chapter  4
42 Pages

Contrasting Economic Priorities in Russian Reform

In August 1992, Gaidar attempted to distance himself theoretically from the Chicago school following accusations that he had succumbed to Western influences that were working against Russian national interests.5 "Russia never had a policy of shock therapy," he insisted later.6 "We could not. We were not able to simultaneously, immediately, correct all the serious structural macroeconomic and financial imbalances .... We never attempted to stabilize the exchange rate, because we lacked the necessary currency reserves." Our reform, he repeated, "can never be put into the traditional scheme of 'shock therapy.'''7 Jeffrey Sachs, also, was insisting in 1994 that" 'shock therapy' did not fail in Russia. It was never tried."g

This argument is a red herring. Shock therapy was not "tried" in the same way that communism was not "tried." They were not "tried" only in the sense that Russian realities in both 1917 and 1991 were badly out of line with the theoretical assumptions that inspired the Marxist agenda for a communist society, on the one hand, and the Yeltsin reformers' program for radical transition, on the other. In sharp contrast to Sachs's retrospective 1994 interpretation, in 1992 he was crediting Russia with having "embarked with remarkable dispatch on a program of radical economic reforms" that had already "created an enormous opening" for market relations.9 Similarly, Anders Aslund was applauding Russia's reformers at that time for having "launched its daring transition" with the immediate tasks of liberalization and macroeconomic stabilization. "The focal point" of the stabilization effort, Aslund continued, "was to balance the budget in the first quarter of 1992." And, he added, "Their very impressive attempt succeeded amazingly well."lo Shock therapy was indeed being tried by Russia's reformers in early 1992, and the unqualified praise from recognized shock therapy proponents in the West attests to that plain fact--one that was later explicitly acknowledged by Aslund himself. I I

Later, Sachs would attempt to account for the failure of shock therapy by directing substantial blame toward the West for failing to provide needed foreign aid, as we noted in chapter one. Observing that the Russian government "surely faced daunting issues, with little experi-

ence," Sachs adds, "The West could have usefully pushed towards solutions together with financing." But, he continues, "There was not a single Western loan in support of the Russian budget in the first six months of 1992, and in practice almost no such loans during the first 18 months of reform." Thus, he concludes, "The Russian stabilization efforts were gravely weakened following May 1992, through a combination of lost resolve, political missteps, and the absence of international supports."12