 21, 1999. The testimony is found in James A. Leach, Russian Money Laundering: Hearing before the Committee on Banking and Financial Services, US House of Representatives (21-22 Sept 1999), p.275. I suspect that Anne Williamson is a pseudonym, possibly for Janine Wedel.


5. Larisa Pyasheva's plan, as near as I can find out, was to privatize firms in Russia by awarding ownership of them to the existing employees. Williamson admired this plan, whatever it was, and praised the author of it for being an Austrian economist like Wilhelm Röpke, the presumed architect of Germany's economic miracle. To be clear, Larisa Pyasheva was not a famous person in 1991 (when the Harvard-Chubais connection appeared), but she and her husband had written Hayek-inspired articles in the dissident publication, Noviy Mir (1987). See Bengt Svensson, Seven years that shook Soviet economic and social thinking: reflections on the Revolution in Communist economics 1985-1991, Doctoral Dissertation, University of Stockholm (2008), p.81. She published occasionally under the name L. Popkova. Notice that in a 170-page monograph about dramatic changes in economic thought in the USSR of this period, Pyasheva gets one mention, as an ideological outlier.


6. UPDATE (29 June 2015): I believe I finally stumbled across the answer: in Martin McCauley, Bandits, Gangsters, and the Mafia: Russia, the Baltic States, and the CIS since 1992, Pearson Education (2001), p.273, it is pointed out that the original privatization law required that vouchers not be sold for at least threee years after issue, and to prevent this from happening, they were issued with names (and presumably identifying serial numbers). On 14 August 1992, Yeltsin issued a degree calling for the vouchers to be issued without names, and therefore fungible. This played a major role in the ability of some players to acquire the vouchers for shockingly small sums of money. Perhaps by September 1995, Russian holders of the vouchers would have been better aware of how to maximize their returns on the vouchers they had.

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ADDITIONAL READING


Matt Bivens 🙵 Jonas Bernstein, The Russia You Never Met (PDF), Demokratizatsiya: the Journal of Post-Soviet Democracy 6, no.4 (Fall 1998). Matt Bivens was (at the time of its writing) a former editor of the Moscow Times; Jonas Bernstein was a business writer for the Moscow Times and analyst for the  Jamestown Foundation; Matt Bivens was business writer for the Moscow Times's sister publication, the St Peterburg Times.

Matt Bivens, "Aboard the gravy train: in Kazakhstan, the farce that is U.S. foreign aid," Harper's Magazine (1 August 1997).  This article is behind a subscription wall but is available here (accessed 2 April 2015).  I found it to be extremely interesting, because it explained explicitly how outsourced contracts with USAID, etc. were actually spent.