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Occasional Paper #283 U.S. Assessments of the Soviet and Post-Soviet Russian Economy: Lessons Learned and Not Learned

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6 Preface

8 Conference Agenda

10 Panel One: Revisiting the Estimates and Analyses of the Soviet Era

46 Panel Two: Assessments of Russian Reform Programs

74 Panel Three: Understanding the Underlying Social Aspects of Soviet and Post-Soviet Russia

112 Keynote Address: The Honorable James Schlesinger

120 Panelist Biographies PREFACE

In March 2002, the Woodrow Wilson ment hoped that the March 2002 sessions Center’s Kennan Institute convened over a would begin to move the participants at dozen specialists on Soviet and Russian that meeting (and the readers of this affairs to evaluate U.S. assessments of the report) towards a shared conversation. Our Soviet and post-Soviet Russian economy. purpose was not to ask participants and We were joined in organizing and spon- readers to abandon strongly held opin- soring this conference by the Office of ions, so much as it has been to encourage Net Assessment of the United States them to partake in a single conversation as Department of Defense. a means for discerning the outlines of Debates over the quality of U.S. legitimate disagreement. As readers of this assessments of Soviet economic capacity Occasional Paper will discern, the result were among the most quarrelsome of the proved to be more successful than not. Cold War. Those debates were subse- Given the intensity of analytic quently matched in intensity by battles passion still simmering underneath the over how to understand the post-Soviet surface of American discussions of Russia, economic reforms in Russia during the we decided that we needed to do more 1990s. The purpose of this gathering and than to bring together in the same room this report was not merely to replay old various participants of debates that have battles. Rather, it was based on the endured for long years and expect that premise that how we talked about our they would talk differently to one another. assessments of the Soviet Union in the We therefore invited Russian colleagues past—and how we in the United States who had wrestled with the same issues in continue to talk about Russia—is about their own distinct context to join into our more than who was—and is—right or conversation. The result proved to be an wrong. Bitter disagreements will long exotic blend of academic and government linger over the old debates about what perspectives from both the U.S. and from happened or did not happen a quarter- Russia, and brought us face to face with century ago and over the past decade. the limitations of our ability to envision It is far more important today to radical change. As conference keynote look with a new perspective at those speaker James Schlesinger observed: clashes which are in essence highly “Almost every major change comes as a contentious debates over how best to surprise. Why is that? Because official understand complex societies. Can social views develop in institutions, and neither reality be disciplined by rigorous and societies as a whole nor institutions expect orderly research strategies and method- change. We tend to see things as continu- ologies? Is there an aspect to understand- ing on an accustomed track, and we tend ing a society which transcends collating to extrapolate from previous trends and data? Are economic conditions more current times into the future.” important than social attitudes? Does The report to follow is based on the culture matter? What role do institutions conference deliberations, presenting both play in shaping reality? When it comes to the formal papers provided by each Russia in particular, analysts have fallen author as well as summaries of the discus- into a pattern in which people of strong sions provoked by those written submis- opinion tend to talk past one another sions. I would like to thank each panelist rather than engage one another in shared for agreeing to join in this enterprise. conversation. The conference in many ways was We at the Kennan Institute and our an extension of a conversation that Igor colleagues from the Office of Net Assess- Birman and I have been having for some 6 time. I would like to acknowledge and to Institute Program Associate F. Joseph thank Igor for his inspiration and for his Dresen and Program Assistant Nicholas help in launching this enterprise. I also Wheeler, and our colleagues at the would like to take this opportunity to Kennan Institute and at the Wilson thank Andrew Marshall and all of his Center, who made this meeting and colleagues at the Office of Net Assess- resulting report possible. ment—not just for having provided the material support necessary to have every- —Blair A. Ruble one appear in the same room at the same Director time, but also for their considerable Kennan Institute intellectual support. Finally, though hardly Woodrow Wilson Center least, I would like to thank Kennan

7 U.S. Assessments of the Soviet and Post-Soviet Russian Economy: Lessons Learned and Not Learned March 27-28, 2002 Kennan Institute, Woodrow Wilson Center 1300 Pennsylvania Avenue, NW Washington, D.C.

Panel One: Revisiting the Estimates and Analyses of the Soviet Era. Chair: Blair Ruble, Director, Kennan Institute. Nikolai Petrakov, Director, Market Economy Institute, Russian Academy of Sciences, Moscow. Abraham Becker, Senior Economist, Emeritus, RAND. Discussants: Igor Birman, independent scholar, Washington, D.C. Robert Campbell, Distinguished Professor of Economics, Emeritus, Indiana University.

Panel Two: Assessments of Russian Reform Programs. Chair: Blair Ruble, Director, Kennan Institute. Mikhail Zadornov, Deputy, Russian State Duma, and former Minister of Finance, Russian Federa- tion. Mark Medish, Partner, Public Law and Policy Practice Group, Akin, Gump, Strauss, Hauer & Feld, LLP. Discussants: Peter Reddaway, Professor, Department of Political Science and Elliot School of International Affairs, George Washington University, and former Secretary, Kennan Institute. Anders Åslund, Senior Associate, Carnegie Endowment for International Peace.

Panel Three: Understanding the Underlying Social Aspects of Soviet and Post-Soviet Russia. Chair: Kari Johnstone, Title VIII-Supported Research Scholar, Kennan Institute. Yuri Levada, Editor-in-Chief, Russian Public Opinion Monitor Bimonthly, Moscow. Judyth Twigg, Associate Professor, Department of Political Science,Virginia Commonwealth Univer- sity, Richmond. Discussants: Arthur Miller, Professor, Department of Political Science, University of Iowa. Richard Dobson, Research Analyst, Russia, Ukraine and Commonwealth Branch, Office of Re- search, U.S. Department of State.

Keynote Address The Honorable James Schlesinger, Chairman, MITRE Corporation, and Senior Advisor, Lehman Brothers.

8 9 Panel One: Revisiting the Estimates and Analyses of the Soviet Era

10 11 Another Look at the Soviet Era by Nikolai Petrakov

The enormous army of Western A Doomed Economy Sovietologists analyzing the Soviet economy The foundation for the irrationality failed to anticipate its rapid and total crash of the Soviet economy was not created and the collapse of the Soviet Union’s when the Bolsheviks came to power in political system. My reading of the available Russia (1917), but, significantly, 10 years literature on the Soviet economy, as well as later in 1927. numerous personal contacts with Western The Bolsheviks’ War Communism experts on the Soviet Union, have con- (1918-1921) was cruelly efficient and vinced me of this. Before 1991, not a single allowed Russia ultimately to emerge from Western analyst had predicted the cata- World War I and its Civil War with mini- strophic collapse of the Soviet economic mal territorial losses from the former system. Disputes were generally limited to tsarist empire. Through a series of bold the rate of the Soviet economy’s growth, the market reforms termed the New Eco- reliability and completeness of official nomic Policy (which contradicted Soviet statistics, and methodologies for comparing ideology), Soviet Russia was able to USSR and U.S. levels of production and emerge from the devastation of war in consumption. In short, what was discussed agriculture, transportation, and the main was the competition between the two sectors of industry. By 1926, the monetary systems. In this game, the analysts empha- system, the budget, and banking had sized the unquestionably greater dynamism stabilized. For purposes of comparison and power of the U.S. economy in particular recall that, for example, Germany had and Western economies overall. However, it is emerged from the war two years earlier clear that the discussion followed a frame- than Russia, but was unable to control work set by Soviet international economists hyperinflation for the next 10 years. and political scientists. The competition was However, the economic success of the understood as a “long distance economic Soviet economy ends at this point. It was race” between the two systems. The clinical replaced by “success” of another sort. The death of one of the systems was not consid- economy was given non-economic, ideo- ered as a possible outcome. logical, and political tasks to perform. The The reality proved to be quite USSR leadership under Stalin called for “a different. While it was not predicted, was it great leap” in industrial development. The really unpredictable in principle? I think slogans of 1927 included: “to catch up with not. A collective ‘hypnosis’ prevented the and surpass developed capitalist countries in world scientific community from evaluat- industrial production,” “to traverse in 10 years ing and drawing conclusions from many the road to an industrial society that took the telltale phenomena that were apparent on West 100 years to traverse.” (Thirty years later the surface of economic life. Now, with a such slogans were revived in China.) decade’s hindsight, I see two reasons for This idea led to a forced structural the blindness from which scholars suffered deformation of the national economy that in the years preceding the collapse of the was unprecedented in world economic Soviet economy. The first was that none of history and lasted for almost 14 years (right the critics of the numerous shortcomings up until the time the Soviet Union entered of the Soviet economic system posed the World War II in 1941). In an environment question in terms of whether such a system of martial law, income from agricultural, could survive. The second reason was a consumer goods, and services sectors was gross underestimation of the scope of confiscated and invested in the defense falsification that affected indicators of Soviet industry, and the metallurgy, machine- economic performance. 12 building, and energy sectors. The distor- 3. Extreme underdevelopment of tion between the Soviet economic sectors agriculture. In labor productivity, was entrenched at this point. While this standard of living of the rural popula- episode in the USSR’s economic history tion, degree of mechanization and has been described in detail numerous electrification, transportation, and times in the Western, as well as the Soviet, social infrastructure, Soviet agriculture literature, it was not analyzed from the was backward not merely by Western standpoint of the strategic consequences standards, but also compared to other of such a serious structural deformation. sectors of the Soviet economy. Structural changes are a necessity for 4. Extremely underdeveloped any dynamically developing economic consumer goods sector, public system. But there are limits to structural utilities, health care, education, and changes beyond which the economy loses its social security. The deformations stability and ability to survive through self- between heavy industry and the social regulation. It is clear that in the 1930s the sector were built up over the years, Soviet economy exceeded the limits of its spurred by the pressures of “socialist structural stability and destroyed its long-term industrialization,” collectivization, World viability. The deformations that determined War II, and then the Cold War. the structure of the Soviet economy and These deformations in the Soviet ensured the inevitability of its destruction economy resulted in continually decreas- may be reduced to the following four aspects. ing rates of growth (see Table 1), with so 1. Bloated defense sector. The many bottlenecks that its survival was put Soviet Union’s geopolitical ambi- increasingly in doubt. The Soviet tions led to extreme over-investment economy was collapsing under the weight in all industries directly or indirectly of its own structural deformations. This, in associated with maintaining the fact, is what occurred during its last armed forces or facilitating the decade. And here again I will quote Igor development and production of Birman: “The principal difference be- military technology. Igor Birman tween the Soviet and the Western econo- called attention to this circumstance mies is that in the Soviet-style economy in Western journals as early as 1983, there are no economic cycles and the writing: “The Western observer of the Soviet Union has difficulty Table 1 coming to terms with the proportion Mean average rate of growth of USSR of the national product and national national income (in %) resources that the Soviet rulers 1951–55 11.4 devote to preparing for war. It is this 1956–60 9.2 that makes it possible to have 1961–65 6.5 enormous military power and yet a 1966–70 7.7 weak economy.” (“The Economy of 1971–75 5.1 Shortages,” New York, 1983, p. 397). 1976–80 4.7 2. Inefficient use of primary 1981–85 3.6 resources in the processing/ 1986–90 2.8 manufacturing sectors. The low level of technology in the processing/ (Computed from handbooks on “The manufacturing sectors required much USSR Economy,” Moscow, “Finansy i larger quantities of primary inputs, 5- statistika.”) 6 times greater than in the West, to prolonged decrease in production is produce a given finished product. 13 irreversible.” (“The Economy of Short- tion of new industrial facilities; ages,” p. 201, 1983). 4. Increasing non-liquidity of Soviet professionals understood the money; Soviet economic crisis better and recog- 5. The hidden budget deficit and nized the developmental dynamic better artificially suppressed inflation. than Western analysts. The leaders of the Unfortunately, the overwhelming Soviet Union most likely understood the majority of Western Sovietologists virtually burden of the structural deformation on ignored these serious symptoms of the the economy, and were worried by the Soviet Union’s economic malaise in their decreasing growth rates, as they were well studies. Moreover, Western experts generally aware that official statistics grossly inflated displayed astonishing confidence in Soviet the growth rates cited above. statistics. In 1953, immediately after Stalin’s A Falsified Economy death, Malenkov made a timid attempt to transfer some capital into the consumer We have already noted that the Soviet sector. But this was counter to the inter- leadership was deeply worried by the ests of the defense sector and Malenkov’s worsening rates of economic growth. Since political career came to an end. In 1965, they were not able to make effective changes after Khrushchev had retired, an attempt in economic policy, they chose to make a (known as Kosygin’s reforms) was made fetish of it by introducing the slogan “growth to soften these structural deformations. regardless of price.” Increasing the volume of But the Party elite considered the reforms produced goods, however, erected a strong to be unnecessary since the boom in wall between the interests of the producer world oil prices in the early 1970s created and those of the consumer. It is true that the the illusion that the Soviet Union would Soviet tractors, combines, metal cutting be able to emerge from the crisis without machine tools, etc. outnumbered their significant restructuring. Western-produced counterparts. But these In 1973, Soviet economist Boris were low quality products for which there Mikhalevskiy drafted a secret report to was little demand and which generally the government in which he cited his own remained in the warehouses of wholesale calculations demonstrating that the Soviet and retail commercial depots. This was the Union had fallen into a structural trap. In case in virtually all sectors of the economy, his opinion, without a radical change in including that of consumer goods. The data structural policy, the country was doomed in Table 2 on page 8 show a typical growth to profound crisis. According to my pattern of goods that were not in demand. information, Mikhalevskiy’s report was According to the data in the Economic squelched from above. Gazette, in 1985 the total volume of A decrease in rate of growth is only commodity stocks for nonfood consumer one of the macroeconomic parameters products attained a value of 61.6 billion indicative of the death throes of the Soviet rubles. economy. Other irreversible negative Of course, such large scale produc- processes were also developing rapidly. tion of goods for which there was no Among these were: corresponding consumer demand, accom- 1. The consequences of monopoly panied as it was by the growth of non- production on the domestic market; liquid cash income (so-called deferred 1 2. Widespread deficit of consumer demand or “monetary overhang,” ) goods; created an illusion of economic growth. 3. Increasing delays in the construc- But this wasted production was only one facet of the falsification of statistics by the 14 Table 2 Growth of inventories of unmarketable and out-of-date nonfood goods in wholesale and retail commerce (as of October 1, based on data from current studies) Type of goods 1985 in % of 1980 Wool cloth 287 Silk fabric 367 Clothing and linens 144 Knit goods 154 Haberdashery 227 Electric appliances and other household goods 237

(Economic Gazette, 1986, No. 48, p. 7.)

Soviets. Another facet, more subtle and 1985) was counted as budget revenue even interesting in my view, was the fact that at though it was largely fictional. The situation the same time that they were falsifying the was similar for the profit tax as well. rate of economic growth, they were also These tactics permitted the legend of falsifying budget revenues. This latter the “never-in-deficit budget.” Since, as was mystery demands further elucidation. explained above, the budgetary contributions The state revenues from Soviet from enterprises came at different times than enterprises came in two forms: profit and the proceeds from sales, Gosbank branches turnover tax. The entire turnover tax was extended the enterprises short-term loans at automatically allocated to the budget, as was nominal interest (0.5 percent). The rapid 50 percent to 80 percent of the enterprise’s growth of short-term loans as compared to profit. The most important thing about growth in production is an indirect but transferring revenues into the budget was obvious indicator of the growing crisis in the the “calendar principle.” The calendar Soviet economy. (Petrakov, “Democratization principle demanded that on the 10th and of the Law of Supply and Demand,” Moscow, 25th of each month, fixed amounts of Ekonomika, 1988, pp. 93-100.) planned profit were transferred to the state Table 3 shows that the growth in budget. The turnover tax was paid in full short-term loans significantly exceeded the when the goods were unloaded at the growth of GNP. Especially striking is that the Gossnab wholesale depot. In reality, goods largest increases are in short-term loans in might never have been sold by producers agriculture (by a factor of 9.4) and construc- nor purchased by buyers (in a number of tion (by a factor of 12.6), i.e., precisely in cases they were never even produced), but those sectors where the return on capital the budget nevertheless received its investment is particularly low. The increasing planned, albeit often fictional, revenues. debt of the construction sector did a great One can see the true scope of falsifi- deal to “stimulate” the enormous scale of cation when we recall that the turnover tax “uncompleted projects.” In 1985, the in 1985 amounted to 97.7 billion rubles. nation’s uncompleted construction projects Analysis of the price structure for nonfood had a value of 78 percent 2 of the total goods shows that the turnover tax ac- annual capital investments, i.e., 140 billion counted for approximately 40 to 50 percent rubles. This exceeded the amount of of the cost for nonfood goods. That year, uncompleted construction in 1970 by a out of 61.6 billion rubles of unsold non- factor of 2.1. 3 The shortage financing food goods, a minimum of 24.6 billion allocated to industrial and public construc- rubles (i.e., a quarter of the turnover tax for tion was one of the main reasons why 15 Table 3 Growth of GNP and of short-term loans by economic sectors, 1971-85 (1970=100)

Economic sector Growth of gross national Growth of balance product in actual prices of of short-term loans 1985 (in % of 1970) in % of 1970 Industry 206.5 314.2 Agriculture 210.6 941.9 Transport and communications 256.8 440.0 Construction 201.6 1264.8 Commerce, procurement, 312.8 235.1 logistical support, and other sectors

(Based on data from: “The USSR Economy in 1985,” pp. 45, 566.)

uncompleted construction and the delay in inevitable crash. Of course, Soviet statis- commissioning new projects took on such tics, as we have already noted, were enormous proportions. widely used to improve on reality. But the Short-term loans that were repaid subterfuges were an open secret. One can slowly or not at all became long-term only wonder why Western Sovietologists loans, and consequently became in did not see through them. essence additional resources. Financing For example, no one in the Soviet obtained through short-term loans went Union tried to hide the fact that the subsidies to pay for raw materials, consumables, and to agriculture had reached 60 billion rubles for the wages of the blue- and white- annually by the mid-1980s (Literary Gazette, collar personnel. If a loan was not repaid 1987, No. 33, p. 12). At the same time it was no on time, then it “dissolved” in the eco- secret that these subsidies did not pass through nomic turnover under the “additional the federal budget, but through a special financing” budgetary item. account that was administered by the Ministry Subsequently the economic situation of Agriculture in order to cover the difference developed as follows. The workers took between wholesale and retail prices. Here is their money and their demand for goods to another example. It was not exactly advertised, the consumer market. Finding no products but neither was it concealed, that the line item that would meet their need, they put a in the budget for “defense expenses” referred portion of their wages (earned while only to the so-called direct expenditures for producing goods that did not meet anyone’s maintaining the troops and ammunitions. The need) in a bank. The bank, having discov- main portion of expenses for the development ered that its liabilities had increased, ex- and manufacture of weapons was part of the tended more loans, including loans to budget of the Ministry of Medium-size maintain industries manufacturing goods Machine Building and was concealed in the that did not meet the consumer needs. In line items “financing of industry” and “re- the ensuing vicious circle, the deficit of search expenses.” The list of such tricks could consumer goods directly facilitated ex- be continued indefinitely. However, it is panded financing to enterprises, which in important to note that if the problems had turn ran up more deficits. been studied conscientiously, most of them This is the way the fictional Soviet could have been identified and enumerated economy functioned, and moved on to its easily. But no such study was ever undertaken. 16 For this reason, the non-viability of the choice inevitably led not only to the Soviet economy was established only after destruction of the old system of manage- the fact. ment, but also to complete economic anarchy and chaos. This is especially Postscript evident when you consider the scale of The profound structural deforma- ensuing criminalization of the economy, tions in the Soviet economy were the root the unprecedented corruption at all levels cause of its eventual collapse. Nevertheless, of authority, the helplessness of the this artificial economy survived for a fairly banking system (and the total loss of faith long historical period. How can we explain in banks by entrepreneurs and the pub- this? I believe that it was possible because lic), the rigid monopolization of even of rigid centralized regulation using extra- those segments of the market where economic, anti-market methods. Mecha- competition would be possible, manipu- nisms to completely suppress competition lations in the monetary system, leading to were put into play. In essence, these mecha- extensive use of barter, the lack of money nisms resulted in the government taking to pay wages, etc. Against this background, away virtually all the revenues created by the few fragments of civilized market enterprises or other economic entities, relationships that have arisen seem to be leaving nothing for investing in their nothing more than pleasant exceptions. development. These revenues were concen- During the decade of “market self- trated in a single center, which constituted a regulation” in Russia, not a single one of powerful investment pie. The center divided the structural deformations that Russia this pie between the various sectors of the inherited from the Soviet Union was economy, defense spending, and social eliminated or even attenuated. Agriculture programs as it saw fit. This was an economy (especially animal husbandry) is living governed by the rules of martial law. And in through the darkest years since the freeing the absence of war or international tension, of the serfs; the national commodity this economy lurched towards its deathbed. producers eke out a beggarly existence in Thus, the sustained (from 1917 to 1989) and both the consumer and the manufacturing inflamed hostility of the Western alliance sectors; there is still no rational solution to towards the Soviet Union continually the problem of the military industrial propped up the irrational Soviet economic complex; and social services are even system. The East-West confrontation more pitiful than under the Bolsheviks. If, justified, morally and ideologically, the in the past, everything hinged on main- existence of the system in the eyes of a taining semi-military discipline, now significant portion of the Soviet Union’s everything hinges on world prices for oil. population. Thus, for a long period of time, Russian economic chaos has replaced the West played right into the hands of the Soviet dictatorship, but the powerful Soviet leadership, actively responding to any nuclear arsenal remains. Soviet foreign policy provocation. This is the first conclusion of this retrospective analysis. Endnotes The second conclusion is the 1. Between 1971 and 1985 wages in industry following. To the extent that the Soviet increased by 58% and the total deposits in economic system was managed solely savings banks by a factor of 4.8. (“The through administrative directives (rather USSR Economy in 1985,” pp. 397, 448.) than responding to market signals), the 2. “The USSR Economy in 1985,” pg. 371. sudden withdrawal of government control and the immediate shift to reliance on 3. Calculated from the data in “The USSR market forces and freedom of economic Economy in 1985,” pp. 366, 371. 17 Revisiting Postwar Soviet Economic Performance by Abraham S. Becker *

It seemed entirely appropriate to cosmos before a learned society: “We must begin this Kennan Institute conference be grateful to Lord Russell for the un- with a retrospective on the Soviet equaled skill with which he has left the vast economy, particularly in the last decade or darkness of the universe unobscured.” Must two of its history. The intense scrutiny of the debate on the CIA estimates leave the the Cold War since its termination has darkness enveloping the analysis of the focused on the political-strategic dimen- Soviet economy unobscured, or is it still sions; much less attention has been possible to dispel at least some of the murk? devoted to the economic side. Fisher This paper will not reenter the debate (1991, p. vii) called the downfall of the over the relative merits of the various Soviet bloc and of the USSR itself the estimates of Soviet performance. In accor- “last great drama of the Cold War.” The dance with the call of the conference lead up to that drama was the developing subtitle to draw the “Lessons Learned and Soviet political-economic crisis, and the Not Learned,” the paper will instead seek to period 1975-90 is pivotal in any review of narrow the area of controversy and arrive at the Soviet economic record. Such a review some conclusions about the significance of should in principle encompass Soviet-era the prolonged struggle over the numbers. measurement of Soviet performance as Three questions are posed: (1) How large well as the analysis of Soviet economic are the differences among the principal institutions, policy and problems. The estimates of Soviet performance since 1960? declassification and release of a great mass (2) What is the analytical or policy signifi- of CIA analytical documents suggest the cance of the observed differences? (3) What utility of an extended reexamination of the lessons have been learned or not learned second heading. That was one main focus from the experience of the debate? of Noren (2001), but he could only sample Performance: The Scope of the the 60,000 pages in over 2,000 documents, Controversy 3 so there is room for further exploration. Ruble GNP This paper regrettably cannot take up that challenge, which must be left to another According to the CIA, Soviet GNP occasion or other hands. The discussion increased at an average annual rate of 3.8 here is devoted to the first subject, the percent between 1950 and 1985 measured measurement of Soviet performance. at 1982 factor cost, or 4.1 percent if the Street opinion still seems to be that the series at 1970 factor cost is linked at, say, 4 CIA record in this arena is one of abject 1975 to the series at 1982 factor cost. If failure, 1 and two members of this confer- the two series were chained to a third, ence panel, Igor Birman and Nikolai employing earlier period weights, perhaps Petrakov, wholeheartedly endorse that view. those of 1955, the overall growth would The present writer sees no reason to change probably be larger still, as index number his overall view that this reading is a serious theory suggests. These are substantial rates distortion (Becker, 1994). 2 Other analysts of increase and a number of critics have and scholars have arrived at the same avowed that they were seriously over- 5 judgment, but apparently it was neither stated. Even more controversial were the widely heard nor credited where heard. CIA comparisons of Soviet and American Perhaps we succeeded only in confusing output at points in time. This section where we sought to clarify. An anecdote, examines the size of the differences perhaps apocryphal, relates that Alfred between the CIA estimates and their chief North Whitehead once congratulated competitors. In quantitative terms, what is Bertrand Russell after a lecture on the the issue? 18 Growth and Structure of GNP Khanin Steinberg Tables A and B in the appendix to Industrial this paper set out CIA estimates of the output average annual rates of growth (AARG) of 1961-80 0.4 ruble total output minus net material 1966-85 0.8 product (NMP), the most frequently used Agricultural Soviet aggregate, as well as GNP and its output components. These are compared with 1966-85 -1.2 the calculations of the Soviet Central Construction Statistical Administration and the principal 1960-75 0.5 alternatives— primarily, those made by Grigorii Khanin and Dmitri Steinberg. 1966-85 2.4 Three features stand out in an exami- nation of total output growth in Table A. The differences noted—total output First, Khanin, Steinberg and the CIA all and branch of origin production alike—are substantially discount the official Soviet for all practical purposes insignificant, claims. There has long been a consensus on excepting Steinberg’s construction series. this judgment in the West, and Khanin was This is not the case with respect to the end the path-breaker in the Soviet Union uses of GNP, where the CIA’s estimates have toward the same conclusion. Second, all the been subjected to much criticism. The CIA- series indicate a marked deceleration of Steinberg margins for the two main end uses growth over the quarter century; the retarda- are also small: 1.2 percentage points in the tion is monotonic in several series after AARG for consumption and one point for 1966-70. On this too there has been a long- fixed investment. Others, however, have standing agreement, even in the USSR. taken a more jaundiced view. Igor Birman Third, the differences among the alterna- (1991, cited in Becker, 1994, p. 299) chal- tives to the official numbers are small. lenged the CIA estimate that the rate of Because this last result belies a widely held growth of per capita consumption in the belief, it is worth brief elaboration. USSR over the period 1951-88 exceeded Khanin’s estimates show the lowest that in the U.S. (although by 0.4 percentage growth rate for each sub-period, except in points). “The figures necessarily mean much the first part of the 1970s; Steinberg’s, with better performance of the Soviet economy as compared with the American during the one exception, are lower than those of the 9 CIA. 6 The differences among the three four last decades! No Soviet propagandist sets of calculations in any five-year period would dare say such a thing.” But neither he are however no larger than 1.5 percentage nor Khanin (AEA, 2000, Vol. I, pp. 105-106), who was also skeptical, offered alternative points. Over the 25-year period 1961-85, 10 the AARG margin between the CIA’s and growth rate estimates. Khanin’s figures for NMP is one percent- On investment the main issue was age point; the AARG of the CIAs GNP the degree of inflation in the value of the series exceeds that of Steinberg’s over the machinery and equipment component of 20 years 1966-85 by 0.7 percentage points. 7 the official investment series, on which Cumulatively, Khanin estimated that NMP the CIA relied to a considerable extent. almost doubled in 25 years, whereas the Various Western observers and Soviet CIA put the change at 2.4 times. writers suggested a range of estimates of For the branch of origin compo- inflation rates (Rumer, 1989, p. 313; nents, the CIA’s numbers exceed those of Measures, 1990, pp. 40-41; Kellogg, 1990, Khanin/Steinberg as follows (percentage pp. 103-104; Shukhgalter, 2000, p. 71; points of AARG): 8 Nochevkina, 2000, pp. 100, 102, 105). The 19 Agency acknowledged the probability of the GNP accounts; the Agency never upward bias in its fixed investment esti- successfully integrated the two. The CIA mate (CIA, 1988, p. 15), but it nevertheless believed that defense elements in its distri- believed that “the upward bias in [the bution were included in fixed investment, CIA’s] total investment growth, at its peak, R&D and the final residual. Total military may be slightly over 1 percentage point expenditures (including R&D) estimated per year” (Measures, 1990, p. 43). The from the separate CIA “building block” Soviet writers may have considered that model represented 12.2 percent of GNP in an understatement of the true rate of 1970 and 15.0 percent in 1982 (Firth and investment inflation, but no alternative Noren, 1998, pp. 129-130). Steinberg’s “total investment series has been offered. defense” took up 17.6 percent of GNP in The divergences among the various 1970 and 18.6 percent in 1982. estimates of growth of total GNP and its Steinberg’s “total defense”/GNP ratios components cannot compare to the clash are by no means at the extreme end of the of views on the growth of military expen- range aired in public discussion. The figure diture. The figures of William Lee (for the of 25 percent has received some currency.12 period 1961-85) and Steven Rosefielde Various reasons were advanced for rejecting (1961-79) exceed those of the CIA by an the building-block-derived figures, but the average of 6.3 percentage points, with debate centered on the scope of the defense considerable variance around the mean. numerator: for example, should all space Lee and Rosefielde found much higher expenditures or the “costs of empire” be rates of technical change in Soviet weap- included? A major issue concerned the onry and much lower rates of price scope and cost implications of Soviet inflation than the CIA did (reviewed in mobilization capacity and the cost penalties Firth and Noren, 1998, Chapter 6). In imposed on less favored civilian activities by contrast, Steinberg’s rates of growth military priority (see Gaddy, 1996, for average only half a percentage point illuminating detail). The CIA defense higher than the CIA’s.11 Franklyn estimates were explicitly based on a rela- Holzman (e.g., 1994) was the most tively narrow definition for the sake of prominent among those who believed the comparability with U.S. numbers. Expan- CIA estimates were overstated. sion of the definition produced expectedly Defense is also the main problem in higher defense/GNP ratios, but the Agency the structure of GNP (Table B). There is never attempted to encompass all the factors disagreement on the sector of origin distri- mentioned by the critics.13 The controversy bution, particularly with respect to trade and over the growth and relative weight of the residual category, but no evident pattern military outlays was surely the most heated of variation. On the end use side, consump- in the Soviet performance debate, exceeded tion accounts for a considerably smaller share in temperature only occasionally by disputes of GNP in Steinberg’s structure, especially in over the comparative size of Soviet GNP 1982 and 1985, relative to the CIA/CIR and household consumption. figures; fixed investment takes a larger weight To sum up: the competing calcula- (though not in 1985). On the other hand, tions of aggregate national output growth Steinberg’s residual category weight is 9-10 do not indicate substantial differences in points higher than that of the CIA/CIR in either average annual rates or cumulative 1982 and 1985. totals. This is also the case for growth of This catchall category is however not output by the originating sectors (except comparable between the two series for Steinberg’s construction numbers) as because Steinberg did, and the CIA did well as the chief end uses, consumption not, calculate defense as a component of and investment. Neither were there sharp 20 disagreements—between CIA and tance Commission. The experiment Steinberg, at least—on the sector of origin failed, as might have been expected, but structure of output. There were major the attempt to compel absolute adherence conflicts on the subject of Soviet military to quality standards shone a direct light on outlays, with respect to both growth and a dark corner of Soviet production share of GNP. On the latter, poor compa- practice, revealing astonishing lapses of rability of the data obscures the actual observance:16 differences. It is clear however that neither • Technical primitivism. There Steinberg’s nor the CIA’s end-use distri- were numerous reports of dirty work bution constituted a full measure of the stations, neglected tools, tools that “real” burden of the Soviet military effort, were grease covered or coated with which would, in any case, depend on the metal filings. definition employed. • Unreliability of suppliers. Producers were reluctant to confront suppliers Are the CIA Growth Estimates Over- over late deliveries of poor quality stated? materials and components, because it Since the CIA estimates of aggregate was often impossible to change output growth rates are, with few excep- suppliers and confrontational behavior tions, higher than those of Khanin and could lead to deterioration of supply Steinberg, the question arises whether problems. there is possibly an upward bias in the CIA • Sacrifice of quality for quantity. series. Two possible sources are considered Workers had become accustomed to here. Regrettably, the discussion of both is cutting corners to raise productivity. inconclusive. It would require considerable Often they were obliged to do so, investigation, assuming the data available, to because wage rates per unit of output arrive at a more definitive judgment. were reduced when new machinery An important possible source of bias was installed, on the dubious assump- 14 is the deteriorating quality of output. tion that the investment would auto- Åslund (2001, p. 6) called “poor quality of matically bring increases in productiv- output the fundamental problem in ity. The combination of supplier socialist economics.” Soft budget constraints unreliability and continued insistence on enterprises, directed supplier-customer on meeting high quantity targets relations, persistent shortages, taut output meant a continuation of the long- planning, general inability of consumers to standing practice of “storming” (racing affect the volume and composition of the to meet output targets at the end of a retail basket, were among the principal reporting period). The tendency to factors inducing producers to neglect sacrifice quality was great at the end of quality in favor of meeting quantitative the month, greater still at the end of output targets. A major role must also be the quarter and at the end of the year: assigned to the military priority system, “even God closed his eyes to defective which effectively siphoned off quality output” (Izvestiia, March 25, 1987, p.3). resources and left the inferior residue for • Inadequate capital base. There 15 non-military uses (Gaddy, 1996, Ch.3). were acute shortages of measuring One of the most revealing bodies of tools, instruments and equipment. evidence on output quality emerged from More importantly, Soviet industrial Gorbachev’s 1987 attempt to impose a plant, even in machine building, was zero-defects production regime on the worn, badly maintained, or obsolete, machinery industry, administered by a making it difficult to fulfill technical new organ, Gospriemka, the State Accep- standards. 21 The anecdotal evidence suggests that over time. Pitzer (1990, pp. 16-17), in the last decade of the USSR’s existence, however, calculated that in the period and perhaps earlier too, output quality in 1955-1987 the average service lives of Soviet civilian goods manufacture was spotty Soviet capital assets fell “within the same at best. In any given year of this period, it general area as those of the U.S.” He seems likely that the value of output concluded that “within very broad con- computed as reported physical production straints, the Soviet depreciation deduc- weighted by base year prices is overstated. To tions represent the economic value of the what extent quality deteriorated over time capital stock consumed each year about as and therefore biased the CIA indexes well as U.S. deductions do.” upward is however much more difficult to One would expect longer actual judge, but it seems possible. service lives in Soviet production capital in Growth rates, though probably not the light of Cohn’s observations (note 18), of GNP, could be affected by correction and the considerably greater importance of for under-depreciation of Soviet capital modernization in American capital growth assets, particularly for obsolescence, for (Shukhgalter, 2000, pp. 71-76). The other which there is also considerable anecdotal side of the coin of under-depreciation evidence. There is a widespread view in would be low rates of retirements of capital the West that Soviet capital stock as a assets, and there is evidence of that too. whole was increasingly obsolete at the Annual retirements as a ratio of the total end of the Soviet regime.17 The Lenin capital stock in 1961-87 were (with minor Steel Works in Magnitogorsk, one of the exceptions) a constant 2-3 percent USSR’s principal steel production centers, (Kellogg, 1990, p. 146). The retirement rate can serve as a symbol of the obsolescence appeared to be declining in the late 1980s, of much of the Soviet industrial capital judging from official data for production stock, especially in the smoke stack capital (N.kh.1990, p. 289). At the same industries. In 1991 the Lenin Steel Works’ time, cumulative depreciation of produc- capital stock still embodied essentially tion capital in industry due to wear and tear 1930s technology (Remnick, 1991). The (iznos) increased from 36 percent of the directors dreamed of replacing their end-year capital stock in 1980 to 41 percent ancient open-hearth furnaces with con- in 1985 and 46 percent in 1990 (N.kh.1990, verters, but that was 1950s technology and p. 375).19 The compilers of the statistical the world had moved on to electric arc yearbook (N.kh. 1990, p. 380) complained furnaces, continuous casting (actually, a that despite some acceleration of asset Soviet invention) and mini-mills produc- withdrawal in industry in 1985-90, “retire- ing a wide range of specialized steels. The ments of fixed capital are still 1.5-2 times situation of Magnitogorsk steel produc- below norm, as a result of which a signifi- tion was replicated throughout the cant amount of obsolete (ustarevshie) USSR—for example, in the Uralmash machinery and equipment is retained.” complex in Sverdlovsk (Smith, 1990, pp. The paradox may be partly ex- 244-245). plained by the separation of Soviet The implication of finding extensive amortization allowances into two funds, obsolescence would be that the asset one for replacement and the other for so- amortization rates recorded in Soviet called “capital repair.” In Soviet deprecia- enterprise accounting, as distinct from real tion practice capital repair funds were economic depreciation rates, were too under the control of the producing low. Moreover inadequate accounting for enterprise, whereas higher administrative obsolescence appeared to be a problem of echelons generally granted the replace- long standing18 and may have intensified ment funds. The size of total amortization 22 allowances may have justified Pitzer’s over. Whether this is the case in the industri- conclusion, but actual replacements prob- ally developed market economies, it was ably fell considerably short of real economic certainly not true in the Soviet Union. The depreciation. This could occur in two ways: recorded amortization allowances of over-expenditure of capital repair at the Magnitogorsk’s steel works may or may not expense of the replacement fund or, more have understated the physical wear and tear, likely, under-funding of replacement by but they surely minimized the real economic ungenerous mid-level administrations or by obsolescence of its capital stock. This may the enterprise itself. The Soviet enterprise also have been the case with much Soviet manager incurred considerable risks when industrial capital. Actual net investment in he undertook replacement investment, risks aggregate for the USSR was probably lower that were reduced by substituting capital than the official figures on the use structure of repair of obsolescent equipment (Cohn, NMP suggest. In ignoring the distinction 1979, p. 244). In a protected seller’s market between net and gross aggregate product in with expected long-term price stability, the USSR, Western reconstructions neglected there seemed little need to worry about a possibly important feature of the Soviet obsolescence. In fairness, it should be growth record. There remains the issue of the noted that the share of total amortization change in depreciation over time. If the allowance nominally earmarked for capital margin between reported amortization and repair showed a clearly declining trend in real depreciation widened, the real rate of the 1970s and 1980s (N.kh. 1985, p. 558; increase of Soviet NNP may well have been N.kh. 1990, p. 25). lower than that of GNP. Even if confirmed, a finding of under- Comparative Size depreciation would not necessarily under- mine the accuracy of the calculated GNP Criticism of the CIA estimates of growth rates, because depreciation affected ruble GNP measures was often vocal but, only CIA’s branch of economy weights. But with the conspicuous exception of military under-depreciation suggests the utility of a expenditure, few alternatives were prof- complementary total net output indicator, fered. In sharp contrast, the measurement which would deduct capital consumption of comparative USSR/U.S. size seemed from the gross product. 20 The dynamics of almost a household industry in the Soviet 21 net and gross product might well diverge. Union. The 1990 AEI-sponsored confer- Western concern with aggregate ence on comparing the Soviet and Ameri- demand and employment has tended to can economies discussed or mentioned focus national income measurement on several views on the Soviet/American ratio gross product and to ignore the net of GNP alone (see table below) (AEI, 2000, indicator. Moreover, in an economy Vol. I, pp. 10, 11, 20, 40, 55, 75, 127): where capital consumption allowances are These numbers appear to refer to closely related to actual economic depre- some version of dollar calculations; ciation, the difference between NNP valuation of American output in rubles (NDP) and GNP (GDP) can be glossed seems to have been attempted only rarely.

Author USSR/U.S. (%) Year Author USSR/U.S. (%) Year Åslund 21-34 ?? Illarionov 45.9 1985 Belkin 14 1987 Khanin 20 1985 Birman 20 “now” Kudrov 35 “present” Bolotin 45 1985 Nikitin and Dikhanov 33.6 1985 Gelvanovskii 33-35 ?? 23 For comparison, the CIA’s geometric from two sets of purchasing power parity mean of ruble and dollar relatives ranged studies, relating to 1955 and 1976. Since between 52 and 56 percent, depending on then the only “extensive, detailed, system- the year of publication (Becker, 1994, p. atic and factual” study to have been carried 309). In addition, figures were cited at the out was by the OECD and the UN for AEI conference for GNP per capita, NMP 1990 in a multinational, Europe-centered and the components thereof, as well as per comparison of GDP, the European Com- capita consumption, investment and the parison Program (ECP, 1994).23 With capital stock. In the 1970s Valentin Kudrov Austrian prices and quantities as a bridge, directed a project at the Institute of World the Soviet/American ratio for per capita Economy and International Relations GDP is 31.6 percent (ECP, 1994, p. 77).24 (IMEMO) on comparison of the two The corresponding CIA figure as extrapo- economies, which did trouble to develop lated by Bergson (1997, p. 3) is 43 percent, ruble as well as dollar relatives. Kudrov more than a third higher. Schroeder (1995, (2000, p. 65) claimed, “To the best of our p. 216) allowed for a 10 percent discount of knowledge, the value-based comparisons the CIA ratios of both GNP and consump- of the USSR and U.S. economic indicators tion, because of superior U.S. quality of performed at the IMEMO are still the output, and then extrapolated the ratios to most extensive, detailed, systemic [sic] and 1990. These are shown here along with factual as compared to all other compari- similar Bergson calculations and the ECP sons ever done in the USSR.” They were ratios (percent):25 replicable and verifiable, but in hindsight Per capita Per capita he believed they were Soviet-biased. GNP or GDP consumption Kudrov (1997, pp. 887, 891, 895, 896) ECP 32 24 provides a considerable set of results from Schroeder 39.5 27.7 the IMEMO studies, from which the CIA via Bergson 38 28 following sample may be cited (geometric ECP/CIA 81/84 86 means of ruble and dollar relatives):22 For comparison, the alternative NMP produced, 1963 46.0 percent numbers favored by several prominent Industrial output, 1967 51.2 critics of the CIA GNP estimates, noted Agricultural output, 1967 84.2 above or cited in Becker (1994, pp. 312- Consumption, 1969 13), ranged from about one-quarter to Total 37.3 four-fifths as high as the Agency’s mean Per capita 31.9 ratio of about 55 percent for the mid- 1980s.26 A World Bank-sponsored study, Kudrov concluded (p. 903): cited earlier, indicated a ratio of 43 per- As a whole the comparisons of the cent, thus about 78 percent of the Agency main macroeconomic indicators of the average. The gap between the CIA and USSR and the USA carried out in ECP aggregate output figures for 1990 is IMEMO reflected lower ratios than therefore tangibly smaller than the differ- those published in the Soviet official ences between the CIA estimates for the statistics on a regular basis. In many mid-1980s and those of its critics. cases the IMEMO ratios were close to This is also true of the comparison those published by the CIA. That was of per capita consumption in 1990. The the main reason these comparisons ECP ratio is but 14 percent below the were kept secret by the Institute. quality-discounted CIA figure. Interest- The CIA’s ratios of Soviet to Ameri- ingly, Igor Birman’s extended critique of can GNP were derived or extrapolated the CIA’s comparative per capita con- 24 sumption estimate for 1976 claimed an military output growth and share of GNP error margin of at least 17-35 percent, but if are sharply higher than the Agency’s the CIA numbers were discounted 10 estimates. Until the late 1980s, however, the percent, Birman’s estimate would imply a Soviet government figures were ridicu- difference of 8-28 percent. The gap between lously low and devoid of credibility within the CIA’s and the ECP’s ratios for per capita or without the Soviet Union. A somewhat fixed investment is somewhat larger: the similar judgment applies to the occasional ECP estimate is 30 percent below that of the official figures on the USSR/U.S. ratios of CIA and 23 percent less than a discounted national income (NMP) and industrial CIA figure (Bergson, 1997, p.8). Military production noted in the next paragraph. outlays are lumped with government Comparison of Soviet and American administration in the ECP accounts.27 performance. This paper has not compared Becker (1994, p. 316) concluded that U.S. and USSR growth rates. But changes in the CIA’s reported average GNP size comparative size, over fairly short periods, ratios were “not just upper bounds but reflect relative differences in growth, at least more likely overstatements of the upper crudely. On this subject the official Soviet bounds on the ‘true’ ratios.” The ECP figures are certainly no help for they have studies suggest that the Schroeder 10 clearly been fudged (Revenko, 2000, pp. 37- percent nominal discount for quality may 38 and Kudrov, 2000, pp. 58-62). The figures not be sufficient. Perhaps, too, the eco- from individual Soviet scholars or institu- nomic turmoil in the Soviet Union before tions cited earlier were single point esti- its demise implies that extrapolation from mates for the most part. Kudrov (1997) did 1976 inadequately accounts for deteriora- report time series data for the major catego- tion of consumption and production ries of the IMEMO studies, and these show standards in the intervening years. uninterrupted increases in the USSR/U.S. ratios of industrial and agricultural produc- What Difference Do the Differences tion, investment, consumption, total and per Make? capita, and total fixed assets, from the 1950s The preceding section reviewed the to about 1970 (pp. 887, 891, 893, 895-96). size of the divergence in the estimates for The article did not provide a time series for various magnitudes. Some of the dispari- NMP. The only extended time series ties observed were considered small, available for comparative aggregate output is others were seen as more significant, that published by the CIA. It indicates that which raises the question, in what analyti- the Soviet/American ratio of GNP increased cal or policy context can significance be considerably between 1955 and 1975 but judged? This section considers the ques- declined tangibly in the next decade tion in relation to three issues. (Becker, 1994, pp. 307-311).28 Appraisal of Soviet official statistics. Evaluation of the Soviet economic This is the easiest issue to gauge. The model. Ericson (1990, p. 90) believed that alternative estimates of the growth of total Khanin’s growth estimates had dramatic output and its major components all implications for the appraisal of Soviet discount the official Soviet figures, and by economic history and the Soviet eco- substantial margins. It hardly seems impor- nomic model. As a result, tant whether the CIA understated the We can no longer believe in the degree of exaggeration in any of the official “command economy” as an effective series, in view of the quite small differences mobilizer of resources or instrument among the alternatives. It might be argued for change over any but the shortest that military expenditure is the salient period of time. [T]he “command exception. Several alternative estimates of economy” appears rather as an engine 25 for the dissipation of social energy model seems a matter of taste rather than and resources, and the propagation analysis. of waste, inefficiency, indifference Relevance to U.S. Government policy. and dishonesty in the social system. Some critics have made much of the CIA’s Moreover, it is an instrument that is alleged failure to anticipate the “collapse” of becoming increasingly ineffective the Soviet economy, a consequence in part over time, even with respect to those of being blinded by the Agency’s high tasks that it once did well, despite all estimates of Soviet economic growth. Thus efforts to reform or improve its handicapped, the U.S. government suppos- functioning. This is a far cry from the edly made erroneous, costly decisions, dynamic Soviet development model including on the military budget and the that threatened to bury us. national debt. Noren (2001), surveying the However one views this character- recently declassified Agency reports and ization of the “command economy,” it is memoranda, argues that the CIA on many difficult to credit Ericson’s assessment of occasions pointed to the increasing difficul- Khanin’s role. Scholars in the West had ties of the Gorbachev regime in coping with deflated Soviet government boasts of the serious structural problems of the Soviet super-high rates of growth long before economy. Whether those analyses were Khanin’s results became known. The adequate must be left to separate examina- 29 differences between the AARG of tion. The quantitative record however Khanin’s NMP and those of Bergson-CIA hardly supports the charge noted. In Table A (Table A and Becker, 1994, p. 304) never all the total output series portray sharp, exceeded about one and a half percentage uninterrupted retardation of growth rates points for either the prewar or postwar from at least 1970. All the non-official periods. Both the quantitative and the calculations show rates of growth below 2 policy studies of the postwar Soviet percent per year in the last decade, except economy performed in the West stressed for the 1970-price valuation of CIA’s the exaggeration in the official view of “NMP.” All four indicate a further growth Soviet performance and the deepening decline in the first half of the 1980s, al- difficulties of Soviet planning and opera- though the change in the CIA series is small tion. Nikita Khrushchev’s vainglorious and in the case of GNP, minimal. All the boast was seen as hollow within a very non-official estimates cited, against the few years of its pronouncement. background of continuing growth retarda- There is, as we have seen, a wide tion since the 1960s, suggest approaching dispersion of views on the comparative size stagnation or recession/depression. A of the Soviet economy at a particular time. somewhat similar pattern appears in the There may also be disagreement on the time second part of Table A. It stretches credulity trend of the Soviet/American GNP ratio to argue that the one-percent per year until the mid-1970s. Since then however the difference in growth rates between Khanin’s ratio declined in the CIA series; presumably and CIA’s estimates for NMP in 1976-85 the critics assent. In the last 15 years of its marks the difference between a forecast of existence, clearly, the Soviet Union fell further “collapse” and an intelligence failure. behind the U.S. This finding may be viewed Some critics insist however that there as bearing its own verdict on the effectiveness had long been handwriting on the wall of the Soviet system in international perspec- that proclaimed the inevitability of “col- tive. Whether one then believes that ratios of lapse.” The CIA’s exaggerated view of one-third or one-half (or their alternatives) Soviet growth, and especially of the com- imply different judgments of the Soviet parative size of the Soviet economy, pre- vented it from seeing and understanding 26 the message. Or so runs the critics’ claim. seemed to grasp the parlous state of the Apart from the merits of the arguments on economy and attempted to pull it out of the statistics, there are two problems with this stagnation, who unwittingly pulled down claim: the dubious meaning of “collapse” and the pillars of the temple.30 the inapplicability of such a notion to the Lessons Learned and Still Unlearned economy of the last years of the USSR. What is the analytical meaning of One of the hallmarks of the analysis of “collapse” or indeed of any of the several Soviet economic performance was the high other synonyms—such as “clinical death,” degree of controversy that enveloped it. “total crash,” “strategic nonviability”—that Disagreements are voiced in all professional have been employed? These are all dra- fields and the argument can be heated. The matic terms, but they lend themselves to temperature of the polemic in economic neither measurement nor analysis. Econo- Sovietology was however particularly high, mies may shrink in size drastically; they with accusations of personal and political may suffer severely from maladies like failings not uncommon. Several factors may inflation, unemployment, corruption, black explain this phenomenon but Soviet markets, etc. But they do not “collapse” concealment policy is surely the single most like a tent whose guy ropes have been important reason. There are debates about suddenly severed; they do not “die.” aspects of national accounting in the U.S. However it may be defined, “col- and in other countries blessed with more or lapse” hardly seems an appropriate less open publication of economic data. description of the state of the Soviet Such disputes have not however generated economy in 1989-91. In the Civil War that the magnitude of differences in estimates, followed the Bolshevik Revolution, certainly not the politicization of conflicting industrial production declined 70 percent viewpoints that developed over Soviet (Nove, 1969, p. 68). According to the economic measurements. The reason is UN’s Economic Commission for Europe, simple enough: the controversial character of the GDP of the CIS economies shrank by the Soviet system, the Cold War political- almost half in the decade following 1989 military conflict between East and West, and (cited in Åslund, 2001, Table 3), although the connection between Soviet economic this figure is arguably exaggerated. performance and U.S. policy choices, most Growth of the Soviet economy through prominently on the size and structure of our 1989 however was positive, though small. military budget. Soviet concealment necessi- The decreases in 1990-91 may have been tated independent estimates of Soviet large, but they were considerably smaller economic performance, but the dearth of than those that followed the dissolution of reliable information also made those the USSR (Åslund, 2001, Table 1). estimates difficult, cumbersome and open The almost continuous retardation of to challenge, well-grounded or not. If one Soviet growth since the 1960s, leading to the can imagine a socialist political-economic absolute declines of 1990-91, was surely due order with economic data as freely to the combination of systemic deforma- available as in the U.S., it seems unlikely tions and the clumsy efforts of the regime to that there would have been either a cope with the increasingly manifest prob- perceived need for independent estima- lems. To repeat the conclusion of Becker tion or much controversy surrounding (1994, p. 394), almost no one foresaw the Moscow-issued statistics. dissolution of the Soviet empire and of the For this reason the controversies of USSR itself because no one foresaw the yesteryear over Soviet economic perfor- immediate cause of the upheaval. Ironically, mance may present few lessons for a new it was Gorbachev, the one leader who generation of analysts in the West. The 27 Soviet combination of hostile purpose countries were of equal size, U.S. GNP and secrecy with statistical manipulation is was, presumably, less than 1.5 times larger not apparent in the Russia of today. So than the Soviet. Even if Soviet industrial long as that is true, tomorrow’s Russian production was only half as large as the data disputes will probably be tame in U.S. volume, the GNP ratio would still comparison with those of the “good old have been less than three, rather than days.” Many observers of Russian affairs are more than nine, according to the logic of however concerned about what they see as the example.33 a concentration of executive power in The elementary but fundamental Moscow and the growing role of the police error of this plausibility test consists in the forces. These developments seem hardly failure to distinguish between two national compatible with a free flow of information price sets and an average of output ratios in a truly democratic society. derived from each set. GNP shares are There is one issue of the Soviet era calculated in dollars and rubles. Average controversies that does bear revisiting. Soviet ratios of output derive from separate ruble- secrecy and the labor intensity of the major weighted and dollar-weighted calculations. independent estimating effort in the West, The attempt to cross these lines arbitrarily essentially that of the CIA, generated a results in the muddle depicted above. The strong incentive for skeptics of the CIA remarkable aspect of this story is that results to resort to “back of the envelope” warnings against such procedures have calculations31 and simple plausibility tests to been sounded for more than forty years challenge the CIA numbers. Some eco- (for example, Becker, 1960). This is one nomic “alternative medicine” efforts raised lesson that some have not yet learned. genuine issues of methodology (Becker, The origin of this methodological 1994, p 302 and p. 307, n. 32), but others error is surely in the temptation to rely on were based on elementary errors of analysis. “common sense,” intuition or “feel” for the A prominent example of the latter is reality on the ground. There have been the following type of comparison. Suppose those who thought they could distinguish Soviet and American agricultural outputs in between GNP growth rates of three 1985 were of equal size. Agricultural percent and one percent, or between production contributed only 2 percent of USSR/U.S. GNP ratios of one-third (or U.S. GNP then, whereas agriculture’s share less) and one-half, on the basis of personal in Soviet GNP was 19 percent (Table B). experience in the Soviet Union. Others Therefore, the argument runs, American were confident that particular CIA esti- GNP was better than nine times as large as mates were completely wrong but could Soviet GNP. If Soviet agricultural output not provide the “correct” number. First was actually smaller than the American, the hand knowledge of an economy and U.S./USSR GNP ratio would have been society is certainly a necessary complement even larger.32 The absurdity of this “calcula- to serious quantitative research, and Soviet tion” can be immediately demonstrated by secrecy and self-isolation imposed signifi- comparing any other originating branch cant handicaps on Western Sovietologists components. Thus, the share of mining and during the height of the Cold War.34 But manufacturing production in the U.S. GNP there are important limits to reliance on in the same year was 23 percent, excluding the qualitative dimension of analysis. A government enterprises, whose output “feel” for the reality may justify rejection of would add another few percentage points. a particular measurement as implausible or Industrial production accounted for 30 even incredible. Famine in a largely (CIR) or 35 (Steinberg) percent of Soviet agricultural society is not compatible with GNP. If industrial outputs in the two claims of rapid increases in per capita 28 consumption. Neither is stagnation at a committed itself. But its quantitative time of full employment and bustling analysis throughout remained within the retail shops a plausible combination. But disciplined framework of careful, detailed these are straw men extremes, easily construction of estimates guided by the knocked down. In between lies a minefield well-tried apparatus of theory and meth- where gut reaction, “educated” guesses and odology. It is those who diverged from back-of-the-envelope calculations greet the that approach whose claims to superior unwary with the potential for major error. merit remain in question. The other side of the coin of reliance APPENDIX on intuition or personal experience is the search for “the answer.” The answer to the This appendix presents and explains question, how fast did the Soviet economy two tables comparing the CIA and alterna- grow—or the magnitude of the Soviet tive estimates of Soviet ruble GNP perfor- defense burden, or the size of Soviet mance. The chief alternatives are those by consumption compared to that of the Grigorii Khanin and Dmitri Steinberg. U.S.—is not inscribed on a tablet from Mt. Table A shows the AARG of output by Sinai awaiting discovery by those possessed five-year periods, Table B the structure of of right reason and a pure heart. And the output in benchmark years. The first part of method of determining a proper response Table A, covering aggregate output, com- is not self-evident. Western economic pares estimates of both net material Sovietology relied on “conventional product (NMP), the most commonly-used Western norms” (Bergson, 1995), and Soviet aggregate, and GNP. The Soviet “standard concepts and measurement Central Statistical Administration began techniques in the field” (Schroeder, 1995, computing GNP only in the late 1980s, and p.200). These were of course derived from the series was not extended backwards to the Western apparatus of the theory and the sixties and early seventies. Khanin’s practice of national accounts. The issue series cannot be associated with a particular here however is not the relative validity of set of prices because his methodology NMP vs. GNP. One is not inherently right attempts to avoid the valuation problem, and the other evidently wrong. The and the official indexes use varying estab- problem with Soviet statistics was not that lished-price weights. Otherwise, the table their theoretical foundation was the labor looks at the results of valuation in, alterna- theory of value, but that the concepts were tively, early-1970s and 1982 factor costs plus 35 often unclear, the methodology skewed or a set at “chained” prices. masked and much of the underlying data The second part of Table A features suspect when not simply concealed. In the growth of the components of GNP, short, whether a number is “right” depends the main originating sectors and then the on its theoretical context, how it is defined, chief end uses. To simplify the presenta- the procedures used to measure it and the tion, the table limits the Steinberg and transparency of the measurement process. CIA entries to those at 1982 factor costs: Regrettably, there seems to be great resis- in either set there is little difference tance to the lesson that the correctness of an between the AARG at 1970 or 1982 factor 36 estimate depends only on the path taken to costs. There is no Khanin row for arrive at it. agricultural output because he accepted In this light the CIA calculations the official index as valid. Neither did may still be criticized for various short- Khanin provide estimates of end-use. comings—even serious ones, as some The structure of GNP by branch of Western analysts have claimed—judged origin and end use is shown in Table B at by the standards to which the Agency had factor cost for the two weight years of the 29 CIA growth indexes, 1970 and 1982. be compared with the data published in These are the only ones for which the the 1990 yearbook (N.kh. 1990, p. 9; CIA estimated both established and factor percent): cost values in current prices. Table B also compares the official Soviet structure of ECP submission N.kh.1990 GNP in 1985 with Steinberg’s distribu- Final national tions as well as with those compiled by consumption 58.3% 56.9% the U.S. Bureau of the Census’ Center for Gross fixed capital formation 30.0% International Research. Because the CIR Increase in stocks 1.8% {30.1}% did not estimate end use at factor cost, that Gov’t collective 1985 comparison is at established prices. consumption 10.4% It is not clear whether the CIR accounts Net exports -0.6% {13.0}% are essentially a continuation of those by the CIA. The accounting structure and the Defense expenditures are suppos- basic procedure seem similar, but it would edly included with collective consump- require detailed comparison to establish tion, but both the latter figure and the whether or not there are significant N.kh residual are obviously far too small differences. to reflect all Soviet military outlays. In 1990 the USSR participated for Finally, the presentation of Steinberg’s the first time in the European Compari- estimates raises questions about the consis- son Program (ECP). The end-use distri- tency of various parts of his calculations. To bution for 1990 in the government our great regret, his untimely passing submission to the ECP (1990, p. 38) may

30 Table A ALTERNATIVE ESTIMATES, POSTWAR SOVIET OUTPUT GROWTH Average annual rates of growth, percent

1961-65 1966-70 1971-75 1976-80 1981-85 1961-85 1966-85 Total Output Soviet official, NMP 6.5 7.8 5.7 4.3 3.6 5.6 5.3 Khanin, NMP 4.4 4.1 3.2 1 0.6 2.6 2.2 CIA, NMP 1970 prices 5.1 5.6 3.7 2.6 n.a. 1982 prices 4.9 5.2 3.3 1.8 1.6 3.3 2.9 chained indexes 5.1+ 5.6 3.7 2.2 1.6 3.6 3.2 Soviet official, GNP n.a. n.a. n.a. 4.8 3.7 Steinberg, GNP 1973 factor cost n.a. 5.2 2.3 1.7 1.1 2.5 1982 factor cost n.a. 5.1 2.1 1.6 1 2.4 chained indexes n.a. 5.2 2.3 1.7 1 2.5 1970 factor cost 5 5.2 3.7 2.7 n.a. 1982 factor cost 4.8 4.9 3 1.9 1.8 3.2 2.8 chained indexes 5+ 5.2 3.7 2.3 1.8 3.6 3.2 Components Industry Soviet official 8.6 8.5 7.4 4.4 3.7 6.5 6 Khanin 7 4.5 4.5 3 n.a. CIA 6.5 6 5.6 2.4 2 4.5 3.9 Steinberg n.a. 4.3 4.2 2.6 1.4 3.1 Agriculture Soviet official 2.3 4.2 0.8 3.5 2.1 2.6 2.5 CIA 2.8 3.4 -2.3 0.2 1.2 1 0.6 Steinberg n.a. 6.9 -1.2 -0.2 2.1 1.8 Construction Khanin 5 3.2 3.7 n.a. n.a. CIA 4.9 5.5 4.2 -0.1 1.1 2.7 2.2 Steinberg n.a. 2.7 0.8 -1.7 -2.7 -0.2 Consumption CIA 3.7 5.3 3.5 2.5 2 3.4 3.3 Steinberg n.a. 4.6 2.4 0.9 0.8 2.1 Fixed investment CIA 7.2 5.5 4.1 2.1 2.6 4.2 3.6 Steinberg n.a. 6.4 3.1 0.8 0.3 2.6 Defense CIA 6.1 4.4 3.4 1.7 1.1 3.3 2.6 Lee 10.1 11.6 11 7.6 8.1 9.6 9.5 Rosefielde 8.7 14.9 8.3 8.9* n.a. Steinberg n.a. 3.5 3.4 2.4 3.1 3.1 *1976-1979 Sources: Soviet official: NMP, N.kh.1987, p. 9; GNP, N.kh.1990, p. 8; industrial production, N.kh. 1987, p. 7; agricultural output, N.kh. 1980, p. 39 and N.kh. 1987, p. 5. Khanin: NMP, cited in Harrison (1993, p. 146); industrial and construction output, Khanin (1991, pp. 146 and 167). CIA: total output: 1970 prices and factor cost, Pitzer (1982, pp. 15, 25); 1982 prices and factor cost, Measures (1990, p. 46); components, except defense, Measures (1990, pp. 58, 73). Steinberg (1990): Tables 2A, pp. 220-221 (GNP and originat- ing sectors) and 2C, p. 227 (end uses). All defense figures from Noren (1995, p. 249). 31 precludes the resolution of these difficulties. The ambitiousness of Steinberg’s effort never- theless required consideration of his results.37 Table B STRUCTURE OF GNP: STEINBERG, CIA/CIR, OFFICIAL SOVIET (Percent; current factor cost, except as indicated)

1970 1982 1985 CIA Steinberg CIA Steinberg CIR Steinberg Official^^

A. Origin Industry 32 29.6 32.4 31.4 30.1 35 36 Agriculture 21.1 22.1 20.6 18.4 18.5 18.7 17 Construction 7.3 10.8 7.8 10.6 7.7 10.6 8 Transport & Communicat. 9.6 7.5 10.4 8.8 9.7 8.8 6 Trade 7.3 4.9 6.5 5.1 5.8 4.9 14 Other 22.7 25.1 22.3 25.7** 28.2 22** 19 B. End Use 1985 established prices Consumption 54.2 50.7 55.3 44.5 54.4 47.7 54.8 Fixed invest. 28.2 30.4 30.4 31.6 30 26.4 Inventories n.a. 1.7^ n.a. 3.6^ 3 3.1 {33} Other 17.6 18.9 14.3 23.9 15.5 22.8 13.2 of which: Defense n.a. 12.3* n.a. 15.4* n.a. 14.7*** n.a. Administ. 2.8 1.6 2.9 1.4 2.8 n.a. n.a. R&D 3.1 2.6 3.4 2.8 2.9 n.a. n.a. All other, incl. stat discrep. 11.6 2.4 8.1 4.4 9.9 n.a. n.a.

*Excluding R&D and, possibly, personnel outlays ** Including 1.9 percent unidentified in 1982 and 2.7 percent in 1985 ^ Including reserves ^ ^ Established prices *** “Total defense” Sources: CIA 1970: Pitzer (1982, p. 41). CIA 1982: Measures (1990, pp. 23 and 72). Steinberg (1990): For 1970 and 1982, Charts 9 and 11, pp. 189, 193; for 1985, Table 2B, pp. 222-225 and Table 1F, p. 214. CIR (1991, pp. iii, iv). Official Soviet, N.kh. 1990, p. 9.

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34 Endnotes he speculated that perhaps Khanin dis- *. This paper is a revised version of one counted growth rates for quality changes. presented at the Kennan Institute confer- 7. The entries for the three Western series ence on “U.S. Assessments of the Soviet and are the “chained” indexes of Table A, Post-Soviet Russian Economy: Lessons which provide a less favorable comparison Learned and Not Learned,” March 2002. for the CIA figures than the series at 1982 1. See the press commentary on the March factor cost. 2001 Princeton conference, “The CIA’s 8. Khanin’s industrial and construction Analysis of the Soviet Union 1947-1991:” output series extend only to 1980 and 1975, for example, Kotkin (2001) and Taubman respectively, and he accepted the official (2001). agricultural output index as valid. Steinberg’s 2. Becker (1998) deals in part with related construction growth figures are lower than issues. Khanin’s for the two five-year periods of comparability. Steinberg’s series shows a 20 3. This section deals with the growth and percent decline in 1976-85 and a negative structure of Soviet GNP as well as its size average growth rate in 1966-85! compared to American output. Growth of the capital stock, productivity, and com- 9. Birman passed over the implication that parison of Soviet growth with that of Soviet per capita consumption gained little industrially developed economies are ground in the competition with the U.S. among the important topics not covered in over four decades. this discussion. 10. The CIA found grounds for believing its 4. The cut-off point for the growth rates consumption index both understated and considered below is 1985 rather than 1990 overstated (CIA, 1988, pp. 15-16; Schroeder, (a) because 1985 is the terminal point for 2000, pp. 84-87). Schroeder (2000, pp. 90- most of the estimates of both Grigorii 92) discusses various objections to the CIA Khanin and Dmitri Steinberg, the main consumption estimates. See also Discussion alternatives to the CIA calculations (2000) and Becker (1994, pp. 299-301). discussed below, and (b) because of the 11. Growth rates implied in Steinberg’s increasing turmoil in the late eighties. After Table 2C, p. 227, for “total defense outlays” the rebound of 1986, when GNP is differ somewhat from those cited by Noren estimated to have grown by more than 4 (1995)—the source of the figures in Table percent, the average annual rate in the next A—which derive from a Steinberg 1992 three years was 1.6 percent (CIA, 1990a, p. article and were valued in 1992 rubles. The 64). But the meaning of factor cost growth rates of the 1990 Steinberg series are measurement of Soviet output must have on the average 1.7 points higher than the been compromised in the last years of the CIA’s. USSR. 12. e.g., Rowen and Wolf (1990, pp. xiii, 7 5. It should be kept in mind that a small and 9) or Birman (2000, p 55). At this minority of critics of the Agency’s estimates Kennan conference, Birman raised his believed they were understated. See estimate to “at least a third of the Soviet Becker (1994, p. 298) and Schroeder (1995, national product.” p. 208). 13. These issues are discussed in greater 6. Steinberg (1990, p. 177) remarked that his detail in Firth and Noren (1998), Chapters estimates of total material product are 5 and 6. See also Noren (1995). For an “notably higher, particularly for the late opposing approach, see Epstein (1990). My 1970s and early 1980s, than Khanin’s,” but 35 own view on many of these matters is set out Standarty i kachestvo) and several regional in Becker (1998). organs (Leningrad, Kazakhstan and Ukrai- nian Pravda; Kommunist of Vilnius and 14. There has been much discussion of Yerevan), largely in the first half of 1987. On another issue, deliberate inflation of the the quality of Soviet machinery, see also reported quantity of output, so-called Shukhgalter (2000, pp. 76-82). pripiski. Åslund (2001, p.3) claimed it amounted to about 5 percent of total output. 17. Ericson (2000, p.15) expresses a near- The degree of over-reporting varied over consensus view. “Most capacities inherited time, as Khanin noted (cited in Becker, [by Russia] from the Soviet Union were 1994, p. 306), and so would any consequent obsolete and extremely inefficient in their upward bias in the CIA’s estimated growth use of energy and material inputs.” rates. Åslund (1990, p. 19) and Ericson 18. Cohn (1979) pointed to six factors that (1990, pp. 64, 70) believed there was a contributed to under-depreciation in the distinct upward trend. There has however 1970s. (1) In Soviet conditions replacement been inadequate information to gauge the investment, rather than investment in new probable size of the error. Cf. CIA (1988, p. plant and equipment, was the essential 11): “…we believe the evidence that bearer of modernization, but the ratio of overreporting of [physical quantities pro- replacement to total investment was far duced] has increased over time is below that in the U.S. and other market inconclusive and note that even the critics of economies. (2) Soviet replacement invest- official Soviet statistics make heavy use of ment did not necessarily involve new such series in constructing their alternative technology. Much of the former consisted estimates.” See also pp. 12-13 in ibid. of assets transferred to lower priority 15. Brixiova and Bulir (2001, p. 22) argue activities. Cohn estimated that at least one- that in a planned economy firms were able third of total replacement investment to “produce goods and services that nobody consisted of obsolete transfers. (3) Until the demanded.” As a rough measure of that early 1960s the concept of obsolescence capability, they cite the sharp rise in the ratio played no part in replacement investment of total inventories to NMP in Czechoslo- decision-making. Even afterwards obsoles- vakia between 1954 and 1989, from 32 to 90 cence was only a minor factor. (4) percent. In the USSR the ratio of material Programmed asset service lives in the USSR working capital to NMP rose in every five- were considerably longer than in the U.S. year period since 1970 (N.kh.: 1985, pp. Assets were retired before the end of norm or 409, 554; 1988, pp. 12, 16; 1990, pp. 11, 27). nominal service lives, not for obsolescence The accumulation of unwanted goods, like but for abuse or poor maintenance. (5) The output losses due to spoilage or waste, does extension of service lives beyond pro- not however require a reduction of sectoral grammed limits was made possible by output in the GNP indexes. Instead, they extensive capital repair, an alternative to should be recorded under final uses—in the replacement and one of inferior technology. CIA accounts, as part of the ultimate (6) Soviet industrial capacity in the mid- residual. See CIA (1988, pp. 13-14). 1970s was far below that required for modernization of the industrial capital stock. 16. The brief summary of the evidence on the Gospriemka episode cited below is 19. Wear and tear (iznos) was measured by drawn from FBIS translations of the central the quotient of the cumulative sum of press (Pravda, Izvestiia and Ekonomicheskaia amortization divided by the end-year gazeta), national economic journals original cost of capital assets (N.Kh. 1990, p. (Ekonomika i organizatsiia proizvodstva, 705).

36 20. Half a century ago it was commonly statement is Igor Birman’s lengthy critique argued that to include the value of capital of the CIA’s consumption comparison, and used up in the production of the national it is referred to below. output, which is what we do in calculating GNP, is to double count just as much as 24. ECP 1994 (pp. 60-61) provided the end- adding the cost of grain and the cost of flour use distribution of GDP in national to the value of the final good, bread. It is the currencies of the 25 countries. Comparison net new addition to production capacity, of the Soviet ruble data, assumed to be the net investment—not the gross—that yields government’s submission to the ECP, with economic output. Edward Dennison, the highly condensed GNP distribution for (1990, p.180) put the case for net output the same year in N.kh. 1990 (p. 9) reveals succinctly: “My own choice of output the following oddities (ECP/N.kh. ratios): measures…is net product. Insofar as a large GDP or GNP 1.03, consumption 1.06, gross output is a proper goal of society and investment 1.09, other uses 0.78! objective of policy, it is net output that 25. Schroeder’s extrapolated 1990 figure of measures the degree of success in achieving 39.5 percent is below the 41.9 percent this goal. There is no more reason to wish to indicated in CIA (1991, pp. 28-29). The maximize capital consumption incurred in latter figure is based on 1990-dollar the production of, for example, television purchasing power parities. sets than there is to maximize the metal or 26. If the competing estimates were true plastic used in their production, and no dollar-valued ratios, the counterpart CIA more reason to include it in the output figure would be about two-thirds, making measure adopted for growth analysis.” the disparity with the critics’ numbers even 21. “…the problems of comparison of the greater. For the most part however the latter main economic indices of the USSR and the are derived from short-cut calculations and USA were an urgent practical task for many often use the CIA averages as referent. state agencies and organizations of the 27. The CIA regularly calculated the dollar USSR” (Kudrov, 1997, p. 883). cost of Soviet military expenditure for 22. The margins between the ruble- comparison with U.S. outlays. It estimated weighted and dollar-weighted ratios in the the ruble value of U.S. defense only IMEMO results are often surprisingly occasionally, owing to the problems of small. For example, NMP produced, 5.6 developing ruble prices for hardware that percentage points; investment in equip- would have been difficult or even ment, 0.8 points! impossible for Soviet industry to produce. 23. The ECP compared 25 countries in a See Firth and Noren (1998, pp. 148-50) and complex framework under which six Becker (1998, pp. 103-04). communist countries were linked to 19 28. U.S. GNP grew 2.9 percent per year in other European countries via Austria. The 1976-85 (Economic Report, 1994, p. 270), Soviet-American comparison is made compared to 2.0 percent for the Soviet possible by a separate linkage of the U.S. via Union (Table A: CIA GNP, linked index). Austria. An earlier World Bank–sponsored 29. Schroeder (1995, pp. 216-24) presents a study involved a direct Soviet-American detailed defense of Western Sovietology’s comparison but it employed extensive analysis of Soviet economic problems and shortcuts (see Becker, 1994, p. 313). Other prospects. estimates challenging the CIA measures did not derive from detailed alternative 30. cf. Shlapentokh (2001): “In an attempt to calculations. The partial exception to this improve the efficiency of the

37 economy…Gorbachev initiated reform that disciplinary analysis to the study of Soviet shook the pillars of Soviet society” (p. 178). problems and prospects. Also, “The Soviet system, a rigid hierarchical organism, turned out to be defenseless 35. Justification of the chained series rests on against the actions of its leaders who four assumptions: (1) Because of structural undermined its vital mechanism” (p. 201). change in an economy over time, it is appropriate to change price weights of 31. Such as the extrapolation of Russian growth indexes periodically. (2) Index Empire/U.S. ratios over 75 years by single number theory suggests that an earlier set of national indexes. prices would yield a higher growth rate in 32. Even Steinberg (1990, p. 16) was 1961-65 than 1970 or 1973 prices. (3) 1970/ attracted to this lure. 1973 prices are acceptable for the periods 1966-70 and 1971-75. (4) The linked index 33. A more common form of this error entry for 1976-80 can be calculated as a concerns the defense/GNP shares, com- simple average of the entries using 1970/ parative military outlays and the bilateral 1973 and 1982 prices. GNP ratio. For examples, see Ericson (1990, p. 91), Birman (2000, p. 36) and 36. The largest changes resulting from the Khanin (AEI, 2000, Vol. II, p. 53). shift of price base by the CIA are: one percentage point in the AARG of industrial 34. A truly profound assessment of the production in 1976-80, 1.4 points in Soviet economy exceeded the capabilities construction in 1971-75 and 2.5 points in of economic analysis alone and required the 1976-80. Steinberg’s shift results in no insights of other disciplines—history, difference in the rates for agriculture and political science and sociology. Perhaps the construction and small differences for most notable shortcoming of Western industrial production. Sovietology was the failure to apply multi-

38 Panel 1 Summary: “Revisiting the Estimates and Analyses of the Soviet Era

Nikolai Petrakov, Director, Market tition between the West and the Soviet Economy Institute, Russian Academy of system as a race. They concentrated on Sciences, Moscow measuring where the “runners” were in relation to each other in the race, and Abraham Becker, Senior Economist, whether the gap between them was Emeritus, RAND widening or closing. They did not seri- Discussants: ously contemplate whether one of the runners might actually die during the race. Igor Birman, independent scholar, By concentrating on the race, according to Washington, D.C. Petrakov, Sovietologists failed to see the Robert Campbell, Distinguished Profes- basic weaknesses of the Soviet system. sor of Economics, Emeritus, Indiana Soviet scientists, through the use of University extensively falsified data, lured Sovietologists Chair: into an ideological trap of exaggerating the capabilities of the Soviet economy, Petrakov Blair Ruble, Director, Kennan Institute argued. Their inflated estimates of the Soviet The first conference panel looked back economy raised the level of the perceived at how American experts on the Soviet threat posed by the Soviet Union and, in turn, economy wrestled with the subject of their helped perpetuate an atmosphere of confron- study. Economics has been the most heavily tation between the West and the Soviet Union. criticized of all the fields of post-Soviet The Soviet regime relied on that confrontation studies for its failure to predict the collapse of in order to maintain an atmosphere of crisis in the Soviet Union. How much of that criti- support of the country’s highly militarized cism is warranted? Analysts of the Soviet economy. economy had to be detectives as well as Abraham Becker concentrated his economists. They sifted through data that was remarks on the issue of understanding designed by the Soviets to mislead, weighed Soviet economic growth. During his survey results of émigrés, and made educated remarks, he stressed that the analyses guesses where information was completely produced by the CIA during the Soviet absent. Controversies included the percent- era represented the work of highly age of the Soviet economy devoted to dedicated people grappling with very defense, the rates of growth, and the com- complex issues with little or no reliable parative living standards between the Soviet data. At the end of the day, Becker argued, Union and the West. And while disagree- they came up with their best judgments, ments over the quality of the work of eco- which actually gave a pretty good picture nomic analysts studying the Soviet Union of the Soviet economy. With the benefit of have outlasted the Soviet Union itself, the hindsight, a number of factors can be panel arrived at some new ways of thinking identified that might bring additional about the disagreements themselves. clarity to the picture of the Soviet In the following summary, only economy. These factors include: conference panelists listed on the agenda • Padding reported production results. are identified by name. This practice, called pripisky, helped Nikolai Petrakov opened the enterprises fulfill production quotas conference with a presentation of his while undermining the strength of paper. He declared that the principal the Soviet economy. The practice may failure of U.S. analysts of the Soviet have increased under Gorbachev. economy was that they thought of compe- • Quality deterioration. The perestroika reforms of Gorbachev exposed the 39 consequences of the Soviet obses- very difficult for its auditors to reveal its true sion with quantity over quality in condition. Nevertheless, Campbell stated, production. Sovietologists had a good record in going • Under-depreciation of capital assets. behind the façade and presenting detailed Factories and machinery were often accounts of Soviet society. Their failure was in not replaced or modernized. One extrapolating from these accounts and WWII-era steelworks in drawing broader conclusions. It would be a Magnitogorsk had failed to upgrade mistake, he argued, to continue to fight to 1950s technology as late as 1991. yesterday’s battles over which accounts of the Replacement investment (moving Soviet economy were closer to the truth. used equipment from higher- to Such debates would require the kind of lower-priority sectors of the technical hindsight analyses, such as “under- economy) was the essential vehicle depreciation of capital,” that were illustrated for modernization under this system. by Becker. One lesson to be drawn from this Instead, Campbell argued, we have to improved understanding of the Soviet address the more fundamental confusion economy is that net national product (that over final demand—that is, the kinds of is, gross net of depreciation) may have goods and services produced by an been a better tool for evaluating the Soviet economy that really satisfies people’s wants. economy than gross national product. Comparing final demand within a single Robert Campbell, the panel’s first economy, such as the United States, is a discussant, noted that the Soviet collapse simple exercise of comparing apples to resembled the collapse of Enron in its apples. That exercise is vastly more compli- surprise and in its speed. He further com- cated when comparing between national pared U.S. Sovietologists and government economies or, even worse, economic analysts with Enron’s accounting firm, Arthur systems. It requires a common denominator Anderson, pointing out that these analysts (in this case, in either rubles or dollars) that made excuses similar to those of Arthur is not simple to derive. For a Soviet-U.S. Anderson—“our estimates were based on comparison, Sovietologists would equate a sound accounting (or for Sovietologists— thousand U.S. passenger miles, cars, research social science research) principles.” This workers, etc. with their Soviet equivalents. second analogy is not as strong as the first, Yet, Campbell stressed, a thousand Soviet Campbell argued. First, Sovietologists were research workers could not produce any- relatively open about their methodologies thing near what a thousand U.S. research and sources—they did not “shred docu- workers would. “When we consider ments.” More fundamentally, Sovietologists something like half of all we were counting did understand that there was a bankruptcy from the Soviet side was either non-true “elephant” tramping up and down the halls final demand or input-measured inputs of the Soviet house as they played with their rather than outputs, we have greatly exag- numbers and formulas. The Sovietologists gerated what the size [of the Soviet made frequent references to the elephant in economy] is,” concluded Campbell. terms of resource waste, economic stagnation, Campbell added that critics of the perverse incentives, and other signs of social prevailing opinion of the day on the breakdown. It is a strong argument to say that Soviet economy, such as Igor Birman, the Soviet house was shaken down when were instinctively right in measuring Gorbachev tried to chase out the elephant, Soviet consumption on quality grounds, rather than by the elephant itself. even if they had difficulty in proving their The Soviet Union, like Enron, made it case according to the Arthur Andersen- esque “generally accepted accounting 40 principles” of the Sovietologists. • Soviet military expenditures were Today U.S. analysts, academic or estimated prior to 1977 at 6 percent, governmental, are no longer the main players and were later raised to 12-16 in measuring Russia’s economic perfor- percent, of Soviet GNP mance. That task has now been taken over by • Soviet living standards were one- the IMF and World Bank. This is not neces- third of American living standards sarily an improvement over Russia’s former • Soviet GNP was 60 percent of auditors, the Sovietologists. The IMF and U.S. GNP, or 50 percent of U.S. GNP World Bank are huge, bureaucratic organiza- on a per capita basis tions and have an institutional inertia in their • The Soviet economy had no real intellectual practice that is possibly stronger financial problems: for example, inflation than the CIA ever had. was low; there was a budget surplus; and This raises the issue of accountability a normal propensity to save of the auditors (whether CIA, IMF, or The reality was much different, argued Arthur Anderson) to the various publics. It Birman. Military expenditures were at least is true that consumers of auditing reports one-third of Soviet GNP, more than twice the can always delude themselves into believ- CIA estimates, according to Birman. The ing all kinds of nonsense, whether they be CIA’s calculation that Soviet consumption investors predicting the inherent value of levels were one-third of U.S. levels was based stock, or Soviet leaders who refused to on false comparisons. For example, the CIA accept the idea of bankruptcy of the compared the weight of an American fish system, or our own military planners who fillet with a whole Soviet fish, exaggerating deliberately mistook the CIA’s estimates of Soviet production by 2.5 times. They com- production potential for military threat pared the number of doctors, and concluded potential. The final question, concluded that Soviet medical services were better. Campbell, is who checks the checkers? It is Birman stated that he had uncovered these pretty hard to imagine any kind of external and other errors in a book-length review of control. “My final hope is that in the best CIA calculations that he had written. tradition of scientific life, peer pressure Birman stated that his many argu- among the different kinds of auditors may ments in his review were not directly operate positively and provide some disputed, but were instead dismissed by protection and independence to the the CIA on the basis that the “corrections different kinds of people who are trying to were not scientifically quantified.” tell us what is going on in Russian society.” Another exercise to demonstrate the Igor Birman, concluding the open- inaccuracy of CIA figures involves comparing ing panel, stated that the question is not how agriculture in both nations. Imagine, Birman wrong CIA estimates were on the Soviet argued, that American and Soviet agriculture economy—they were very wrong. A typical were equivalent in terms of output. Next, example of the CIA’s poor work is their remember that agriculture was 3 percent of 1985 estimate that East German GNP per GNP in the U.S. and, according to CIA capita was $10,330, while West German estimates, 16.5 percent of GNP in the Soviet GNP per capita was lower—$10,320. Union. Under these conditions, U.S. GNP Birman stated that a similarly “accu- would be 5.5 times larger than Soviet GNP, rate” picture painted by the CIA of the and not around twice as large, as the CIA Soviet economy, a picture that was em- claimed. In fact, the difference must be even braced by the Western intellectual com- greater, as U.S. agriculture produced far more munity, included the following character- than the Soviet Union. This is not a scientific istics: measure, allowed Birman, but it is still

41 relevant as a check on CIA estimates. on. In sum, Birman concluded, one As we look to the future, Ruble cannot find a single correct CIA estimate continued, it seems that the lessons concern of the Soviet economy. The Sovietology two sets of issues. One has to do with refining project cost billions of dollars, and failed intellectual concepts that are used in response miserably. Lessons should be drawn from to feedback. Becker’s point about the need to this failure. The most obvious mistakes reformulate the question of understanding must be understood. In a country built on the Soviet economy around the net domestic competition, there has been no rivalry in product instead of gross domestic product the field. Instead, an institutional culture seems to be the kind of lesson that can be has prevailed, and, with the exception of learned from looking at the experience of the military field, there has been no the collapse of the Soviet Union. Such a professional criticism of CIA analyses in lesson from the discipline of economics is print. Too much attention was given to the applicable not just to looking backwards, but science of method and not enough to also to looking forwards and even beyond common sense. Finally, it must be noted Russia. that experts of the day trusted too much A second message, from political in the invented figures and statistics science, relates to something that a current produced by the Soviet government. fellow at the Wilson Center has talked Panel Chair Blair Ruble opened the about a lot. James Manor was asked by the discussion period by reminding the panel- World Bank to evaluate decentralization ists that the purpose of the conference is not policies in 125 countries around the world, to refight battles over specific estimates, but and indeed the 1990s were a period of to try to draw out some larger issues to map decentralization. The fundamental issues, at out where we go from here. the end of the day, are the issues of gover- Ruble commented that Campbell’s nance and accountability. There are two image of a bankruptcy elephant stomping kinds of accountability here: Campbell’s around in the house as the accountants are version of who “checks the checkers;” and counting beans is one of the central issues then the larger accountability regarding raised by the panel. He noted that Petrakov what was or was not happening inside the argued that outside analysts who were trying Soviet Union. At this point, Ruble turned to assess Soviet economic performance fell the discussion back over to the panelists. into an ideological trap. That ideological Campbell responded that there is trap, to use the elephant image, was that U.S. really no formal way to “check the analysts were not asking about the elephant checkers” aside from maintaining an even while they were cohabiting with the atmosphere that is conducive to debate elephant. This leads to the point that Becker and allows open competition in ideas. raised in his paper and Campbell repeated, Looking towards the future, which was that the problem came when the Petrakov warned, we see a Russian people in the house realized that there was government again pushing an optimistic an elephant and attempted to get the line on economic growth. While there has elephant out. The elephant didn’t react very been growth, it is based almost entirely on well and brought the house down. Birman temporary factors—the high price of oil is basically saying that there was an elephant, that is buoying the Russian economy and that the elephant was military expenditure, the post-1998 currency devaluation that and that people in the CIA and people on boosted the competitiveness of Russian the outside who were looking at the industry. The level of investment in the elephant kept saying that it was a dog and Russian economy, continued Petrakov, tells we therefore totally missed what was going another story. Now the IMF experts are the 42 lead analysts on the Russian economy, returned to the issue of how to use and they share the Russian government’s intuition and observation, especially when optimism. However, Petrakov argued, the the scientific statistics and estimates IMF has an institutional interest in Russian strongly disagree with what is observed success, given the years of advice on reform on the ground. and the billions of dollars that they have Becker replied that observation is a loaned Russia. If economic growth is truly step in the direction of reaching a sup- dependent upon temporary factors, then portable estimate. Casual observation may there are serious implications not only for the arouse questions, but is not really an economy but in the political realm as well. appropriate basis for a generalization on Returning to the image of the the whole. “bankruptcy elephant,” Becker asked how A former official who was a close would it be possible to tell if it is in fact an observer of U.S. government debates on elephant, or a dog, a shark or a mouse? The Soviet policy commented that any mistakes answer is certainly not by feel—the issue in CIA estimates had little impact on the must be approached scientifically. Only a actual formulation of policy. First, the mis- scientific method enables you to get a takes made may have clouded the picture of handle on a problem. Without it you the Soviet economy, but they did not com- would be lost. There has been a great deal pletely obscure it. He noted that as early as of criticism that rested to a very consider- 1962 the CIA had predicted that the Soviet able extent on one’s “feel for reality.” The Union was running out of extensive factors of field of Soviet studies, especially early on, economic growth and was running into a struggled with secrecy and a lack of access. crisis. Second, there were offsetting errors. If As time went on, these obstacles eased and the CIA had gotten the GNP and military understanding of things on the ground expenditures right, it would have inflated the increased substantially. Nevertheless, threat perceived by U.S. policymakers, Becker argued, “The primacy of systemic, because only a society with Hitler-style disciplined approach by economic science aggressiveness could adopt such socially or political science is the only way that perverse priorities. A third factor which was these problems can be approached.” understood but underestimated was the Birman countered that it is important degree to which Soviet military behavior was to be scientific, but it is also important not to governed more by military industrial supply- be wrong, and repeated his claim that the push rather than military demand-pull. CIA was always wrong in its estimates. Anders Åslund echoed the points Ruble concluded the initial discus- that were raised in Becker’s presentation sion by drawing out the difference in about the distorted investments of the approach between Becker and Birman. Soviet era. He noted that while Soviet Becker focuses on social science and how to investment was nominally twice the measure and approach the problem of current Russian level of investment, much studying a complex society in a disciplined of that investment was totally wasted. way. Birman’s response is that intuition is Åslund calculated that one quarter of more important and that this is about art Soviet investment went directly into more than science. Hopefully, Ruble inventory (military stocks and unsold continued, it will be possible to figure out if consumer goods). Another source of there are bridges between those two wasted investment was uninstalled equip- approaches to Russia, for this is a recurring ment. For example, he noted that a debate, and not just on this panel. Ruble Swedish company that sold 200 dairy lines then opened the discussion to the audience. to the Soviet Union tried to trace them The first question from the floor following the Soviet collapse, and could 43 only find six lines in operation. The rest U.S. government frequently got into, often must have been resold, scrapped, or simply driven by policymakers who wanted uninstalled, but were nevertheless counted evidence of what they wanted to see. in Soviet investment figures and should not It was only in the later years that have been. This supports Campbell’s point they started to be able to get a union of about understanding the final demand of people with analytical skills and on-the- Soviet investment and Russian investment. ground experience. Then there was the It would tell us if Russian output really more fundamental problem of getting collapsed by 44 percent as official statistics anyone to believe facts. “Birman men- state, or by 10-15 percent, which, Åslund tioned East Germany,” the former Foreign argued, would be more accurate. Service officer related, “a place that I Campbell responded that the issue happen to have a great deal of experience of how to direct investment in Russia is an with. I can tell you that in the mid-1980s important one. He noted that the New the U.S. government had superlative Economic Policy during the 1920s re- economic analysis coming from our stored the Soviet economy from the embassy, the finest that I ever read in my ravages of War Communism during the entire foreign service career, demonstrating Russian Civil War. Russia is at another the East German economy was approach- crossroads—their current system for ing systemic collapse. It was absolutely top- directing investments is poor. How they flight, unimpeachable and we couldn’t get might arrive at a better system is a subject anybody even at a moderate policy level in that requires a great deal of study. Washington to believe it because every- A former Foreign Service officer body knew that East Germany was the noted that Ambassador George Kennan success story of Eastern Europe. Everybody once wrote of his concern that in the West knew that it was the tenth largest economy there were people who had a deep in the world, which was nonsense; every- scholastic knowledge of Russia, but who body knew all these things that they knew had never stood in a Russian line or had and trying to get them to believe otherwise Russian mud on their boots. During the was difficult.” In retrospect, he concluded, a Soviet era, the U.S. was limited to 135 large part of the problem was that we had a diplomatic personnel, and analysts had division between the impressionistic and few chances to visit the country of their the methodological. That was the reality study. A tension between analysts and and it did lead to many shortcomings. personnel in the field evolved as a result, Mikhail Zadornov returned to the reducing the effectiveness of both. Impres- question of bad investments. Citing the sionistic evidence is not superior to example of two big bridges recently built analytic methods, but the two have to be in Japan at a cost of over $60 billion, he married together to be fully effective. asked the panel whether this should be Relying on analysis alone leads you into counted as an investment if, as is generally the Stanley Hopkins fallacy. Stanley recognized in Japan, it is a bad investment. Hopkins was a young inspector in a Birman recommended that the Sherlock Holmes story who arrested a 90- utility of an investment should be taken pound weakling, on the basis of circum- into account. If the result of investment is stantial evidence, for a murder that re- waste, then it is not a genuine investment. quired the murderer to thrust a harpoon This, in his view, was one of the mistakes through the victim. Sherlock Holmes of the CIA—they compared capital pointed out that the only problem with investments in the Soviet Union and the this case was that it was intrinsically impos- U.S. by cost and not by results. The costs sible. That is the kind of fallacy that the in the Soviet Union were tremendous, but 44 the results were not. China and the Soviet Union that argue Campbell argued that even if the against the possibility of a “soft landing” for Japanese bridges prove to be useless in the the Soviet economy. First, the Soviet future, they must be recorded as an invest- economy was significantly more centralized ment since actual resources went into their and militarized than the Chinese economy. construction. Where the cost to society will Second, agriculture in China was in much materialize, if the bridges are indeed better shape than Soviet agriculture. Third, useless, is in lower Japanese growth rates in even after the Cultural Revolution, China the future compared to potential Japanese still had a small class of entrepreneurs and growth if the bridge resources had been businessmen, whereas the Soviet Union had more productively invested. completely obliterated such individuals in Petrakov stated that all infrastructure Soviet society. Following the collapse of the investments bring about positive effects. If Soviet Union, Russian government officials those bridges could be used free of charge, were “zombified” by representatives of the it would cause a positive spurt in economic IMF into following policy prescriptions, growth. Economic cycles are so short that stated Petrakov, while “the Chinese were such projects are not considered cost smarter…there was wisdom on behalf of effective. Government must undertake an the political leadership of China to bring it active role in such investment projects, to a softer landing.” because no private company can bear the A member of the audience who spent delay in getting a return on the investment. ten years in the former Soviet Union asked A discussion ensued about Soviet how the U.S. could increase the numbers of military expenditures and their impact on the people with vital field experience. Ruble Soviet economy. Several panelists directly responded that the U.S. government has questioned the relevance of measuring the dramatically slashed funding for programs strength of the Soviet military in terms of that send young analysts to the field. “The estimates of the size of the Soviet economy 1990s will have been a golden age for and percentage of the economy dedicated to people, graduate students and students who military expenditures. Petrakov noted that have done academic field research in Russia military goods were produced under a and Ukraine, because the programs that central planning system that so distorted costs have supported [this research] in the past are that it would be impossible to calculate the not going to be there,” he warned. Further- economic factors of military products. more, programs that support scholars from Calculating the size and growth of Soviet the region to study in the U.S. are likewise GNP in order to measure Soviet military dwindling. production potential was an illegitimate The final question returned to the question, argued Campbell: “There is no issue of the proper use of GDP and GNP way that GNP accounts can answer all when talking about the Russian economy. questions, they are not appropriate for that.” Becker commented that economists do Several panelists agreed that in terms of the more than calculate the value and growth final products of military spending, the U.S. of GNP; they study the structure of GNP, had distinct advantages in military forces even final demand, income distribution, and a with the Soviet Union spending more in host of additional calculations to describe relative and absolute terms. an economy. He argued that “there is a The panel was asked to compare the total portfolio of analyses that go along experience of China’s “soft landing” with [GNP calculations] that deal with transition from central planning with the policy, that deal with institutions, that deal Soviet Union’s collapse. Petrakov listed with structure…there was a lot more to it three important differences between than GNP.” 45 Panel Two: Assessments of Russian Reform Programs

46 47 The Russian Economic Transformation: Interim Results by Mikhail Zadornov

In the last two years of its existence, the The government’s first set of announced Soviet government took hardly any action to objectives included price liberalization to reform its economy as structural imbalances achieve equilibrium in the commodity worsened and foreign debt snowballed. At market, opening up the economy, and the same time, those years were marked by macroeconomic stabilization on the earnest preparation and discussion of strength of a balanced national budget. economic reform programs. After the Soviet In the absence of a clear plan of Union’s collapse, the post-Soviet Russian action, the only objectives achieved in government headed by President Boris 1992 were price liberalization and the Yeltsin and Vice-Prime Minister Yegor elimination of the government’s mo- Gaidar relied on the theoretical foundation nopoly over foreign trade. That year of the so-called “500 Days Program,” as well inflation broke through the promised as the experience of economic transforma- ceiling, eventually exceeding 2600 per- tion in Poland and Yugoslavia. The Polish cent. The fiscal deficit, which was over 30 experience of 1990-91 had a particularly percent of GDP, was monetized through strong impact on the policies of the Yeltsin- Central Bank loans. Moreover, the gov- Gaidar government. In 1991, IMF and ernment and Central Bank acted with World Bank experts drafted a fundamental little consistency. For example, the gov- review of the Soviet economy; although ernment lacked the courage to eliminate rather good, it proposed no action program. regulated fuel and energy prices, in effect By late 1991, the Soviet and Russian leader- maintaining a substantial portion of fiscal ship was in a tug-of-war over effective tools subsidies and “in-kind” benefits for of economic management, each trying to various sections of the population. In grab a larger share of the tax revenue, while 1992 and early 1993, the Russian Central fiscal deficits and consumer goods shortages Bank provided so-called centralized loans loomed large. With these struggles, Russia directly to industrial and agricultural had entered into a decade of difficult enterprises. It even continued lending to economic transformation, which can be split the national banks of former Soviet into four major phases: republics until mid-1993.1 • 1990-91 – reaching a conceptual It was this inconsistency and weak- base for economic reforms; ness on the part of government and the • 1992-93 – price liberalization and Central Bank that triggered hyperinfla- opening up the economy; tion and a sharp decline in living stan- • 1994-98 – attempts at macroeco- dards, undermining the credibility of nomic stabilization and early struc- economic reforms in the Russian public’s tural reforms; eyes. Since then, public trust in the • 1999-2001 – macroeconomic authorities has never been restored. The stabilization and growth. early economic failures and public disen- When the Yeltsin-Gaidar government chantment first ushered in a new Prime came into office, the previous system of Minister (Viktor Chernomyrdin was planned distribution was paralyzed. Many of appointed Prime Minister in December the institutions and tools of a market 1992) and later triggered a political crisis economy did not yet exist. The public’s lasting from March through October 1993. swelling expectations of an immediate Economic reforms did not receive a improvement in the economy and in their new impetus until early 1994. The follow- standard of living contrasted sharply with ing four years were marked by macroeco- unavoidable inflation and a slump in output. nomic stabilization and structural reforms. 48 The government’s goal during this phase government’s attempt to introduce an was to reduce inflation to single digits by emergency package of financial and tax simultaneously tightening fiscal and measures3 and “loans of last resort” from the monetary policies. By that time, not only IMF and World Bank in August 1998, the the Polish experience but also reforms in government and the Central Bank moved to the Baltic countries, the Czech Republic devalue the ruble and default on domestic and Hungary provided a model of post- liabilities. The core reason for the macroeco- Communist economic transformation that nomic policy failures of 1994-98 lies in the revolved around the sequence of liberaliz- fiscal arena. The government was simply ing the economy, privatizing public unable to collect the budgeted revenue property, creating a competitive environ- amounts. At the same time, shaky political ment, and assuring macroeconomic support for Yeltsin and his government from stabilization through tight budget con- the public and the State Duma prevented any straints. Under this model, international reduction of government commitments to financial institutions (IFIs) were to provide more closely match the level of actual rev- technical assistance, largely in the area of enues. It should be noted that the government structural reform, and to finance deficits in had not actually tried to streamline or reduce the balance of payments if and when its budgetary commitments prior to 1997. needed. By that time, Russia had used This period’s tax system featured an IMF facilities twice (a stand-by program in exceedingly high nominal taxation level 1992 and the first short-term facility (STF) with numerous tax exemptions. Combined program in 1993), although in both cases it with a weak tax administration, the system failed to meet macroeconomic conditional- was laced with disincentives for taxpayers. As ity. From 1994 through 1999, Fund- a result, Russia’s federal and consolidated supported macroeconomic programs and budget deficit remained within 6-8 percent structural reform programs approved by of GDP during 1995-97. Since direct the World Bank effectively served as action Central Bank lending to the government plans for the Russian government and the was prohibited by law, the fiscal deficit was Central Bank. In fact, those documents financed with external credits (mostly from were incorporated into the Mid-Term the IMF and World Bank) and with ruble- Program of Economic Reforms drafted by the denominated T-bills (known as GKOs). By government and intended for 1995-98.2 mid-1998, domestic debt had risen to The government’s policies brought roughly US$60 billion, while outstanding about a temporary and deceptive stabiliza- borrowings from IFIs had reached US$28 tion from 1996–97, which was achieved at billion. Despite borrowing huge amounts, the cost of racking up extensive external federal and regional budgets were unable to and domestic debt, defending a ruble- cope with their existing commitments. On dollar trading band, and holding to a tight the flip side of this fictional stabilization, monetary policy that stymied growth. This quasi-monetary and barter payments to the illusory stabilization was brought crashing government and between enterprises kept down by a combination of several adverse rising. More than 20 percent of federal developments striking at once: the 1997 budget revenue in 1996-98 came in the form financial crisis in Asia that undermined of so-called “offsets” (i.e. simultaneous write- credibility of all emerging markets, includ- off of tax liabilities against budget commit- ing Russia; the collapse of petroleum ments that were never met). The share of prices that plunged Russia’s trade balance quasi-monetary operations in regional into negative territory; and finally a rapidly budgets stood at 30-50 percent as late as 1999. worsening portfolio of increasing debt and This weak fiscal policy was accompa- cost of debt service. Despite the nied by an unreasonably tight monetary 49 policy. When the currency band was it helped to identify economic distortions introduced in January 1995 the ruble and set new corrective trends in motion. appreciated 75 percent in real terms in the Russia’s national budget was fully executed band’s first year alone, dramatically under- in 1999 for the first time in its modern cutting both the external and domestic history. The federal fiscal deficit dropped to competitiveness of Russian enterprises. In 1.5 percent of GDP. In 2000 and 2001, the 1996, the Ministry of Finance was borrow- central government posted a surplus ing at effective rates of 40-100 percent in standing at 2.0-2.5 percent of GDP. This dollar terms, dropping to 18-20 percent per turnaround depended on three factors: annum only in 1997-98. As a result, the fiscal 1. Fiscal revenue growth from 10.2 sector sucked in all cash liquidity within the percent of GDP in 1998 to 15.5 percent economy, greatly increasing the interest rates in 2000 and 17.5 percent in 2001; for financing the industrial, transportation, 2. Containment of federal non- and agricultural sectors. The Russian interest expenditures to within 11-12 Central Bank, seeking to suppress inflation, percent of GDP during 1999-2001; and consequently spent three years pursuing a 3. Increase of the federal share in monetary policy that obstructed economic total revenues of consolidated growth in the non-financial sectors. budget from 45 percent to 60 Meanwhile, the period of 1994-98 saw percent between 1998-2001. some visible progress on the structural In real terms, federal budget expendi- reform front. To begin with, substantial tures dropped by about a third in 1999. At government assets were privatized between the same time, quasi-monetary transactions 1993-95. By 1997, 70 percent of all property were reduced to a bare minimum, and the was privately held. Yet the mass privatization bulk of budget liabilities accrued over past of 1993-94 and, in particular, the loans-for- years was repaid in 2000–01. This macroeco- shares schemes of 1995-96 provided the nomic stabilization resulted in a number of government with minuscule revenue, positive effects. Between 1999 and 2001, increased income inequality in Russian economic growth exceeded 20 percent, society, and handed the crown jewels of the strengthening the foundation of macroeco- Russian economy (oil and gas, metals, nomic stabilization. Russia’s public debt, telecommunication, etc.) to a small group of which exceeded 130 percent of GDP financial and industrial conglomerates. immediately following the meltdown in Among the successful structural reforms was 1998, is now below 50 percent of GDP. In the transformation of Russia’s coal sector, in 2001, the nation coped with an external which the least profitable third of all mines debt repayment spike of US$22-23 billion. were closed, over half of the rest were Monetary policy was significantly privatized, and new jobs were created for relaxed right after the meltdown. In 2000, displaced miners. By 1999 more than 70 the money supply grew 62.5 percent, with a percent, and presently over 95 percent, of 40 percent rise in 2001 (i.e., 1.5 to 2 times the industry (in terms of sales) had turned over the monetary policy targets of the profitable. Over the past two years, the coal Central Bank and the Russian government). sector has enjoyed growth rates surpassing Interest rates on deposits, government the national average. securities and, since late 2000, on bank The 1998 financial meltdown brought loans, remain negative in real terms. These an end to the illusionary stabilization financial conditions have produced, on the period, badly hurting external investors, one hand, a rather high rate of inflation private depositors of commercial banks, (around 20 percent per annum between and numerous small import businesses. At 2000 and 2001), and, on the other hand, a the same time, as with any economic crisis, 50 dramatic growth of bank lending to the real businesses, and political elite towards Russia sector (by 35-36.5 percent a year), while the during the past decade reminds one of economy’s monetization increased to 18 the way a child treats his favorite toy. It percent of GDP by early 2002.4 Macroeco- went from early wild enthusiasm and high nomic stabilization and robust growth has hopes for Russia’s rapid transformation created a solid foundation for continued into a developed democracy and successful structural reforms. The tax reform has already market economy, to a period of chill decreased the nominal tax burden by 5-6 disenchantment and lost hopes in the percent of GDP, whereas actual tax revenues aftermath of the 1998 collapse. Still, it collected by the central government rose by 3 would be difficult to overestimate U.S. percent of GDP between 1999 and 2001. The influence on developments in Russia total number of taxes has been reduced, during the last decade of the 20th century. virtually all corporate tax breaks abolished, and In fact, many of the newly created Russian most income tax and VAT exemptions have institutions were modeled after U.S. been removed as well. More revenue is now economic institutions. American professors collected from commodity exporters, although were the first to advise the Russian govern- still at an insufficient level. The tax reform ment. Finally, the U.S. role in influencing should be completed within 18 months. IFIs and the G7 is obvious, and in turn Substantial progress has likewise these organizations wielded a great degree been achieved in reforming the judiciary of clout over economic reforms in Russia. and the land title system. Natural mo- There are four principal levers that nopoly restructuring is finally under way. A the U.S. administration used in the 1990s sizable share of the proposals and legisla- to influence developments in Russia: tion conceived and drafted in 1997-99 were • technical assistance; implemented between 2000 and 2001. • official lending; For the first time ever in modern • international financial institutions; Russian history, an economic reform • direct political influence. roadmap for the period through to 2010 has been developed and is currently being During the 1990s, the U.S. provided at implemented. In addition, the Russian least US$3 billion in technical assistance to government independently developed Russia, mostly through USAID channels. both the strategy and short-term plans. The The funds were largely used to pay experts, role of the IMF has been reduced to help draft legislation, and cultivate a favor- monitoring the economic situation and able public opinion towards reform through providing advice and technical assistance. the media. The largest portion of this largess It has taken Russia nine years to was spent on preparing and implementing implement the standard action plan of a the privatization program (roughly US$400 transition economy, i.e., “liberalization— million) and creating an infrastructure for privatization—macroeconomic stabiliza- the stock market (over US$100 million). In tion.” During each of the reform phases, the addition to economic projects, the U.S. Russian government relied on a theoretical Congress allocated substantial funds to foundation laid down during the preceding address the problems of arms reduction: phase. For the most part, programs prepared around US$1 billion was spent to dispose of together with the IMF heavily influenced nuclear and chemical weapons, to decom- the reform period. mission nuclear submarines, etc. Finally, the U.S. administration and Congress frequently American Advice and Leverage in the coordinated technical assistance provided to Russian Economy Russia by European countries, Japan, and The attitude of the American public, non-governmental organizations and 51 funds. The significance of such technical of the most recent stand-by program of assistance for promoting international 1999-2000. The sectoral and structural experience and developing legislative facilities of the World Bank had a mixed frameworks, infrastructure, and institutes record of successes (such as the coal facility for the new market economy cannot be mentioned above) and failures (such as overestimated. Still, the resources allocated employment service reform, an environ- for those purposes were occasionally mental facility, etc.). Nevertheless, Russia utilized with less than optimum effect, certainly paid too high a price to avail itself which might have been achieved with of international transformation experience. better coordinated planning. Finally, at critical junctures dotting the Unlike credit lines provided by the last decade of Russian history, the United governments of Germany, France, and States resorted to direct political influence, Japan, the official loans from the U.S. to the throwing around its own weight or using the Russian government did not play a promi- G7 mechanism in order to influence nent role in the 1990s.5 In this category are developments. The United States clearly credit lines the U.S. ExImBank opened to exerted substantial ideological, financial, and some Russian companies, plus a food political influence on the Russian economic credit of US$700 million extended in 1999 transformation throughout the 1990s. along with humanitarian aid. Furthermore, such influence was critically The weightiest tool the U.S. used to important at various make-or-break mo- influence both the economic and political ments (such as early 1992, the fall of 1993, situation in Russia in the mid-1990s was its and the presidential campaign of 1996). huge voting power in the Executive Boards of Certain Lessons of the Past Decade the IMF and World Bank. As noted above, facilities extended by IFIs between 1994 and The history and interim results of 1998 were a vital funding source to offset Russia’s economic transformation suggest enormous fiscal deficits. Usually, the Russian some general rules applicable to all post- government failed to observe all precondi- communist economies. Each of these tions and benchmarks of the IFIs macroeco- countries had to pass through certain trans- nomic and structural programs. In critical formation phases, their duration dictated by times of program approval and revision, the country’s initial situation and the attitudes everything would hinge on the position of the political elites. The Russian experience taken by the U.S. representatives in the IMF does not provide any supporting arguments and World Bank. It was the U.S. Treasury and to the advocates of a unique “third way” of Department of State that would formulate economic transition. Instead, Russia’s experi- that position in consultations with IFI experts ence points to some general lessons. and Russian government officials. First, successful economic reform Between 1992 and 2000, Russia invariably requires a national government received six IMF-supported programs, with a well-defined plan of action and a raising a total of US$18 billion. Over three- strong political will. No amount of exter- fourths of that amount came in 1995-98. nal advice or external financing for struc- World Bank loans totaled US$8 billion. tural adjustment purposes can make up for Unfortunately, more than half of the Bank the political weakness of the nation’s loans to Russia were comprised of so-called leaders or their failure to understand each “budget substitution” facilities (i.e., funds of the phases involved in such transforma- used for financing fiscal deficits), rather than tion. Escalating foreign loans are nothing loans for investments or structural reforms. better than hard drugs for a weak govern- None of the IMF-supported programs ment. Unfortunately, Russia offers a glaring achieved their objectives, with the exception example of such addiction. 52 Second, any reformist government decreased to the level of 12-13. It should be must enjoy popular trust and support. As noted that a significant share of income Boris Yeltsin’s rock-solid public support hit earned by affluent Russians never makes it rock bottom in 1992, his economic policy into official statistics. Under such circum- floundered, his budget would not balance, stances, sweeping customs and tax breaks and his reforms dragged on and on and on. granted to certain entities (such as the In the end, the public paid too high a price National Sports Fund, oil exporters, and for the transformation. In such an atmo- Gazprom), as well as the loans-for-shares sphere, attempts by political leaders to privatizations of 1995-1996, were a slap in compensate for low public trust by relying the face of public decency. heavily on the support of selected sections of Any reforms the Russian government society and vested interests (such as defense, plans or pursues today should take due police forces, or large business) threaten the account of this lesson. In the medium term, development of democratic institutions. one of economic policy priorities should Which leads to the third lesson. In involve modernizing Russia’s social infra- planning and promoting economic reforms, structure (including its health, education, and the government must closely monitor their social assistance systems), which has been impact on core sections of society. A pro- starved of investment for the past decade. tracted and sustained drop in living stan- Lesson four: for reforms to succeed, dards, if experienced by a sizable share of the country should be on a path towards the population, hurts public trust in the economic growth. It is growth that would reforms and inevitably impedes their assure public support for reforms and progress. Russia’s experience with reforms provide means for implementing any vividly demonstrates the worst aspects of further steps. such developments. For example, 36 to 38 Lesson five: though general prin- million retirees (exactly one-fourth of ciples of economic transformation are Russia’s total population) twice saw their indeed important, the specific economic average pensions collapse in real terms: situation in each particular country between 1992 and 1996, their pensions fell by requires thorough review and consider- 35 percent; then, following a certain improve- ation. Clearly, Russia’s economic policy ment, they dropped again by 30 percent in the missed a number of key factors: second half of 1998. It was only in February • The badly distorted structure of the 2002, after real average pensions rose 30-35 Soviet economy, with its over-investment percent in 2000-01, that pension benefits in the defense and capital good sectors. exceeded the official and highly conservative This distortion explains the depth of benchmark of “retiree breadline.” It is small the GDP slump between 1992 and wonder that between 40 percent and 50 1996 (45 percent). However, the percent of senior citizens over the age of 55 authorities used few, if any, measures voted for the Communist Party in the parlia- to soften the impact of the reforms on mentary elections of 1993, 1995, and 1999. affected enterprises or displaced Enormous income disparities also workers; serve as a bad irritant to the Russian public. • Weak government, lack of proper The income ratio between the top 10 governance structures, institutions, and percent of richest Russians and the bottom legislation at the outset of reforms. Many 10 percent of the nation’s poor, which never actions that sought to transplant exceeded 3 during the Soviet era (with all Western experience of established due reservations for Soviet statistics), reached democracies and institutions in Russia 13-14 in 1995-97, rose past 15 in 1998, and foundered in the quicksand of sponta- only during the past 12 or 18 months neous development. Hence the 53 overwhelming shadow of crime that tance of the commodity sector or difficul- hung over the economy in the first ties and inconsistencies in reforming half of the 1990s; and Russia’s natural monopolies. Moreover, • A looming debt trap that precluded the the concentration of financial resources very possibility of sustainable growth. The among the lucky few who own and reader may be reminded that, in manage the fifteen or seventeen largest 1991, Russia assumed the external companies, combined with concentration liabilities of the ex-USSR to the tune of political power in a single pair of hands, of US$95 billion. Real life experi- lays the groundwork for an economic ence quickly dispelled any hopes system whose sole purpose is to collect that, once economic growth kicked and redistribute natural resource rent. in, the debt would be easy to repay. Therefore, it is fundamentally important that Russia’s political leadership Hopes for the Future should strive for an open economy, the Will Russia enjoy sustainable nation’s integration in the global market- economic growth from now on? Has it place, and further development of demo- learned the lessons of years past? So far, cratic institutions. There are quite a few these questions defy clear answers. lessons still to be learned. There is good news and bad news for Endnotes the prospects of sustainable growth in Russia. On one hand, the present-day 1. The sum total of 1992 loans the Russian strength manifested in Russia’s budget and Central Banks provided to various balance of payments, combined with enterprises and CIS countries is estimated at structural reforms launched in 2001, bode roughly US $14 billion. well for the continuation of the favorable 2. Since the Russian government was trends of 1999-2001. Compared to other reluctant to advertise the terms and content emerging economies, Russia has a much of IMF and World Bank-supported greater base of natural resources and programs, the Mid-Term Program was largely human capital. On the other hand, there is intended for internal use. a palpable threat of stagnation and Russia losing ground not just to developed 3. Only a portion of the package could be economies, but also to the dynamic approved by the parliament in the summer emerging economies of East Europe and of 1999. Asia. This concern stems from an obvious 4. In mid-1998, monetization of the weakness of Russia’s financial sector; economy sustained a drop to 12 percent of namely, that it prevents the flow of capital GDP. to small and medium businesses and the 5. Between 1992 and 2000, the Russian hi-tech sector. The past decade has not government raised US$12 billion in seen the dismantlement of structural bilateral facilities. imbalances, such as the inflated impor-

54 Reading Russia Right by Mark C. Medish

The economic system of Russia has from Karl Marx, the Russian reformers— undergone and is undergoing such rapid and their outside supporters in the West— changes that it is impossible to obtain a have sought not merely to interpret precise and accurate account of it…. history but to change it. Moreover, since Almost everything one can say about the the unexpectedly peaceful fall of the country is true and false at the same time. Berlin Wall in 1989 and subsequent John Maynard Keynes, 1925. dissolution of the Soviet Union in 1991, history has been at a gallop across Eurasia. Evaluating Russian economic perfor- And the trends in the former Soviet bloc mance in the post-Soviet period has been have coincided with larger historical akin to trading on the Nasdaq. It has been forces, loosely termed “globalization,” easy to fall prey to excited expectations of which have been producing unprec- rapid transformation, and equally easy to edented changes in the economic and overreact to bad news and disappointments. political realities of countries around the In my view, the plausible story lies some- world over the past decade. The events of where in the vast middle distance, a race 9/11 have only heightened our awareness between reform and resistance, a balance of that profound changes and realignments change and continuity, a complex transition may be under way affecting Russia and characterized by the uneven creation of new other parts of “post-Soviet space.” modes of political-economic organization What can we say about the nature and destruction of old ones. and quality of Russia’s transition in this After a full decade of post-Soviet changing world? How has Russia done? transition—a journey without maps—the What lessons have been learned? The Russian economy of 2002 is in many respects notion of “lessons learned” is a useful if in better shape than it could have been, had somewhat tricky one. Its utility lies in its certain variables played out differently, but it implied pragmatism. Policies may be is also considerably worse than it should be derived from first principles and norma- or can afford to be in the longer term. Put tive commitments, but their implementa- differently, throughout the 1990s, Russia was tion is the ultimate test of both principles something of an underachiever during a time and policies. Lessons are discovered by of miracle and wonder. Yet, with respect to trial and error, through the iterative Russia’s vector, I believe it is both possible process of reform. Other things being and defensible to be a short-term skeptic— equal, we can talk about “best practices.” about the quantity and quality of reforms— The lessons are “out there” to be learned, but a long-term optimist about Russia’s if only one can isolate the right variables reasonable prospects. and examine the right data. All of this is In thinking about Russia’s economic correct, but what is slippery about the transition, it is important to accept short- idea of “lessons learned” is that it sounds term volatility for what it is and to main- over-determined and overly objective. tain historical perspective. The magnitude The developmental goals of an open of the transition Russia has embarked market and an open society may be upon must not be underestimated. Russia axiomatic, but there is more than one true is attempting a national rebirth after and effective path to achieve those goals. decades of political-economic We know this from the development of misdevelopment, shifting its paradigm the G7 economies over many decades. A from plan to market, from one-party state modern market economy must have to participatory democracy, and from certain irreducible core features, but there empire to federal republic. To borrow can also be a wide variety of structures, 55 laws, and socio-political institutions journey with false maps. underlying modern market economies. Some observers look at the Russian Compare Japan and the U.S., for example. economy and grab their heads in grief or In addition, it matters who is learning exasperation, while others tend to see the supposed lessons. And it turns out that welcome surprises and sources of encour- what lessons one learns may depend agement even amidst the wreckage of importantly on where one stands or sits demonstrable failures. Russia is periodi- while things are happening. Thus, Russian cally “lost,” then it is “found” again. Why officials, Russian workers, Russian oli- do assessments of Russia vary so widely? I garchs, Russian intelligents, foreign bond- believe that there are two main reasons for holders, foreign equity owners, G7 the high variance pattern. policymakers, IMF officials, and Western The first, less interesting, reason is experts may focus on different facets of that Russia remains a highly politicized the story and learn different lessons from case. This is due in part to the Cold War particular events, such as those surround- hangover of squabbling post-Sovietologists, ing the financial collapse of 1998. many of whom are good foxes but tend to I am not suggesting that all lessons be lousy hedgehogs. For them, most but or perspectives are equally important or not all pessimists, Russia is held captive by valid or persuasive. Far from it. The test of dark shadows and deep structures of its validity, at least in economics, is whether long, unhappy, authoritarian history, from something works or not, whether it the Mongol Yoke and the oprichnina to the produces or hinders growth and prosper- Bolsheviks and the NKVD. For example, ity, and whether it makes the best use of you can tell where Richard Pipes is going scarce resources. As far as we can tell, when he writes that “Russia having there are laws of economics. But we have become acquainted with property late in only theories of economic development. its history, and even then only fitfully, failed We can understand relatively well the to create institutions capable of protecting hydraulics of general equilibrium theory its people from the despotic authority of in an advanced market economy. We Leviathan.” From this perspective, Yeltsin understand poorly the inner dynamics of and Putin are essentially just the latest shifting from one mode of production to avatars of the tsars (Alexander II and III) another, from one quantum level to and commissars (Khrushchev and another in terms of political-economic Brezhnev), and so on. A more curious modernization. trope evident in some scholarly analysis of Put differently, we think we know 1990s Russia is the longing for the good what makes a strong economy hum. We old days under Gorbachev: if only are far less certain how to turn a bad perestroika had been given a little more (“vicious circle”) economic system into time, perhaps 500 more days. (The Shatalin one that hums like a good (“virtuous Plan was path-breaking in early 1991; but it circle”) one. In a sense, we understand was retrograde by late 1991.) end-states but not transitions. Indeed, The polemical heat over Russia also things get quite murky when we try to stems in part from the cycle of understand, let alone control, the systemic triumphalism (“we won the Cold War”) and organic change of an entire social and revisionism (“who lost Russia?” or order, which is precisely the nature of the “who robbed Russia?”) in American challenge for the Soviet successor states. political and market rhetoric. This was Transition truly is a journey without certainly evident during the Roaring maps, to borrow Graham Greene’s famous 1990s. Our pictures of other countries, phrase. Or, perhaps worse, it has been a particularly important ones like Russia, 56 tend to fit our own rhetorical or emotional price collapse, demographic implosion). needs. Some of the stories people tell about Uncertainty is another way of saying that, Russia—alternatively exuberant or accusa- compared with other periods of its history, tory, hot or cold—are told to move markets Russia is still in a phase of radical transition; or to move voters or to sell books or to abet the transition is malleable, plastic, and narcissism of one kind or another. An indeterminate. Policies matter, choices matter, observer from Mars might conclude that and luck probably matters, too. Things could Western analysis of Russia tends to take on go very well (boom), or very badly (bust), or the characteristics of the proverbial “Russian in between. Nothing is written in stone or soul:” the extremes tend to dominate. preordained. Nothing is inevitable, until it The second reason for the high is—because of choices already made and variance of opinion is that Russia is big and options thereby foreclosed. complex, and profoundly contradictory Notwithstanding this inherent evidence abounds. Poverty and wealth uncertainty and ambiguity, U.S. coexist, growth and stagnation coexist, policymakers must of course make opportunity and risk coexist. As Keynes choices in real time. What accounts for the observed in the 1920s, “almost everything way available information about Russia one can say about the country is true and was interpreted at the highest levels in the false at the same time.” This is not a trivial U.S. government in the 1990s? How was point. Sizing up a country as big as Russia U.S. policy crafted in the face of divisive (or China or India) is difficult. And Russia debates and conflicts about what was has been untethered from its decades-old, if happening in Russia? The best answer not centuries-old, moorings. It is in flux, it one can give is that the winning interpre- is an open text. There are many Russias, tations tended to involve coherent and some fighting for ascendancy, some fighting concrete plans of action in line with a for survival. The balance of Schumpeterian strategic normative commitment to “creative destruction” is still up for grabs, advancing Russia’s rapid post-Soviet even as it moves to the tipping point. Thus, stabilization and process of political- in addition to a possible case of national economic transformation. schizophrenia, there is an element of Certainly the Clinton Administration Heisenbergian uncertainty at work here. To made some mistakes vis-à-vis Russia in push the physics metaphor a bit further, one eight years, perhaps sometimes paying too could say that those who study the “loca- little attention to bad news, as the critics tion” of the Russian economy often don’t accuse, and hyping “success stories.” see its “direction,” and vice-versa. The hard Doubtless, we made interpretive mistakes, part is giving the right weight to the avail- preferring the Lexus of globalization to able evidence, understanding its meaning, Russia’s olive tree, to borrow Thomas and remaining open to contingencies. Friedman’s phrase. That is, we deliberately Another way to look at the uncer- promoted the power of global integration tainty principle as applied to Russian over the peculiarities of culture, and we reform is that there is a degree of disconti- were impatient with notions of Russian nuity between diagnosis and prognosis. exceptionalism. But, from what I wit- Things can look grim (e.g., debt default, nessed at senior levels in three foreign financial collapse), but outcomes can still policy agencies, the Clinton team tried to turn out positive (e.g., high real GDP be realistic about Russia’s options and our growth). Contrariwise, even if things look own, while always tying our policies to good (e.g., fiscal surplus, reserves accumu- U.S. national security interests. In this lation, high medium-term growth pros- context, as the current Bush Administration pects), the trends could reverse (e.g., oil is likely to appreciate, it is important to 57 remember that U.S. interests can be well ous conduct of the rent-seeking oligarchs, served by a less than perfect transition in the cynical machinations of Yeltsin’s various Russia. In foreign policy, the best is not handlers, the veksel scare (which was the enemy of the good. forecast to trigger a Gresham’s Law dis- Cognizant of these methodological placement of the ruble), the perils of the issues let me turn to a few substantive value-subtracting “virtual economy,” the lessons I have learned from the zigzags of financial malfeasance of Russia’s many bad Russia’s journey away from the Soviet banks, the crash of the GKO debt jugger- system and its attempt to become a naut and the massive financial collapse in market-based economy integrated into 1998, two dirty wars in Chechnya, and the the global economy. accession to power of a former KGB officer The first lesson relates to one of the in 1999—it is remarkable that Russia’s strongest correlations of region-wide economy is where it is today. If anything, transition, namely that the faster reformers the pro-market trend has only intensified have recovered faster in terms of real GDP since the financial collapse and in the last growth, a theme well studied by Anders two years under President Putin. All should Åslund, among others. Russia’s record be hopeless; and yet there is more than supports this thesis. Russia turned in a hope for Russia today. The new Russia has mediocre reform performance in the a real chance to succeed. 1990s—compared with some other The second lesson is that market transition economies such as Poland, the transition—the road away from serfdom— Czech Republic, Hungary, Slovenia and must be multi-dimensional to succeed. To Estonia—and has not recovered as quickly begin with, the purely economic dimen- as they have. Things are looking a bit sion of market transition is itself richly better now, with positive real GDP growth layered. For macroeconomic aggregates do for the last three years, as some long- not tell us everything we need to know delayed structural reforms (e.g., tax, land about economic sustainability. Balanced codes) begin to affect productivity. fiscal policies and a sound monetary stance But, for Russia, the big news of the are necessary but not sufficient conditions last ten years is different. It is that, despite for macroeconomic sustainability. Success- the deep dislocations from a dark, dishon- ful transition entails both profound changes est decade of half-reforms, stops and starts, in macroeconomic management and Russia has stayed the course of market- completely new patterns of microeconomic oriented change. This could not have been behavior responding to decentralized predicted and must not be taken for market incentives and new, law-based granted. Given the hardships endured by institutional and structural arrangements average Russians, it is remarkable that no (e.g., state administration, market regula- political faction, not even the relatively well tion, industrial organization, social sector, organized Communist Party, managed to accounting standards, etc.). turn widespread economic misery into a Furthermore, transition across winning electoral or revolutionary strategy. Eastern Europe and the former Soviet (True, a couple of coups were attempted, Union has given the old field of “politi- but they failed.) Indeed, against the cal-economy” a new lease on life. The backdrop of the ravages of hyperinflation post-communist challenge has been of 1992-93, the proliferation of criminal systemic and organic in nature. It has investment schemes like “MMM,” the called for the root-and-branch revision of rapid mass privatization of 1992-94, the the “organizational capital” of entire insider “loans-for-shares” scheme of 1995- societies. Thus, for an economy’s perfor- 96, the financially and politically promiscu- mance, political infrastructure can be as 58 important as economic policies. For while the philosophy and functioning of example, functioning federalism in Russia open markets and open societies go hand (as elsewhere) is both an economic and a in hand, progress in history toward these political issue. Equally, the capacity of the two goals in any given country is not state to impose appropriate regulatory and necessarily correlated in a linear way. The administrative authority is of key economic developmental relationship between relevance. Putin’s emphasis on the “vertical political and economic liberty appears to of power” and the need for a “strong state” be more complex. They are closely related, can be understood in this way, at least in but incommensurable goods. They can also theory. The prevalent theory in the Yeltsin conflict as tools of development. China is a era that the decentralization of power was an case in point. China has experimented unadulterated virtue for post-Communist with economic liberalization as a gradual Russia was understandable but wrong. path to wider political freedom. Compared The nexus of politics and economics with China, Russia’s economic perfor- relates not only to the architecture of power mance has been slower over the past but also to the processes of power. As in all decade (lower real GDP growth rates, lower the other transition economies that have flows of foreign investment, etc.), but its instituted democratic practices, or reasonable democratic progress has been impressive. facsimiles thereof, the emergence of political Perhaps Russia was fortunate, contrary to pluralism in Russia has complicated the the critiques from some Sinologists who business of “reform from above”—because favored gradualism, that Mikhail it turns out that the economic losers can Gorbachev launched simultaneous (if fight back at the ballot box, in parliament, in highly inadequate) reforms in economic the courts, and through other channels of management and political pluralism in the resistance. Indeed, the risk is that the losers twilight of the Soviet period, a dual from economic reform can at times credibly direction and a holistic path that carried threaten to scupper the whole venture. This over into the new Russian chapter. is not to say that Russia has a well function- Also, with respect to the second ing democracy—by G7 standards, it plainly lesson, all of these dimensions of politi- does not. But neither does Turkey or cal-economic development have an Argentina or Indonesia, three emerging impact on what financial analysts call markets roughly in Russia’s financial weight “country risk.” Particularly after the global class. Russia’s “democratic deficit”—the financial crises of the 1990s originating manifest weakness of its political parties, from emerging markets, the investment media, courts, and civil society, its rampant community learned to assess country risk corruption—is not unique or exceptional in more rigorously, examining not only the the world of developing nations. In fact, invidious risk to macroeconomic stability such deficits are widespread in the develop- (such as current account deficits, debt ing world. Still, in Russia today, the public, service mismatches, exchange rate vulner- voters, and civilian interest groups have ability), but also insidious risks stemming unprecedented influence in the ebbs and from the political, institutional, and social flows of policymaking. How quickly they texture of countries. In consequence, the can consolidate and institutionalize this new transition economies and emerging influence is an open question. markets such as Russia, which wish to The deeper point is that it is unwar- attract external capital, must seek to ranted to draw a straight line between reduce their own country risks even as the democracy and economic development. world outside raises the standards of Hayek was certainly right that open markets assessment and the level of scrutiny based and open societies perfect each other. Yet, on received experience. The markets are 59 getting smarter, or so they like to think. ers. On the other, without the rule of law, The third lesson is about what Kant the laws of economics will not work well might have called “false antinomies.” Such in practice. And we know that the roots of apparent contradictions abound in the law grow slowly. As Holmes wrote in The recipe book of transition. The most famous Common Law, “the life of the law has not one by far is the dichotomy between been logic: it has been experience.” Thus, “shock therapy” and gradualism. On the the antinomy between shock therapy and surface, the shock therapy school—which gradualism is false because transition favors “big bang” or “cold turkey” methods economies need both. They need both to affect systemic change—is supported by systemic reform and systematic, organic the empirical conclusion noted earlier that development. the faster reforming economies in the One of the best and most contentious former Soviet bloc have recovered and examples of the shock vs. gradualism debate grown faster. In the same vein, a former relates to the process of privatization. Not a U.S. Treasury Secretary used to warn few commentators have noted that the visiting finance ministers whose domestic experience of privatization in the post- reforms were not moving fast enough: communist economies across the region has “You can’t jump over a chasm in two illuminated what Proudhon meant by his leaps.” This elegant warning was perhaps axiom that “all property is theft.” The more helpful psychologically than it was dubious genealogy of ownership and title, entirely accurate as a practical analogy for usually hidden over generations in advanced most developing countries most of the industrial countries, was laid bare in the time. Indeed, what we have learned from messy process in the 1990s throughout the these economies is that, too often, slow region. But privatization has been essential reform means no reform. You must begin to transition, because private property is the change process somewhere, change indeed an indispensable building block of a will usually be quite painful, and delay can modern market economy, and perhaps also be measured in terms of greater pain later. of a democracy, as Pipes has argued. The In this sense, the caution against gradualism question is how to go about it de novo, with was well placed, and shock therapy was the little or no living memory of the idea of right medicine. private property (or privacy). But gradualism, defined not as delay In Russia and the other transition but as systematic reform through all the economies, privatization of state-owned intersecting dimensions discussed above, is assets on a national scale has responded to in fact the key to—not an enemy of— multiple strategic objectives: to de- sustainable development, primarily be- politicize a once centrally planned cause people and institutions matter. And economy by decisively breaking the link people and institutions do not change fast. between ministries and industries; to This is why, almost in the same breath as promote efficiency, productivity and we encouraged reformers to leap centuries competitiveness through restructuring of in a single bound, we also predicted that firms at the microeconomic level; to transition would be a matter of “genera- democratize, decentralize, and ideally tional change” and that the proper se- legitimize new principles and patterns of quencing of reforms was important. There ownership; to promote the development are important considerations of political of capital markets; to improve the national legitimacy and legal development at work fiscal outlook through asset sales and here as well. On one hand, it usually takes long-term tax-based revenue streams. time to achieve “buy-in” for reform from In view of this matrix of related but enough of the relevant societal stakehold- sometimes-competing objectives, it should 60 be apparent that there can be serious Monetary Fund or by seasoned develop- tensions between the quantity, quality, and ment experts from the World Bank, though speed of privatization. In a climate of it drew on much of their received wisdom. uncertainty, such as the immediate post- The thorough indigenization of Russian Soviet years, it is understandable that reform is an important milestone in Russian reformers would want to move Russia’s transition, and it bodes well for the quickly with privatization, while it was still future. One can call it learning on the job politically feasible, and that this could have or “x-efficiency,” but it has real economic some serious costs for the quality of the value. Russia now has the human capital to process. As Joseph Stiglitz has observed, save itself. That is big news. there is nothing particularly difficult about This is an appropriate place to note a privatization as a legal fact; that is, transfer- complaint about the philosophical or ring state assets to new owners. The hard spiritual tenor of Russian reform, namely part has to do with the web of public and its lack of wholeheartedness. Indeed, it has private institutions, laws, regulations, norms, rarely seemed that the Russian leadership and expectations—the culture of trust—that or a majority of Russians have craved determine the operational patterns of economic or political liberties the way private enterprise. And this cultural web some of their counterparts in Eastern takes time to develop. You cannot merely Europe have done. Without a law of legislate changes of institutional and legal “lustration” such as that used in the Czech culture. Thus, here again the antinomy Republic, Russian reform has depended between shock therapy and gradualism for sponsorship largely on the emergence breaks down: both modes may be necessary. of reconstructed cadres from the ranks of The fourth lesson of Russia’s experi- Soviet-era apparatchiks (Yeltsin being the ence with economic reform is that “owner- patron saint) and on the younger genera- ship” matters. Shortly after the August 1998 tions. The current commander-in-chief of crisis, Mayor Yuriy Luzhkov festooned reform, Vladimir Putin, is almost certainly Moscow with signs saying “Nobody will not a natural democrat or a neoclassical help Russia except for us ourselves.” This liberal. He has endorsed—not embraced— patriotic slogan, perhaps tinged with an market-oriented reform based on cost/ element of lonely recrimination against benefit analysis. He seems to have en- Russia’s erstwhile Western partners, was dorsed it not because of metaphysical something of a mental breakthrough. It had commitments, but on utilitarian or prag- an Emersonian ring of self-reliance. And it matic grounds. Putin seeks the results of signaled what the international financial modernization. But he is still learning how institutions would approvingly refer to as a to use modern methods to get there. Putin country’s leadership taking “ownership” of its is still a work in progress, and a passable problems, not waiting around for bailouts, track record since 2000 does not guarantee and designing its own solutions. True, parts of good outcomes in a second term. Indeed, the Russian elite seem to have reached this one might ask whether “Putin risk” (is he conclusion only after exhausting all the other at heart really a chekist or a pragmatic options, but better late than never. reformer?) will tend to increase after he has What has been particularly impressive secured reelection. What is particularly about Russia’s reform program under worrisome about the current political Putin—exemplified in the 2000 plan put scene in Russia is the absence of credible forth by Economy and Trade Minister political opponents, in a chilled media German Gref—is that it is home-grown. It environment compared with the Yeltsin was not crafted by a team of fine era. For example, gone or seriously macroeconomists from the International deflated are the Lebeds and Yavlinskys of 61 the last decade. The heavy-handed manner indeed be strongest: transparency is a tool in which certain oligarchs have been of both political accountability and “depoliticized” and separated from their economic efficiency. Yet, like the rest of a financial-media empires by Putin’s Kremlin rule-of-law culture, learning how to only fuels the general concern. The risk is institute and implement the practices of that Putin’s “managed democracy” (not his transparency takes time. The G7 economies words) may have started out as enlightened did not become transparent overnight. and responsible, but may end up looking The sixth lesson of transition is about (to us) more like a form of despotism. a different kind of pollution, the physical This brings us to the fifth lesson of kind. Any assessment of the economic Russia’s transition: methods matter. In a condition of Russia and other transition sense, countries in transition require not just economies must recognize the grave new hardware, but also software upgrades. negative externalities of the Soviet legacy Perhaps the most fundamental paradigm on the environment and on the quality of shift the Russian political economy faces is human life. The much-catalogued “eco- the movement from a culture of command disaster” and the related demographic and compulsion to one of persuasion and pathologies of Russian society are the attraction. Another way of saying this is that quiet killers. But killers they are. The land, Russia will not realize its potential until it water, and air of the Russian Federation establishes trust as a basis for social organiza- are in many places degraded beyond tion. As Francis Fukuyama has argued, trust comprehension. Infectious diseases such as is central to modern society and modern TB are running out of control. The devas- economics. Without it, no state can evolve tating impact on the average life expectancy beyond the Hobbesian state of nature: nasty, of Russians is well known. Russia ranks brutish, and short. Building trust is a process 55th according to UNDP’s 2001 human deeply linked with establishment of the rule development index, behind the European of law and the practice of citizenship, which economies it aspires to associate with. This in a modern society unite all actors in the is an economic issue of enormous signifi- construction of the common good. But cance for Russia’s prospects. It is also a again, describing the glorious end-state political issue. The best laid macroeco- does not automatically help illuminate how nomic and structural reform plans will to get there. amount to little in terms of human devel- The trust deficit in Russia and the opment unless due attention is paid to the other transition economies can be mea- social sector and environmental protection. sured in the prevalence of criminality, A recent UN study concluded that by 2050 corruption, and cronyism in private and Russia’s population, now about 145 public life. How to contain and extinguish million, could either shrink to 100 million this legacy of the communist system, which or grow to 152 million. Determining was held together by mistrust? First of all, it which scenario will prevail depends is important not to be smug in assessing heavily on the policies of political-eco- the problem. Corruption, like all the nomic transition in the present period. human vices, is part of all societies. The The seventh lesson of Russia’s critical difference between the advanced reform story cuts closer to home. It relates post-industrial countries of the West and to the limits of outside aid. For over a the developing countries is the presence in decade, the Russia agonistes in the West the former of law-based mechanisms to have struggled to design the ultimate aid expose and clean out corruption. Rejuve- package. It started with talk of a “Grand nation, instead of denial. And here the link Bargain” in 1991 either to forestall the between democracy and development may collapse of Gorbachev’s reforms or to 62 turbo-charge the post-Soviet transition In its day, the Clinton administration’s through large-scale bilateral and multilat- support for Russia’s economic reforms eral aid packages. Such assistance plans earned a great deal of criticism from political were inspired by the legacy of the post- opponents and academic experts alike WWII Marshall Plan, notwithstanding all because of its tendency to “lead the markets” the important differences (e.g., unlike by consistently hyping and over-promising as defeated Germany, there was no military to the speed and scope of reform. Perhaps occupation, nor living memory of market the best that can be said about the Clinton mechanisms, etc.). Whatever the opportu- administration record is that, despite the nities might have been to do more at an hype, U.S. decisions to support or withhold earlier stage, the real magnitudes of support for IMF programs were based on external financial assistance were not so what Robert Rubin termed “probabilistic grand and came slowly. Over a decade, analysis” based on a convincing interpretation Russia received about $30 billion in of the best data available, in real time. Foreign conditioned debt financing from the IFIs. policy must play the odds. Providing large- It has also received modest debt resched- scale financial assistance is like placing a uling (though there is occasional discus- strategic wager in at least two senses. First, it is sion of more substantial debt forgiveness). a bet that the combination of financing and Fundamentally, the role of foreign pre-conditioned policy measures will be assistance has been limited by practical and enough to maintain macroeconomic stability. prudential considerations. A country can Second—and subtler—because money is usefully import capital for balance of pay- fungible in a national budget, it is also a bet ments support; it can import technical that the overall policy conduct of the recipi- assistance to learn from other countries’ ent government will move in a net positive mistakes (that is to say, best practices); but it direction. After all, one can find abominations cannot import political will. Thus, the in any budget. grandeur of the bargain has always been In retrospect, it is not hard to disagree limited by the size of the bargain the Rus- with the $22 billion, U.S.-backed, IMF-led sians have been willing to make, not only support package commenced in late July with the West, but also with themselves. 1998, but it is hard not to agree with the The smart strategy for the U.S. with decision to withhold disbursements under Russia as with the other transition econo- this package a couple of weeks later in mies has been to help speed their conver- August 1998. It may have been a strategic sion into bona fide emerging markets error to try to defend a fixed ruble peg at capable of competing for cross-border that point (though there were reasons for private capital flows, which have far doing so). But, contrary to popular myth, exceeded available official development there was no bailout in the sense com- assistance (ODA) flows for at least the past monly understood. The Russian Duma decade. Of course, attracting private capital, blocked key structural reforms required by especially for direct investment, typically the IMF, and Yeltsin and Kiriyenko were requires management of country risk. In too weak to overcome the opposition. The light of this, one could look at much of the next IMF tranche was withheld and instead U.S. aid program to Russia and the other of a bailout, Russia defaulted on its do- transition economies as an effort to help mestic debt, devalued the ruble, and systematically reduce country risks through suspended inter-bank forward contracts. improvement of macroeconomic policies Thus, contrary to the conventional wisdom, and support for structural, legal, and the Russian case proved false the prevailing institutional reforms consistent with expectation among many emerging market international investor standards. investors of a “moral hazard play.” 63 It is worth noting that Russia re- protection of property rights, and agricul- mains current on all its IMF and World tural land reform; to encourage the Bank obligations, and has steadily re- diversification of the productive economy duced its exposure to the IFIs since 1999 away from reliance on the extractive including through early repurchases industries; to continue the demilitariza- (repayment) to the IMF in 2001. Further- tion of the economy; to build a “knowl- more, one can now say with some confi- edge economy” conducive to the growth dence that the era of large IMF and World of services industries; to attract new orders Bank financial programs for Russia is past. of magnitude of foreign direct investment; Their utility was in providing the G7 to “go global” by integrating with the some policy leverage and in buying international rules-based trading and Russia some precious time, a little financial institutions, especially the WTO. “breathing space” to work out some of Reviewing a similar list of reform chal- the knotty problems of political-eco- lenges, a Western investment bank analyst nomic transition. These are limited tools, recently commented about Russia that and Russia is by no means the only recent there is “reason to believe.” Of course, emerging market case that reveals the one may be tempted to ask how much difficulties of IFI conditionality and the money that bank made or lost last time so-called “Washington Consensus.” the markets were looking up in Russia. Other key criticisms of U.S. bilateral (Reportedly, it did well by shorting the assistance also include an over-focus on ruble at the right time.) Moscow, St. Petersburg, and the central Ten years on, what have we learned government, to the detriment of Russia’s from and about Russia’s transition? far-flung regions and localities, as well as Reflecting on the course of history, Hegel an over-focus on economics, to the wrote that the owl of Minerva spreads her detriment of civil society, institution- wings at dusk. It is part of the human building, and people-to-people ex- condition to learn lessons only late in the changes. These grievances are generally day. If we could turn the calendar back, well taken and have been heeded in some knowing what we think we know today, measure, though perhaps not enough. Russia might have had better maps for its To reach its goals of modernization journey. History may provide such insight, and integration, Russia has yet a long but it does not afford such luxury. We journey ahead. It bodes well that the must make decisions based on imperfect current leadership in Moscow appears to information. Going forward, the challenge have made a sober assessment of the for policymakers, investors, and analysts deficits and challenges. These areas alike in dealing with Russia is to keep a include the need to lose no more time on sense of historical perspective and to the long-delayed structural reform maintain realistic expectations, but with- agenda, including the restructuring of out missing the opportunities for break- natural monopolies and the banking throughs, big and small. sector, better corporate governance,

64 Panel Two Summary: “Assessments of Russian Reform Programs”

Mikhail Zadornov, Deputy, Russian State the audience his paper describing the Duma, and former Minister of Finance, course of economic reform in Russia Russian Federation during the 1990s. He perceived four distinct stages in Russia’s transition from a Mark Medish, Partner, Public Law and centrally planned economy: Policy Practice Group, Akin, Gump, 1990-91—reaching a conceptual base Strauss, Hauer & Feld, LLP for economic reforms Discussants: 1992-93—price liberalization and Peter Reddaway, Professor, Department opening the economy of Political Science and Elliot School of 1994-98—attempts at macroeco- International Affairs, George Washington nomic stabilization and early struc- University, and former Secretary, Kennan tural reforms Institute 1999-2001—macroeconomic stabili- zation and growth Anders Åslund, Senior Associate, Carnegie Zadornov noted that early on the Endowment for International Peace Russian government failed to open up the Chair: economy or maintain budgetary disci- pline. It maintained regulations on energy Blair Ruble, Director, Kennan Institute prices and continued providing substantial The second conference panel fiscal subsidies, while at the same time the brought together divergent and informative Russian Central Bank provided loans to voices on the issue of Russian economic industrial and agricultural enterprises and, reform during the 1990s. This first post- until mid-1993, to the national banks of Soviet decade has been one of wrenching the former Soviet republics, creating the economic and social change. While a so-called “ruble zone.” The result was handful of Russians have risen to astonish- hyperinflation, budget deficits, and a loss ing wealth, millions have been reduced to of public confidence in the government. abject poverty. Russian economic reforms The Russian government achieved a have been credited with destroying the level of macroeconomic stabilization after centrally planned economy of the Soviet 1994, Zadornov continued, by closely Union, and blamed for causing an unprec- following IMF-prescribed action plans. edented economic depression in its wake. These policies achieved stability at a high As Russia emerges into a post-transition cost: extensive internal and external period under President Vladimir Putin, borrowing, a tight monetary policy that debates over the advisability of “shock retarded economic growth, and an artifi- therapy” reform versus a more gradual cially high ruble-dollar exchange rate that approach are still heated, if less urgent. rendered many Russian enterprises Another controversy centers on Western uncompetitive at home and abroad. The advisors and the value of their advice to the August 1998 financial crisis, during which Russian government, Western the Russian government defaulted on policymakers, and international financial domestic debt and allowed the sharp institutions. These controversies and others devaluation of the ruble, hurt many were fully argued by the panelists. private depositors in Russian banks. It In the following summary, only also helped identify economic distortions conference panelists listed on the agenda and set new economic trends in motion. are identified by name. The Russian economy has grown each Mikhail Zadornov summarized for year since 1999 and the government has 65 run budget surpluses in the last two years. changes. Second, he cautioned the audi- It would be difficult to overestimate ence to be wary of the phrase “lessons U.S. influence on Russia’s development learned”—while it is important to learn over the past decade, stated Zadornov. It lessons from history; the phrase suggests accomplished this through such tools as that some hard and fast script may have technical assistance, bilateral lending, its been available. Moreover, lessons may influence within the IMF and World Bank, vary depending on one’s perspective, and direct political pressure on the Russian whether as a foreign investor, Russian government. At the same time, Zadornov worker, or U.S. official. The third point is emphasized, some general lessons have that while the laws of economics are clear, emerged from Russia’s transformation that the laws of economic development are are applicable to all post-communist less so. Medish pointed out that while we economies. These lessons include the are good at describing equilibrium states, necessity for political will on the part of the we are less good at describing how to reforming government, the importance of move from one equilibrium state to popular support for reforms (as opposed to another. Finally, Medish warned the reforms by decree), and the importance of audience to beware the high variance of considering, monitoring, and adjusting to opinion about Russia: “…the number of the social impact of reforms. times that Russia has either been lost or Zadornov concluded by warning found in the past decade is truly mind- that while the economic situation in boggling, and it suggests that there are a Russia at the moment is positive, the variety of motives behind the interpreta- concentration of financial resources in a tion of Russia.” Russia is fundamentally few large financial groups combined with headed in a positive direction, he argued, the concentration of political power in but has not reached a stable end state. one set of hands could pose a very serious Medish next listed a number of threat not only to economic growth, but substantive lessons that he has drawn from also to Russia’s still weak democracy. Russian reform during the 1990s. Mark Medish summarized for the First, Anders Åslund was correct in audience a number of lessons and obser- writing that throughout the formerly vations he has taken away from his communist nations, the faster reformers experiences in helping to form and have been the faster growers. If Russia has implement U.S. foreign policy towards been in the middle of the pack of reform- Russia during the 1990s. By way of ers, the big news is that its direction has explaining how difficult it was to confront been fundamentally correct. the issue of economic reform in Russia, Second, macroeconomic indicators Medish cited John Maynard Keynes, who are not enough to understand Russia’s wrote in 1925: “The economic system of transition; it is vital to look also at Russia has undergone and is undergoing microeconomic processes and institution such rapid changes that it is impossible to building. obtain a precise and accurate account of it. Third, the very premise of the Almost everything one can say about the debate between shock therapy advocates country is true and false at the same time.” and gradualists is wrong—both are Medish raised four points before necessary. Shock therapy is needed to start discussing his observations on Russian reform in the right direction, and must be reform. First, it is important to remember sustained with gradual processes of the magnitude of changes that have taken institution building. place in Russia, and that Russia traveled Fourth, ownership of policy matters. down an unmarked path to achieve these You can import technical assistance or 66 balance of payment support, but you though not definitely, be vindicated in the cannot import the political will to sustain long term. reform. Zadornov’s position, according to Fifth, Russia is shifting from a Reddaway, is very similar to Medish’s, but paradigm of command and compulsion to is less optimistic. Zadornov gives more incentive and attraction. In achieving this weight to the costs of rapid, top-down shift and building trust within society, reforms and to the loss of legitimacy that reform methods matter. resulted from these reforms, especially Sixth, the Soviet legacy of environ- during the loans-for-shares episode. mental and demographic degradation Zadornov concluded that these factors, places an enormous burden on Russia’s plus the trends towards authoritarianism growth prospects—sick people cannot in Russia, make the future uncertain. build a strong economy. Particularly notable is Zadornov’s conclu- Seventh, U.S. external assistance to sion that “there is a palpable threat of Russia was highly necessary (if not stagnation.” essential), quite imperfect, but nowhere Looking at the presentations in greater near as bad as most critics would claim. detail, Reddaway commented that if Medish Assistance could not take the place of considers himself a short-term skeptic and political will (as argued above), but it long-term optimist, then it will be up to played a crucial role at key moments in future historians to judge whether the the previous decade. staggering short-term social, economic, and The large financial packages to political costs are worth the long-term gains. Russia from the IMF are things of the Reddaway noted that Medish argued past, observed Medish. Incentives to on the one hand that the needed legal, reform Russia will come from inside cultural, and social change would take a Russia, and one of the more important generation. On the other hand, he holds incentives is to join the WTO. Many of that carrying out privatization and key the long delayed structural issues that have liberalizing economic reforms in a single been on the IMF and World Bank agenda bound was right, and he doesn’t criticize for years are requirements in the WTO the sequencing of reforms as carried out in accession process. Russia. Medish failed, argued Reddaway, Going forward, Medish concluded, “to consider the key point raised by the challenge for policymakers, investors, Joseph Stiglitz, and also of Dmitri Glinski and analysts that deal with Russia is to and myself in our book, and I think this is maintain a historical perspective, to try to also implied by Mr. Zadornov, which is maintain realistic expectations, but not that if radical privatization is done before miss opportunities for breakthroughs both the rule of law and the web of institutions big and small. has been built up then the legitimacy of Peter Reddaway, the first panel the whole system is likely to be severely discussant, began by drawing out the undermined.” Long delayed structural broad conclusions that he drew from each reforms may now be underway, but those of the preceding presentations. reforms, as many liberal Russian econo- Medish, according to Reddaway, mists argue, are being completely under- favored the rapid, top-down reforms mined by the bureaucracy. conducted during the 1990s. While he Reddaway disagreed even more later appreciated the costs and pitfalls of sharply with Medish’s positive evaluation this approach, Medish nevertheless of democracy’s prospects in Russia. The believes that the chosen course has been roots of the problem of illegitimacy, stated belatedly corrected and will probably, Reddaway, extend back to 1991 and 67 Yeltsin’s decision to make an alliance with enterprises conducted on all levels of elements in the nomenklatura and some government were initiated by business of the new entrepreneurs. The trend rivals, and that if this continued no presi- towards illegitimacy continued and dent or head of government would be able deepened with the increasing manipula- to guarantee the sacred right to private tion of a series of elections. Recently, new property or even the personal freedom of laws on political parties, combined with many captains of Russia’s economy.” the decline of media freedoms and civil Only these individuals and groups, liberties, raise serious worries about the Reddaway stated, have the resources to future of democracy in Russia. These hire whole departments of the justice worries seem to be absent from Medish’s system. This raises the question of whether presentation, concluded Reddaway. the dubious quality of marketization in Turning to the paper by Zadornov, Russia will, as Medish argues, work itself Reddaway quoted one passage as particu- out in the future. Reddaway agreed instead larly striking, but insufficiently explored with Zadornov’s observation that the threat in the paper: “The concentration of of stagnation is palpable and even worse financial resources among the lucky few scenarios can be imagined. Reddaway who own and manage the 15-17 largest concluded by saying that he hoped companies in Russia, combined with the Medish’s analysis would prove correct, but concentration of political power in a that it doesn’t seem likely. single pair of hands, is laying the ground Anders Åslund began his com- for an economic system whose sole ments by reminding the audience of the purpose is to collect and redistribute lessons from the first panel on how resource rent.” One implication of this distorted and destructive the Soviet statement, according to Reddaway, is that economy was. Nobody thought that the liberal Russian economists are right in transition would be an easy task, and in saying that recent reforms remain largely fact Russia has had an annual average on paper. A second implication is that growth of 6 percent for the last three democracy is so undermined that political years. This growth is actually rather early, power has been concentrated in “a single argued Åslund, when you consider how pair of hands.” These two processes Korea was considered hopeless for a combine to produce, in Zadornov’s decade after the conclusion of the Korean words, “the palpable threat of stagnation.” War. Russia’s post-communist transforma- Reddaway then expanded on a tion is one of the greatest revolutions of concern that was not emphasized suffi- all time, and it should be judged in this ciently by Zadornov and not at all by context. “We don’t judge the French Medish, which is the role of the Russian Revolution on the growth rate after 1789,” bureaucracy. Quoting a Russian economic Åslund stated. Instead, a revolution should liberal, Reddaway warned: be judged by its outcome—dictatorship “In reality, the oligarchs and the or democracy, market or state economy, major companies hire the armed and privatization or state ownership. judicial organs of the state in order to We now have more than twenty resolve their business problems. A year ago, former communist countries that started when President Putin had his first meeting off with the Soviet system, noted Åslund, with the oligarchs, he directly accused and they have all come out different. Some those in the room and all of big business of are fairly modern Western democracies themselves corrupting the organs of law with 80-85 percent privatization, while and order. He said that one half of the others are full-blown dictatorships. In all criminal cases, investigations, and raids on cases, however, democracy, privatization, 68 and liberalization have gone together. argued Åslund, if you consider what the The first panel described very well political possibilities were: “Chubais’ the peculiarities of Soviet Russia that option was either to accept [privatization] influenced the path of reform in that as the state directors demanded or not to country. The central issue, Åslund argued, privatize, and he chose to privatize.” was that the state dominance in all facets On the role of the West, Åslund of economic life, particularly the domi- commented that the West played no role in nance of the nomenklatura, created a state Russian reforms in 1992. “This was the that was both lawless and omnipotent. biggest sin of omission and [the first Bush] Five policies were needed to over- administration should pass into history as come this. First, democracy is essential to the administration that slept when the provide checks and balances over both the Soviet Union collapsed,” declared Åslund. state and nomenklatura. Second is swift The period of 1994-98 was a missed liberalization of prices and trade to avoid opportunity, an era when policymaking in expensive distortions of partial reform. Third Russia was dominated by critics of reform. is reforming fiscal accounts to reduce the By contrast, “the crash of 1998 turned out flow of public means to private interests. to be the most successful reform package Fourth is adhering to strict monetary policy for Russia that the outside world came up to avoid the exploitation of the state through with,” stated Åslund. The IMF and the subsidized credits directed through political Kiriyenko government agreed upon policy influence. Fifth is privatization to get cures, the parliament failed to legislate the property out of the hands of politicians and necessary measures, and the IMF then let bureaucrats and lay the foundation of a law- Russia fall. This is a good, but frightfully based society. The alternative to this plat- hard, lesson, declared Åslund, and is how form of radical reform was a gradual reform conditioned assistance of international that would benefit rent-seeking forces and financial institutions should work. the nomenklatura. The only real alternative On the one hand, concluded Åslund, development example for Russia, therefore, we see the corrupting costs of slow reforms is Belarus. that are likely to continue haunting Russia. Recounting the experience of Complaints about the bureaucracy are in Russian reform, Åslund agreed with the fact complaints that too little change was episodes listed by Zadornov. If you look at made. On the other hand, Russia has now each episode, Åslund continued, you could adopted a quite liberal economic model, say that most of the major initiatives went even more liberal than the Central Euro- only half way. Yeltsin’s ability to capitalize pean countries now joining the European on his early democratic legitimacy was Union. Russia’s economic model looks undermined by a pre-democratic obstruc- pretty similar to the East Asian model, and tionist parliament. While some prices were that should lead to more economic growth. liberalized early on, commodity prices and Panel Chair Blair Ruble gave the commodity exports were not—this was the panelists the opportunity to respond to initial big money source for the new rich, each other. not privatization. On fiscal accounts, Zadornov disagreed with Åslund’s Åslund continued, Gaidar’s ability to cut assessment of Russia’s experience with arms procurement constitutes a tremen- privatization. The Russian government dous, if forgotten, success. By contrast, received not more than $4 billion from monetary policy was a failure; the ruble privatization between 1993-99, yet Gazprom zone lingered on until late 1993 and has over $20 billion per year in revenue and became a zone of hyperinflation. Finally, the oil industry brings in a collective $25 privatization was a great success for Russia, billion per year in revenue. A counter- 69 example to Russia’s approach is Brazil or and corrected over the course of time Argentina. These countries established under Putin. Reddaway stated that he is special state banks to finance privatization more skeptical and shares the concern of sales, allowing the state to collect a more Russian economic liberals for the future real price for privatized assets. Another of democracy. failure of the Russian approach was the “Although I disagree with Mr. exclusion of foreign capital from competi- Åslund on just about everything,” contin- tion. “No foreign capital meant no real ued Reddaway, “I do agree with him price,” declared Zadornov. about the enormous desirability of Zadornov also questioned the IMF’s holding new elections to the Russian success in accomplishing its “clear goals” of parliament in late 1991.” A new parlia- promoting economic growth and maintain- ment would have facilitated carrying out a ing a stable balance of payments in the serious economic debate about the former Soviet Union. Smaller countries government’s future economic strategy. without Russia’s oil and gas resources, such Medish reminded the audience that as Moldova, Georgia, and Kyrgyzstan, have decisions on Russia policy were hotly foreign debts close to 100 percent of GDP. contested behind the scenes in the admin- This debt burden cannot be repaid by these istration; this included the 1998 IMF smaller countries and is preventing eco- package. As for the IMF itself, Medish nomic growth. The conclusion, according to disagreed that the institution has “clear Zadornov, is that the IMF made mistakes goals” as Zadornov stated; rather, the IMF and failed in its mission in this region. has too many goals. It originated as an Medish disagreed with the criticisms institution concerned with the stability of leveled against his assessment of economic exchange rates, and evolved into an institu- reform and democracy in Russia. He tion that is used by the shareholders to repeated that radical change is necessary at promote development and transition. first, but requires a gradual process in Åslund disagreed with Zadornov’s order to consolidate that change. He assessment of Russia’s privatization pro- agreed with Åslund’s case for early gram as costing the state revenue, compar- privatization, and that the relationship ing Russia’s program to the expensive between democracy and economic reform privatization of East German enterprises. is fundamental but not linear. Further, he argued, the worst privatizations Medish also agreed with Reddaway’s occurred late during the 1996 “loans for view that legitimacy is a real concern and shares” scheme. A successful privatization that it takes time to build, and on the report needs to be as fast and as widespread as card of deficiencies in Russia’s reform possible to create strong core owners. Not record. He disagreed on what the signifi- only do privatized industries receive fewer cance of those deficiencies is for the overall subsidies than state enterprises, democracy report card. He repeated his view that on and private property go together. balance, the progress that Russia has made is Reddaway countered that it is really quite remarkable. “There were many difficult to draw a clear line between possible Russias that have been avoided that privatization and stealing in Russia. The were much worse than the one we see “loans for shares” could be described as a today,” concluded Medish. mechanism for the oligarchs to steal the Reddaway affirmed that there is a major assets of a state legally. difference in perspective. Medish believes Ruble opened the discussion to that the undermining of democracy and questions from the floor, urging the inadequacies and failures of economic panelists to relate their answers to the reforms are all things that can be adjusted lessons raised from the morning panel. 70 Igor Birman challenged the idea class,” concluded Zadornov. that privatization in Russia was successful, A series of questions and comments and asked the panelists to comment on were fielded from the audience. The first the issue of a middle class in Russia. question centered on Russia’s weak Medish again defended the idea that banking system, and whether sustained privatization had to be accomplished quickly, economic growth is possible without a or it would never have happened at all. The safe banking system. Polish example, where large-scale The next question addressed the issue privatization was delayed and growth came of U.S. assessment of Russian reform: The from the Greenfield private sector, was not a personnel responsible for administering the feasible approach for Russia, given the U.S.-sponsored programs in Russia were political and cultural differences between the evaluating these same reform programs. two countries. In Russia, Medish argued, Since they were under political pressure breaking the back of the nomenklatura and from Washington to report success, and had ministries was absolutely essential. careerist interests in reporting success, was Reddaway commented that the the process corrupted? middle class is closely linked with small One audience member commented business, and, as President Putin has that Russia’s privatization represented a pointed out, small business development “feudalization of the system,” where in Russia is very weak. Reddaway cited people in the private and public sector two reasons for this weakness. First, the abused the public trust for private gain. parasitic nature of the Russian bureaucracy He then directed a question at Medish, at the federal and regional levels discour- asking who were the influential sources of ages entrepreneurs from starting or main- perception on how reform was progress- taining small businesses. Second, organized ing, given that U.S. intelligence did not crime imposes a kind of tax on the opera- have a central role. tion of small and medium businesses. Medish, responding to the question Zadornov agreed with the negative on Russian banking, stated that banks in assessment of Russian privatization, arguing Russia would not become real banks until that the real share of private enterprise in there is a critical mass of trust. So far, Rus- the Russian economy is 50 percent rather sian reforms have not built an atmosphere than 70 percent because “Gazprom, of trust. One of the lessons of the East Asian Aeroflot, and the larger Russian enterprises crisis, Medish observed, is that while the are really state managed enterprises.” East Asian miracle occurred on the backs of Zadornov suggested that the panel did not unsafe banks, it was those unsafe banks that address the issue of the Russian middle class brought down most of those economies in because there is no middle class in Russia in the late 1990s. Another growth source in the reality. Two groups of people are tradition- absence of safe banks is directed lending, ally identified with the middle class—small which is the Chinese model. business owners and professionals such as On the issue of political pressure health care workers and teachers. As already from Washington, Medish emphasized noted, small business owners face tremen- that his recollections from government dous obstacles in bureaucracy and organized service during that time were of candid crime, and in fact small enterprises provide and acrimonious debates at high levels. only 10 percent of Russian GNP. Profes- He stated that in a hostile funding atmo- sionals such as educators and health care sphere in Washington, the administration workers, on the other hand, earn a salary of did have to “lead the market” in selling $200 per month. “With this level of salary the story of the possibilities of Russian rates, it is impossible to be a real middle transition. “I think our advertising about 71 what was happening in Russia tended to learned” must include lessons on the be hyperbolic,” Medish acknowledged. ground. In her experience, technical On the issue of sources of information, he assistance must be long-term and done in confirmed that open sources, such as partnership with the target institution. investment bankers and journalists, Robert Campbell returned to the became a much more important source of issue of long-term consequences of information for policymakers than was Russian privatization. Economic theory the case in the Soviet era. says that if property ends up in the hands Åslund noted that the semi-priva- of non-enterprising officials, true entre- tized companies like Gazprom are per- preneurs will eventually buy out the forming badly compared to fully priva- officials. “That will have distributional tized companies: “The Russian big consequences,” concluded Campbell, “but economy is now driven by about twenty it has no consequences for efficiency.” big enterprise groups where you have a Campbell raised the issue of the core group of owners who control 75 to relationship between law and economics. 100 percent of the shares.” One theory is legal practice over time Zadornov pointed out that people conforms to what makes sense economically. don’t trust banks because of their experi- Another theory is that it is the function of law ences over the past decade. During that to codify and validate insecure property time, depositors have lost money through relationships that have grown up through hyperinflation, pyramid schemes, and the power. If the latter theory were correct, it 1998 default. There has been recent would have serious implications for the progress, but banking reform, bank consequences of privatization in Russia. restructuring, and capitalization are still Another question from the audience needed. On the issue of whether the raised the issue of whether open sources of Kremlin has been “privatized” along with information on Russia were reliable, given state assets, Zadornov argued that democ- that they may also have an interest in “leading racy is the only counterbalance to financial the market” in reporting on Russia. groups’ influence over the Kremlin: “We Medish clarified his characterization need a healthier parliament, political of the administration leading the market parties, freedom of the press, because these on Russia. There are two competing are real checks and balances not only for schools of thought on development the Kremlin but also for all power.” assistance. One school believes that assis- Reddaway stated that in his experi- tance only delays hard choices and helps a ence the Clinton administration was not country avoid the real challenges confront- receptive to his dissenting opinion: “They ing it. Another school believes that devel- appeared to me to have extremely one- opment agencies, both U.S. and interna- sided sources and they couldn’t under- tional, can make a big difference in helping stand how anyone could have a different a country in trouble. To succeed in getting one.” Congress was more open to hearing appropriations for these institutions in this different viewpoints, but in they end they atmosphere of debate you have to tell a big bought into the arguments from the story about aid. The Bush administration, administration when appropriating funds. which recently announced its intention to The next comment from the audi- increase foreign aid, is about to learn this ence came from a specialist who works on lesson, Medish commented. a program to help Russian research On the issue of the reliability of institutions convert from biological open sources, Medish stated that the warfare research to pharmaceutical solution is to be a critical analyst of the research. She argued that any “lessons information you are given. An investment 72 banker’s analyses may be promoting his are, and should resign if he cannot prove own portfolio, for example. The point is that he has done something about it. that in the 1990s open sources became “Russia has millions of bureaucrats and much richer than they had been in the public employees,” concluded Åslund, past, and they were important sources of “cut them by two-thirds, raise the remain- information that shaped the perceptions ing salaries accordingly, and do something of policymakers in the U.S. government about corruption.” on the Russian economy. Zadornov noted that the official The next comment from the audi- position of the federal government on ence centered on the Russian state privatization is case-by-case privatization. budget. By the estimate of Russia’s Some recent privatizations have achieved Minister of Labor, Aleksandr Pochinok, if good results, including Onako Oil Com- all budget-funded employees were paid at pany and Rosgostrakh (the state insurance a subsistence level, it would consume the company). entire state budget. Similarly, the OECD Reddaway concluded the panel points out that if all the social benefits on discussion with the observation that the books, even excluding wages, were Campbell was right in seeing a danger in implemented, that would also consume law cementing the monstrously unjust the entire state budget. divisions of property that exist at the Åslund responded that Russian moment in Russia. The recent fates of public expenditures have been stable at Boris Berezovsky and Vladimir Gusinsky around 33 percent of GDP, which is very do not imply otherwise, because there are similar to the U.S. level. Given the poor special reasons that they have been functionality of the Russian government, threatened. “What is important to keep in and its lower level of development, it mind is that Putin was chosen as a repre- would be good if expenditures fell to 25 sentative who would consolidate the percent. Minister Pochinok, Åslund Russian elite and the Russian state after argued, has been in office for two years the chaotic and “revolutionary” years complaining about how hopeless things under Yeltsin. He sees this as his job; he has said many times that there should not be any re-division of property.”

73 Panel Three: Understanding the Underlying Social Aspects of Soviet and Post-Soviet Russia

74 75 An Attempt at Understanding Social Problems Associated with the Transformation in Post Soviet Russia by Yuri Levada

This report can naturally only touch events in the near and distant future. It is upon a few problems associated with the very likely that some of these future complex developments in Russian society events will also result in unexpected rapid during the last ten-plus years. To illustrate changes. my points, I will use data obtained from Many weaknesses in the analyses of public opinion surveys taken by the recent transformations in Russia can be Russian Center for Public Opinion attributed to narrowness in scholarly Research (VSIOM). approaches. It is understandable that until The social and political development recently Western observers were most of the Soviet state during the last years of its interested in the military and political existence and that of post-Soviet Russia (as aspects of Soviet development, evaluations well as the entire so-called post-Soviet area) of the veracity of the claims made by the has involved a series of unexpected, unpre- Soviet leadership, and of the possibility of dictable cataclysms and changes in direction. some liberalization of Soviet policy (prima- Several forks in the road (situations involv- rily with regard to the outside world). The ing an important choice of future direction) significant problems involving the structure can be noted in the development of events and succession of the ruling elite, their during that period. The choices made social base, public opinion, etc. remained in certainly did not always prove to be rational the shadows. A more sociological analytical or expected. It is not surprising that such approach to examining post-Soviet reality progress has reinforced Russia’s reputation has not yet been utilized sufficiently. This is for unpredictability. especially true now that the opportunities to However, on closer examination, it is obtain extensive social information using, clear that in many instances scholars and among other methods, regular surveys of observers—as well as the actual participants public opinion, are extremely great. in the events themselves—were not pre- After the Breakup pared to explain the unexpectedness and unpredictability of Russia’s changes, nor to The breakup of the Soviet Union in analyze the relevant factors, conditions, or late 1991 was to its citizens even more alternatives. This applies not only to our unexpected than the precipitous collapse own Soviet or Russian experts, but also to of the Communist regime several months foreign observers and scholars regardless of previously. While as many as 40 percent their political or ideological position. of Russians regret the loss of the Soviet Neither the supporters of the totalitarian system, more than 70 percent (74 percent model of the Soviet regime nor the sup- in 2001) regret the breakup of the USSR. porters of evolutionary models expected The negative consequences of this such a rapid and such a complete collapse of breakup throughout the last decade have the Soviet system and empire. seriously impacted the position of Russia A thorough analysis of the reasons among the other former Soviet republics, for this phenomenon, in my opinion, and the social and national self-image of would be of a great deal more than mere all these nations. In late 2001, 31 percent historical interest. After all the changes of of those polled believed that indepen- past years, Russia is still not on a course of dence benefited Russia and the other steady, evolutionary development. An former Soviet republics, while 49 percent understanding of why the changes that perceived only adverse consequences. occurred in Russia continue to appear Some of those polled explained this with incomprehensible is extremely important reference to the severance of contacts in explaining the further development of with their friends and families, the 76 difficulty of crossing the new borders, etc. on the road to a market economy and had Others referred to the loss of pride in assimilated such principles and values of being citizens of a great world power. democratic society as freedom of speech, Many find the loss of their former status multi-party elections, freedom to leave the as a great world power even more painful country, and private entrepreneurship. than the economic crisis and decrease in Russia had joined the worldwide commu- living standards. nity. These principles had been proclaimed Of all the countries that emerged from earlier during Gorbachev’s regime, but the wreckage of the USSR ten years ago, they were put into daily practice only only Russia failed to officially mark the tenth under Yeltsin. The break with the Commu- anniversary of the events that led to the nist past became essentially irreversible. collapse of the Soviet Union. This demon- Currently the majority of the population strates that neither the authorities nor society and even a significant portion of Commu- are capable of defining their own place in the nist Party supporters acknowledge that. historical processes and the changes occur- The high degree of adaptation to the ring in recent times. The very description of changes that occurred in the country is Russian society as “post-Soviet” presupposes even more remarkable, since it has been the indeterminate nature and instability of accompanied by constant deprivations, a the social institutions that were formed after decrease in production and the standard of the collapse of the Soviet system. Speaking living, and a succession of political crises figuratively, we in Russia (as in other coun- that have shaken weak government institu- tries of the former Soviet Union, except, tions. The power of anti-Communism as an perhaps, the Baltic nations) are still not living ideology to mobilize or frighten the public in our new home, but rather in the ruins of was virtually exhausted by the mid-1990s. our old one. Only through crude manipulation of the Boris Yeltsin, judging from his charac- mass media and the creation of artificial ter and biography, was significantly less political crises (including preparation of a prepared to assume the role of reformer coup d’etat by the president’s team in 1996, than his predecessor, Mikhail Gorbachev. in the expectation that they would lose the However, his desire to separate himself from election) did Yeltsin manage to get elected the party elite that had created him, and to a second term. After years of political from Gorbachev, whom he personally intrigues within the ruling camp, blatant despised, forced him to take up a position manipulations of public opinion, the in support of the most radical—and far from shameful collapse of the Chechen cam- the most promising—alternatives for paign of 1994-96, Yeltsin’s physical incapac- breaking up the Soviet system. In practice ity during and after his reelection, and this meant that during each of the crises finally the financial and economic crisis of throughout his regime, he selected the most 1998, the regime had fallen into in an primitive, brute force response. In each of extremely critical position. Yeltsin’s popu- these cases, the long-term consequences larity reached new lows. This was not only seem not to have even been considered. a reaction to Yeltsin as an individual, but Probably, he decided to support the radical also to the profound shortcomings of the economic reforms proposed in 1991-92 by political system in operation since the Gaidar’s team in this style. Soviet regime self-destructed in 1991. For However, epochs as well as people this reason, the problem of succession of should be judged by what they have power towards the end of Yeltsin’s regime accomplished. During Yeltsin’s presidency, demanded, essentially, nothing less than a Russia—despite all the costs and difficulties shift to a new model of political organiza- of the transition—firmly established itself tion. 77 Characteristics of the Current Transi- the situation in 1991-92. In fact, President tion Period Putin has been compelled—both by After a series of searches within economic considerations and the need to Yeltsin’s inner circles of power, Yeltsin maintain his image in the West—to demon- and/or those surrounding him chose a strate that he supports a free market. The complete unknown: a St. Petersburg native radical economic reformers, however, do not and officer of the KGB (and its successor have the same level of influence as they did agency the FSB) named Vladimir Putin, in the early Yeltsin administration. The who had no political experience, no team, political situation and forces active in Russia and no clear political sympathies. Septem- are significantly different from those that ber 1999, when Putin was appointed existed ten years ago, as two powerful forces Prime Minister, marked the start of the have emerged. The first is the phenomenon current, new, and, in my opinion, still of large semi-privatized businesses with incomplete “political transition” to a new high-level political connections—the so- political regime in Russia. called oligarchs. The second is the phenom- The transition has proved to be enon of “enforcement” agencies, mainly the prolonged and difficult. The struggle among Federal Security Service (FSB) and the different groups for influence in Yeltsin’s Prosecutor’s Office, acting as an instrument team continued even after Putin succeeded of coercion in the hands of those in power. Yeltsin as president of Russia in 2000, with Under these circumstances, even the most intrigues accompanying virtually every well conceived steps toward a free market executive action. After some time the frequently end up stifled under rigid police political elite, observers, and the general surveillance. Instead of an evolution of public grew increasingly familiar with the normal rules of economic behavior, we have personal style of the new leader. Yet no one witnessed a series of frightening—often could concretely identify his program, team, deliberately so—actions against individual social base, or the methods he was likely to firms or oligarchs who have fallen out of use to solve Russia’s most painful problems. favor. To this day approximately half (46 percent) According to public opinion polls of those surveyed acknowledge that Presi- taken in December 2001, the perception of dent Putin remains a mystery. 31 percent of respondents is that President The new generation of leaders, Putin represents first and foremost the currently symbolized by Putin, is virtually interests of the “enforcers” (i.e., members of free of the “anti-Communism” baggage of the military and security forces); 20 percent their predecessors. These leaders are search- believe that the interests of the bureaucracy ing for other means of self-definition. They are predominant under Putin; 20-21 percent are open to practical and ideological com- cite the “middle class” and “poor people,” promises with the forces or symbols of the and 15 percent the “Family” of political past. For example, the “presidential” party insiders that surrounded former president (Edinstvo) reached a series of parliamentary Yeltsin. During Putin’s first two years in office, deals with the Communists in 2000, result- the influence of the “enforcers” on those in ing in power sharing and the adoption of authority has unquestionably grown, in spite the old Soviet national anthem. of some setbacks and perceived attempts at Economic liberals have maintained opposition from influential groups. For close contacts with the Putin administra- example, attacks on the influence of the tion, and hope with the help of presi- military (i.e., the punishment of a large group dential authority to succeed in pushing of senior officers for the loss of the “Kursk” the country along the road of radical submarine) are soon followed by concessions market reforms, to some extent repeating (i.e., an increase in military pay or increased 78 harshness in the Chechen campaign). or even negative. Similar balancing tactics are clearly used in Thus, in November of 2001, 51 other situations: for example, after steps are percent (vs. 45 percent) believed that the taken that many perceive as limiting demo- president was successful in his attempts to cratic freedoms (the closing of a central maintain law and order in the nation; 39 television channel, elimination of the percent (vs. 55 percent) said that he was president’s pardon commission), gestures successful in improving the economy and are made to honor the democratically- well being of the population; but only 24 minded intelligentsia (with special presi- percent (vs. 64 percent) agreed that Putin dential meetings, awards, etc.) had been successful in regulating the The mobilizing effect of the second Chechen conflict. Nevertheless, in January Chechen campaign played an enormous 2002 more than half (between 50 and 70 role in building Putin’s popularity, contrib- percent) of those polled expressed confi- uting greatly to his landslide victory in the dence in Putin’s ability to manage the presidential election in 2000. Soon it turned remaining problems. This means that the out that, in order to support his public public’s confidence in the president is image and to maintain control over the rooted not so much in the results of his political elite, Putin was constantly com- actions, as in its hopes for the future. The pelled to create similar “mobilizing events.” effective absence of alternative or competing Thus began loud attacks on local governors figures on the political scene no doubt adds and oligarchs, pressure on the mass media, to these figures. intrigues against and prosecution of busi- Today scarcely anyone is disturbed by nessmen who were in Putin’s way, dubious Putin’s past. Thus, according to January 2002 “spy cases” launched against inconvenient data, only 20 percent express unease about scholars and activists, etc. Such actions today the fact that the president previously worked no longer are able to create an environment for the KGB/FSB, and 36 percent about the of mass terror reminiscent of the Stalin era. fact that he was associated with Yeltsin’s However, such “pinpoint” strikes at seem- “Family.” The same number (36 percent) are ingly randomly selected targets create a worried that Putin might become a rigid mood of uncertainty and anxiety for one’s military dictator. However, more than half (55 professional future in the fields subject to percent) are disturbed by the fact that Putin persecution—business, journalism, did not propose a single specific economic or academia, and human rights advocacy. political program. The largest percentage (74 Moreover, they give rise to a certain style of percent) express concern that the president maintaining law and order using enforce- has not yet been able to put an end to ment agencies and scare tactics that are not military actions in Chechnya. very conducive to the normal development It is noteworthy that Putin’s high of business and social activism. ratings have boosted the public’s evaluation Two and a half years after his ascen- of Prime Minister Mikhail Kasyanov (49 sion to the ruling elite of Russia, Vladimir percent approve of him), but not of the Putin enjoys the stable support of the government, the parliament, or other majority, as more than 70 percent of the government institutions. These institutions population approves of his overall perfor- receive predominantly negative ratings in mance as president. However, assessments public opinion polls, with the exception of of particular attainments of his administra- the respondent’s “own” local governor. The tion in various areas—maintenance of law prevailing opinion is that the government and order, improvement of the economic is not capable of improving the country’s situation, solution of the Chechen prob- situation in the near future. In a public lem—remain significantly more restrained opinion poll taken in 2001 more respon- 79 dents considered the federal authorities, as for a relatively long time. The following compared to Soviet rule, to be less “for the table shows the Russian public’s attitude people,” less legitimate, and less effective. toward the statement that “a strong leader With Putin’s rise to power, the political can do more for the country than the best scene in Russia’s parliament changed possible laws.” significantly. The confrontation between the Communist and the various “democrat” Year 1995 1997 1998 1999 groups in parliament, which had seemed to Agree 66 72 78 76 Disagree 24 20 14 15 be the main axis of the political battles Cannot say 10 8 8 9 under Yeltsin, eventually evaporated under Putin. A number of hurriedly assembled In April 2000, almost three quarters pro-presidential groups, merging in the new (72 percent) of those polled agreed with the United Russia party, came to the forefront statement “Russians cannot get along in the State Duma and substantially de- without a powerful leader’s strong hand to prived the “old” parliamentary factions of guide their actions.” It seems very likely that independent deputies and influence. The a significant portion of the population parties and forces that were traditionally associates hopes for authoritarian order with considered democratic (Yabloko, The the figure of President Putin. Although Union of Right Forces) were significantly public opinion registers a concern over the demoralized and unable to strongly oppose possibility of a military dictatorship (or even presidential authority. To maintain its worse, a Stalinist totalitarian regime), these influence and to some extent its continued are in fact pitiful reservations as there are no existence as the largest parliamentary faction, institutional limits on the regime that would even the Russian Communist Party was curtail totalitarian action. Furthermore, forced to avoid confrontation with the today’s presidential authority hardly needs president’s team. If current trends continue, to resort to the methods and conditions of in future parliamentary elections factions the past. As the last two and a half years have and groups that are close to the Kremlin shown, mass repression or totalitarian will either win an outright majority or have control over words and thought are not little difficulty in controlling parliament necessary to transform a political regime. All through exerting pressure on small coali- that is needed are selective actions against a tions of deputies. few disobedient figures for the requisite The attempts of those in power to degree of obedience to be attained. form a guided political system (i.e., a “managed democracy”) have not yet been The Population Status met with any notable protests on the part of According to various polls, no more the Russian people or public opinion, and than 15 to 20 percent of the Russian public this is unlikely to change. A significant today believes that it has benefited from the portion of the population, exhausted by the changes that have occurred in recent years. insecurity and lack of law and order during Approximately 70 percent believe that their the previous decade, is ready to sacrifice a material and social position has worsened. number of freedoms in the name of law and At the same time, however, somewhat more order, especially if the initiative were to than 70 percent assert that they have already come from an authoritative leader. adapted to the new situation or believe they The idea that maintenance of “law will soon be able to do so. It is this paradox and order” in Russia requires rigid (“we lost out but we have adapted”) that control by an authoritative leader has defines the main character of the public’s been prevalent in virtually all strata of perception of its position. This is also the society and at all levels of the government source of people’s lack of confidence in 80 tomorrow and their nostalgia for the people, have succeeded in discernibly tranquil past. improving their lives. It should be re- In evaluating this mood, it should be membered, however, that, as is generally remembered that the attention of the the case with public surveys, the social public tends to be focused primarily on extremes (the poorest and richest people) unresolved, painful, acute problems. What are underrepresented. has already been achieved becomes Recently, the ratio between the number familiar and is no longer noticed (if these of people who profess themselves in favor of gains were threatened, that would be market reforms continuing (in January another matter). Such historically signifi- 2002—37 percent) and those who favor their cant changes as the new abundance of rollback (in January 2002—22 percent) has consumer goods and services, the opportu- been relatively stable, while a plurality of the nity for consumer choice and travel abroad, population (41 percent) declines to answer. multiparty elections, freedom of speech, This suggests the public’s lack of confidence etc., now seem almost natural. This is in the choice they were forced to make. particularly true because these achieve- Freedom of Speech and the Position ments were not long-sought goals of of the Mass Media public demand, nor the results of a hard- fought struggle, but instead suddenly The only area in which the majority appeared as if they fell from heaven. An of the population considers that things have additional factor to consider is the typical improved significantly during the years of Russian suspicion of anything unexpected. transition is in the information sector. The According to official statistics, after a level of public confidence in the mass media decade of economic setbacks, the mean is very high—in fact, it is higher than in the income per capita has only now ap- U.S. In rating the importance of various proached its 1990 level. A significant sector institutions in the life of the country, people of the population—at least 30-40 per- polled in January 2002 placed the mass cent—has a lower standard of living and is media in third place (after the president and poorer than 10-12 years ago. The over- oligarchs). whelming majority of the apartments, cars, However, the majority of the popula- overseas travel packages etc. that are ac- tion has yet to develop the ability to think quired by Russians are bought by the critically about the information dissemi- richest 20 percent of the population. The nated by media. The predominant attitude dramatically increasing income differential, to the mass media is passive and nonselec- which is becoming more and more obvi- tive. This creates a situation where it is ous, is generating a great deal of dissatisfac- possible to exert pressure on public tion. However, in the last few years, the opinion through television channels that attitude of the general public to the rich, are under government control or depen- and the newly rich, has become more dent on government. This is the lesson to relaxed and now indicative more of envy be learned, in particular, from the presi- than hostility. dential election campaigns of 1996 and A number of recent polls present a 2000, when the influence exerted on the picture of the life style and outlook of voters via television ensured the election of various groups of the Russian population. the candidate favored by the government. As Table 1 shows, a significant Censorship was officially repealed in majority has difficulty adapting to the new our country under Gorbachev in 1990. economic reality and has been forced to However, many methods of pressuring the accept a decline in financial and social media are still available to the government status. Only a very few, primarily young at the federal, regional, and provincial 81 levels. Examples of these methods include and detentions, control over Gusinsky’s registration procedures, court decisions media outlets passed into the hands of (delivered by judges that are subordinate individuals and corporations who were to the executive branch), and pressure on directly dependent on the authorities, and station owners. The Russian press and the leading journalists working there were journalists have no true legal guarantees of forced to leave. For example, after a long independence that prevent government legal battle, NTV was taken over by and corporate interference with their work. Gazprom, an energy company in which The government retains financial control the government has a large ownership over the vast majority of large television stake. We can learn a lot from the public channels. Other mass media are either reaction to these events. More than a third financed by large corporations (oligarchs) of the Russian citizens polled (36 percent) or by the local authorities (governors). and more than half the Moscow residents The most famous example of federal expressed dissatisfaction and outrage at government pressuring media was the what had happened. However, the major- scandal surrounding the independent NTV ity of those polled were willing to accept television channel as well as print media, the official version of events (i.e., every- which were previously owned by media thing that happened was purely a business oligarch Vladimir Gusinsky. Without ques- dispute among shareholders, which was tion, the reason for the government’s attacks duly resolved in the courts). was the critical position that Gusinsky’s The attack against the less well media outlets adopted towards the new known privately-owned channel TV-6, president, his team, and his policies. After a where a number of journalists from NTV year of various kinds of pressure, including had fled, was a direct continuation of the law suits, actions by the procurator, tax raids, scandal surrounding NTV. After a few Table 1 % of those Mean age Per capita polled income ($/month) I “I am absolutely unable to adapt to life as it is today.” 15 56 27 II “I am reconciled to the fact that I have had to give up the standard of living to which I was accustomed and that I have to deny myself in large and small ways.” 30 52 30 III “I have to scramble, seizing every opportunity to make money, just to provide myself and my family with a tolerable standard of living.” 26 38 26 IV “I have succeeded in taking advantage of the new opportunities to achieve a better life.” 7 31 43 V “I live as I did before—not much has changed about my standard of living in the last few years.” 16 41 41

November 2001, 2400 people polled. 82 months of trials in various courts regarding The Dead End of Chechnya the complaint of a minority stockholder The conflict in Chechnya has (the pension fund of Lukoil, another remained a painful test of the political energy company dependent on the govern- maturity and democratic orientation of ment) about the company’s losses two years Russia’s leadership and all of Russian before, the channel was forced on a legal society. It would seem that the whole technicality to close at the end of January problem stems from the political forces, 2002. When polled in February about this agendas and intrigues in Moscow, within event, 47 percent of respondents expressed and surrounding the Kremlin leadership. perplexity and outrage, 5 percent satisfac- The second Chechen campaign tion, and the remaining 48 percent declined served as an important means for uniting to give an opinion. But, again, the majority the public around Vladimir Putin, who had agreed that what had taken place was just appeared on the political scene as the merely a dispute among stockholders. No newly appointed Prime Minister. In the protest meetings like those held prior to the wake of a series of apartment bombings destruction of NTV took place this time. blamed on Chechen terrorists in the fall of In February 2002 there were signs of a 1999, not only did the top political and new pressure campaign—this time directed military leadership succumb to the illusion at the popular radio station “Echo of Mos- of “putting an end” to the problem cow,” which was known for its critical through a decisive strike, but so did a positions and connections with the embattled significant portion of the public, including television channels. Possibly, the next step many of those of democratic orientation. will be actions against the few remaining The further course of events forced people critically disposed newspapers and weeklies. to reassess this view. Starting in late 2000, This whole series of events, which the desire to move from military action to the government-controlled media tries to negotiations became relatively firmly portray as normal legal disputes between entrenched in Russian public opinion. In a companies, is of critical importance to the poll conducted in January 2002, 38 percent current situation in our nation. These are came out in favor of continuing military new examples of the “pinpoint” strikes on operations, while 52 percent were for a few “uncooperative” individuals and negotiation. At the same time, 35 percent of organizations in the mass media that are those polled considered the recent actions the modus operandi of the authorities. The of the Russian forces to be successful and majority of the professional colleagues of 52 percent unsuccessful. Both before the these victims and of previously prominent start of the second Chechen campaign and reformers believe (or pretend to believe) more recently, less than a quarter (23-24 that these actions do not have an impact on percent) of Russian citizens were confi- them. They try to justify the persecution dent in its success. The majority sees no with references to the real or imagined future in it, and many (37 percent) express mistakes of the previous leadership of the fear that the military actions will last NTV, TV-6 etc. The disarray of the journal- for many years and spread to the rest of istic (and intellectual) elite and its confu- the Northern Caucasus. Only 25 percent sion in the face of these challenges from think that Chechnya’s withdrawal from the authorities is very typical of the current the Russian Federation should be op- social situation in Russia. Also typical is the posed at all costs, the remainder are more passive attitude of the majority of viewers or less ready to accept some version of and citizens in general, who acknowledge secession. They do not feel this way that they do not feel themselves to be because of sympathy for the Chechen citizens, but merely subjects of the state. 83 separatists (public opinion is sharply President Putin himself stated this more negative toward them), but out of a desire than once, and increasing fear of terrorist to get rid of this “trouble spot.” attacks affected the public’s attitude to the In Russia, and evidently in the West, Chechen war for a certain period of time. there are attempts to justify the actions of In September, the percentage of people the Russian troops and special services by supporting continuation of military action referring to the cruel acts of the rebels, increased compared to August; however, their reluctance to negotiate (even on subsequently, opinions on this issue humanitarian issues, for example, tempo- returned to their previous level. rary cease-fires to allow evacuation of the It is growing increasingly clear that wounded and civilians), and to the frag- there is only one course of development mentation of the Chechen rebel army and possible for post-Soviet Russia—moving the lack of authority of the elected presi- towards a contemporary civilized society. dent, Maskhadov. Such reasoning cannot Attempts at returning to the Communist be accepted. The pitiless actions of the past or constructing some kind of national- Russian forces do not frighten, but rather ist patriarchal utopia do not have the enrage the rebels and the majority of the slightest chance of succeeding, regardless of Chechen population. At the same time, what percentage of the population might lawlessness corrupts the Russian army and support them. It is important to note that spreads weapons and the violence far acceptance of that reality is now evident in beyond the boundaries of Chechnya itself. official declarations as well as in public According to one poll (May 2001) only 23 opinion. Yet according to a poll taken in percent of respondents believe that the November 2001, 71 percent of Russians current military campaign in Chechnya still believe that Russia does not belong to will “strengthen the military spirit of the the West but to a separate Orthodox Slavic army and the entire Russian people,” civilization. Very few fear a return to the while 63 percent tend to believe that this old Communist form of government and campaign “will lead to the weakening of society. There is a more realistic and more the moral foundations of society and the dangerous possibility: a rebirth of half- spread of violence.” There is constant forgotten Soviet mechanisms to “mobilize” violence and unauthorized reprisals against society under the slogan of maintaining the peaceful population of Chechnya, as law and order. The attributes of such a well as looting. Even the Russian authori- “mobilized” society, or martial law society, ties, judges and prosecutors, have been would be autocracy, encroaching dictator- forced to acknowledge this. ship, enforced unanimity of thought, and Unfortunately, attempts to justify the control over the mass media and public cruelty and unauthorized reprisals against the opinion by a ruling individual or junta. peaceful population are accepted by a Such a society would have no separation of significant portion of the Russian population. powers, no real opposition, no freedom of A very dangerous desensitization is develop- thought, or any other attributes of a civil ing in society—an indifference to violence, society. Martial law would subordinate the cruelty, and the suffering and deprivations of life of society, social institutions, and others. The effects of such attitudes reach far individuals to the solution of extreme beyond the conflict in Chechnya. problems, either real or imagined, through After the events of September 11 in purely military or militaristic approaches. the U.S., the Russian authorities have The difficult choice Russia faces been attempting to convince the public today is no longer a choice between that their actions in Chechnya are part of Communism and capitalism, or between the fight against international terrorism. modern civilization and a patriarchal 84 utopia. It is rather a choice between different types of market-oriented societ- ies, with modern Europe or America at one extreme and struggling Latin America at the other. To put it metaphorically, the question is where our “time machine” is going to land – at a spot where there is a developed democratic society or a spot where there is some kind of primitive, “dictatorial” capitalism. This will be decided in the nearest future.

85 Western Assessments of Soviet Society: Missing the Forest for the Trees by Judyth L. Twigg

This paper1 takes as its mandate a More importantly, a narrow view that review of Western assessments of Soviet captures only the final act of the Soviet society during the Brezhnev and drama obscures the far more significant Gorbachev eras. It examines scholarly and larger picture. Asking who foretold the journalistic accounts from the mid-1960s precise timing and mechanisms of the through the late 1980s, along with avail- Soviet collapse, who didn’t, and why, is able analyses from the U.S. intelligence counterproductive. That approach insists community during that time period. that the Sovietological community should Ultimately, its aim is to make a judgment have been able to predict specific events about what we got “right” and what we whose detailed contours were perhaps got “wrong,” to compare the performance inherently unpredictable. of the scholars with that of the intelli- This paper will therefore tackle the gence analysts, and to derive lessons issue more broadly, in a manner that ulti- potentially applicable to future examina- mately should prove more useful for tions of the post-Soviet world. deriving “lessons learned.” It will ask: Did A framing of this task that dwells the Western scholarly and intelligence primarily on August 1991 and its immedi- communities comprehend the magnitude ate aftermath presents a significant inter- and breadth of the social challenges con- pretive challenge. Hindsight is not yet, and fronting the Brezhnev, and later the perhaps never will be, 20/20 when it Gorbachev, regimes? Did we understand the comes to defining the role of “society” in social dimensions of the larger imperatives the course of those events. From one that led Gorbachev to unleash his reform perspective, a focus on the unleashed efforts? Did we correctly assess the policy energies of the masses supporting Boris and political implications of those social Yeltsin in front of the Russian White challenges? Did we draw the synergies House, the questions seem obvious: Why between the social, the economic, and the did “the people” finally rebel? Did we or political? In sum, did we grasp the nature did we not detect those undercurrents of and strength of the broad social forces that frustration and anger that led thousands to may have helped ultimately to pop the lid risk their freedom, and perhaps their lives, off the Soviet cauldron? in protest of the abortive coup against Source material for this review Gorbachev and in support of democracy includes books, articles, and government and the overthrow of the old regime? Why documents written and published between didn’t we see “it” coming? But a focus on 1965 and 1990. Clearly it cannot claim to be the millions who stayed home from August comprehensive, since literally thousands of 19-21 generates quite a different array of books and articles on the subject were questions: Why weren’t more people out in written during this twenty-five year period.2 the streets? Why did most Soviet citizens The goal is therefore to be reasonably remain so politically inert, when presented representative of the most significant with the immediate opportunity to topple literature in the field, with detailed coverage the system responsible for decades of of the journals that routinely covered Soviet Brezhnev-induced insult and Gorbachev- society and social issues—Problems of Com- induced turmoil? Why was so much of munism, Soviet Studies, and Studies in Com- Soviet society so tentative, when “it” finally parative Communism—and a sampling, where came? The jury is still out on the role appropriate, of other major journals, “society” played in triggering and steering monographs, and edited volumes. The the ultimate course of those fateful days and paper also relies on contributions to the months. compendia on the Soviet economy com- 86 missioned every few years by the Joint apparatus still trying to create the new Economic Committee of the United “Soviet man;” “oligarchic petrification,” States Congress. For analysis of the work focused on an aging group of leaders bent of the intelligence community, the paper on retaining control over their own politi- draws primarily on formerly classified cal positions and over a stagnant, decaying Central Intelligence Agency documents society; and “institutional pluralism,” released to the public since 1996. portraying a significantly more dynamic system in which fragmented and energized Soviet Society: Passive and Inert? administrative and intellectual classes Most observers of the Brezhnev era played an active role in policy formation viewed Soviet society as essentially stag- and implementation. Later, in the early nant, the Soviet people unable or unwill- 1980s, corporatist models emerged as ing to countenance even the possibility of another alternative view, describing significant change in their lives or of the constituent interest groups as having been regime. Feuer (1970, p. 13), for example, recruited and granted representation by the wrote that “a mood of socialist pessimism state in return for a variety of limitations grips both the intellectuals and the Soviet on their access and activity (Bunce and masses…they find it hard to be confident Echols, 1980). To the extent that scholars of any alternative, more than a half-century moved away from the totalitarian model, of Soviet rule having stifled the sense of an however, they still dwelled almost exclu- alternative…it is a feeling that history has sively on the interests and activities of the reached its end: the socialist revolution has elite strata of society and on the relation- been made, a new world has been created, ship between those elite strata and the state and lo! it is not good.” Other accounts (Green 1966; Skilling and Griffiths, 1971; stressed the passivity of the public mood, Janos, 1979; see also Hough, 1977). but for the opposite reason, due to a A survey of the literature explicitly “marked improvement in their own living intended to draw the Soviet Union into standards” and a sense that “sufficient the mainstream of comparative politics progress has been made to keep most bears out this observation. Fleron’s 1969 people relatively happy and content” effort Communist Studies and the Social (Knight, 1979). In essence, stability was Sciences, for example, included case studies guaranteed by an implicit social contract, only of elite groups and behavior (similarly where the regime contributed a gradual in Barghoorn, 1969). Attempts at class- improvement in living standards within a based analysis similarly focused primarily context of relative social calm (meaning the on the “ruling class” (Nove, 1970, 1975; absence of arbitrary terror), and the Hirszowicz, 1976). Even Atkinson, Dallin, population returned the favor with com- and Lapidus’ 1977 edited volume Women in placency and acceptance of consumer Russia dealt almost exclusively on the shortages and political emasculation regime’s policy toward women, rather than (Connor, 1975; Hough, 1976; Lapidus, on the roles and behavior of Soviet women 1983; Colton, 1984; Bialer, 1986). themselves and the potential larger impli- The conviction that Soviet society was cations of women’s situations. The vast essentially passive and stagnant began, of majority of the Soviet population was still course, with the totalitarian model. Over viewed as essentially weak and passive, still subsequent decades, the consensus built being acted upon by the forces of a domi- around that interpretation of Soviet society nant regime whose decisions were unceas- evaporated, and new paradigms developed, ingly forced upon them. summarized by Jerry Hough (1972) as the Even those who focused on the most “directed society,” with the Communist visible manifestations of dissatisfaction 87 with the Soviet system—dissidence and in excruciating detail; the problem is that labor unrest—dismissed the masses as almost nobody stood back to paint a plagued with a “traditional passivity” picture of the forest. A survey of the (Gidwitz, 1982, p. 42). The varied and literature reveals extensive attention to the active dissident movement was simply too turmoil brewing underneath the apparent disconnected from the fatalistic majority “stagnation” of Soviet society. But virtually of the population to foment significant all of these treatments remained focused systemic change or overthrow (Feuer, narrowly on their individual subject areas. 1970; Sternberg, 1976; Kerblay, 1983; To the limited extent that they tried to Reddaway, 1983). cross-fertilize with other issue areas, or to draw broader conclusions about the Signs of Life beneath the Surface relationship of the object of their study to Beneath the radar of the the condition of society at large, these Kremlinologists obsessed with leadership were generally limited to a few throw- pronouncements and the minutiae of the away sentences at the end of a published high-level policy process, Soviet society en article. And those concluding after- masse was in fact displaying quite observ- thoughts virtually always dealt with the able evidence of dissatisfaction with the limited policy options available to Soviet regime. Jerry Hough and Moshe Lewin leaders for coping with social problems, have lambasted the Sovietological commu- never with the (apparently unthinkable) nity for blindness to the possibilities for proposition that the existing Soviet system change in Soviet society. In Hough’s words, could not accommodate a working “The major literature of comparative solution to the problems at hand. political science has been strikingly limited in recognizing and evaluating societal Specific Social Issues inputs in the Soviet Union” (Hough, 1977). It was in the treatment of these Lewin is even harsher: “The rich and specific social issues, as compartmental- complex social fabric of the USSR was ized as they were, that Soviet society was very little studied; Soviet culture and the most accurately revealed as something countercultures and subcultures that shape other than malleable and passive in the minds, attitudes, and expectations were face of an all-powerful communist regime. largely ignored. And the interrelation of The Economy, Consumer Frustration, and society and culture with the economy, the National Psyche state, and the party remained unexplored…In sum, what has been Although a straightforward statistical missing was the idea of a Soviet ‘social analysis might have indicated that Soviet system’ and, in turn, the conceptualization living standards were steadily increasing of a dynamic historical process in which all throughout the Brezhnev period, and in the subsystems interact in time and space, some categories may even have approached yielding ever more complex and intricate Western levels, those numbers masked a patterns” (Lewin, 1988, pp. 3-5). reality in which the majority of products Lewin and Hough may have been offered to Soviet buyers were completely correct in the degree to which the unusable. Quantity trumped quality as the Sovietological community failed for issue of primary concern, an artifact of Soviet decades to comprehend the “big picture” investment choices and of the perverse of Soviet society. But we certainly cannot incentive structure governing Soviet industrial fault scholars for their lack of attention to behavior. Schroeder and others (Schroeder, that society’s turbulence at the molecular 1973, 1982; also Bronson and Severin, 1970, level. The “trees” were, in fact, described 1973, and Teckenberg, 1987) repeatedly demonstrated that Soviet living standards 88 consistently fell far below even Eastern (eloquent on this score is Smith, 1976, pp. European levels, while Matthews (1978, 52-80). A similar line of argument sur- 1986) highlighted the structure and extent rounded the frustrations of dealing with of Soviet poverty—a prevalence as high as the oppressive Soviet administrative 40 percent in the late 1970s. bureaucracy (Osborn, 1966). Goldman Most of these studies relayed some (1983) was certainly the most comprehen- version of the Catch-22 involving low sive academic chronicler of these everyday consumer satisfaction and the performance insults. He detailed the types and extent of of the Soviet economy as a whole: even if consumer shortages, summed up perhaps there were some financial rewards to be best by one glaring fact: “Soviet consumers had from working harder under an im- cannot find enough ways to spend their proved set of labor incentives, the lack of money” (p. 98). He then proceeded to anything worthwhile to buy with addi- relate the shortages to alienation of the tional rubles negated any incentive to work work force, poor labor morale, alcoholism harder. Without improved labor productiv- and other health problems. Furthermore, ity, however, consumer goods worth buying the meaninglessness of the ruble implied could never appear on the shelves that other mechanisms must be in place for (Denton, 1979). Yet the authors of most the allocation of scarce goods, in the Soviet Brezhnev-era studies of the consumer case political status or connections (blat). economy either presented data without Goldman likened Soviet society to a caste extending their writings to include broader system, where those without blat suffered a political implications, or limited their life routinely subject to “abuse, inefficiency, analyses to a fairly narrow horizon. For and inequality in the system as a normal example, the 1981 Joint Economic Com- course of events” (p. 107). mittee study Consumption in the USSR But it was a grave error to assume that concluded: “The Soviet government may Soviet citizens were passive victims in the have to face some difficult choices in areas face of these frustrations. Quite the contrary, related to the population’s welfare. Be- they continually displayed sometimes cause of severe resource constraints, leisure astonishing creativity and initiative in may have to be curtailed and wider income “beating” the system. Of course, the “sec- differentials sanctioned in an effort to ond” or “colored” economies were the most strengthen work incentives and to spur evident manifestations of this phenomenon, production” (p. 31). Schroeder and Severin and a small community of Western econo- (1976) and Schroeder (1973, 1982) ven- mists studied them extensively tured slightly further, with discussions of (Katsenelinboigen, 1977; Grossman, 1977, broad policy alternatives that might raise 1979; O’Hearn, 1980; Rumer, 1981). output and quality of consumer goods, and Although many observers correctly the political implications of an attempt to observed that this active resistance to the introduce limited market arrangements in Soviet system was, in essence, privatized— the consumer sector, but even here the it did not appear in forms that overtly discussion focused on elite policy making threatened the public existence of the rather than on the broader societal impli- regime itself—surely over time its extent cations of continued consumer frustration. and patterns undermined the legitimacy Some authors focused squarely on that and even the operational mechanics of the consumer frustration, expanding it to most basic Soviet ideologies and institu- observations about the general emotional tions (see Kerblay, 1983, pp. 283-285). state of the Soviet people and drawing Clearly, long before Gorbachev’s glasnost conclusions about its economic, demo- policies made possible a widespread public graphic, and even psychological implications unleashing of private thoughts, the failure 89 of Soviet ideology to permeate the psy- Feshbach, for example, extrapolating from chology and dictate the behavior of limited data following the Soviet decision millions of Soviet citizens was apparent. At to stop publishing infant mortality statis- minimum, although a surface tolerance of tics in 1975, correctly deduced that infant “Soviet” values may have been visible, just mortality had continued to rise through- beneath that veneer was a society rejecting out the mid-1970s (Davis and Feshbach, “integration into [the Soviet] value-system, 1980). With consistent and exhaustive sharing values apart from it and labeled mining of Soviet data sources, Feshbach deviant from it” (Biddulph, 1979, p. 431). (and others) compiled a decades-long Not surprisingly, an increasing record of encyclopedic description and number of observers detected the underly- analysis of Soviet demographic trends ing active societal frustration during the (Feshbach, 1970, 1982; Feshbach and Gorbachev years, as glasnost’ made possible Rapawy, 1976; also Taagepera, 1969; Leedy, an open discussion of these problems. 1973; Rapawy and Baldwin, 1982). Most Most of these writings detailed the degree of these studies focused on the long-term to which the old social contract would no economic and political implications of longer satisfy the strata of society on which declining Russian and increasing non- Gorbachev would have to rely most Russian birth rates, and the policy impli- heavily in order to revitalize the economy, cations in such areas as family allowance relatively well-educated urban profession- and abortion/contraception policy. als and skilled workers (Ludlam, 1991). Vladimir Treml’s (1975, 1982) work on Lapidus (1987) noted a shift in fundamental alcohol parallels Feshbach’s on health and societal values, particularly of the elite, away demography in the ingenuity of its “detec- from the ideological and political passivity of tive” work and its impact. Treml almost previous years. Hough (1988) drew direct single-handedly, piecing together fragmen- political implications from this evolution, tary data, uncovered alcohol consumption stressing the population’s new desire to patterns and their consequences not only participate in political processes and benefit for the health and manpower situation, but from a freer circulation of information. And also for the state budget and its reliance on many works of this time period focused on alcohol-derived revenues. the evolution of a new “civil society,” a grass- Other Social Issues roots, organized and quasi-politicized manifestation of the “social energies that were Other scholars similarly zeroed in on marginalized or suppressed under Brezhnev, a wide array of social and quality-of-life [now providing] much of the impetus to issues: housing, of which there was never today’s [1988] economic and political enough, and the available stock suffered reforms” (Starr, 1988; see also Lewin, 1988; from dismal quality standards (Barry, 1969; Shlapentokh, 1989; Brovkin, 1990; Bonnell, Morton, 1974, 1980; Alexeev, 1987); 1991). But before the Gorbachev era, few quality higher education, which soon into scholars dared speculate about potential the Brezhnev era became stratified and political consequences of the social pressures increasingly available only to a self- engendered by consumer frustration and its reinforcing political elite, limiting its use psychological implications. as a tool for social mobility (Medlin, 1968; Goodman, 1970; Carey, 1973); health care, Health and Demographics whose universal accessibility remained a The scholarly community achieved positive feature but whose quality led some remarkable successes in its study of most citizens to seek alternatives to the the Soviet health and demographic state system (Field, 1969; Davis, 1982, situation. Christopher Davis and Murray 1987; Powell, 1985); drug abuse, which 90 apparently did not develop into a widespread Sovietological community took for granted phenomenon until the Gorbachev period “the uniqueness of Soviet politics and the (Kramer, 1988); youth issues and problems, futility of comparing it with other political including an emergent “youth culture” in the systems” (Skilling, 1983). As a consequence, 1980s and juvenile delinquency (Hollander, for example, political scientists or sociolo- 1969; Connor, 1975; Tempest, 1984; Riordan, gists missed the opportunity to apply a 1988); and rural society and decay (Hill, 1975; concept as fundamental as the danger of Kaplan, 1990; Pallot, 1990). expectations outpacing reality—Gurr’s Most of these reports were structured classic account of the causes of rebellion similarly: first a brief historical account, (1970)—to what the economists were saying detailing the challenges the problem under about Soviet living standards and psychol- examination had presented since the ogy in the 1970s and in the early Gorbachev beginning of the Soviet regime, or since period. When data on a society are scarce or the post-war period; then the “meat” of their reliability is uncertain, the precision the article, drawing exclusively from and insight offered by scientific methodol- printed Soviet sources, describing the ogy increases in importance. Yet most current situation in exhaustive detail; and scholars of Soviet society failed to harness finally a concluding section, again drawn even the most basic conceptual tools the from Soviet sources, chronicling the social science disciplines had to offer.3 policies the Soviet government had pur- Of course, not all study of the USSR sued as coping strategies. In essence, most was completely atheoretical. Connor of these single-issue examinations of Soviet (1975), for example, examined Soviet social problems involved little more than dissent explicitly through the theoretical translation of Soviet sources, and then lens of social integration and differentia- presentation of that translated material in a tion. Ruble’s 1989 study of ethnic friction coherently organized fashion. This is not to usefully drew on social theories of deriva- say that these reports did not serve a useful tion of ethnic identity, ending with a call purpose. It is simply a commentary on the for more explicitly comparative investiga- consistent failure to draw broader societal tion that would place the study of Soviet or political implications, or even to attempt urban ethnicity in a broader geographical to integrate these studies with one another. and theoretical context (1989, p. 410). In Ticktin’s words, these works “simply Gaenslen (1986) and Van Atta (1989) provided descriptions of Soviet reality uncovered a relatively vigorous, not-so- rather than any explanation of why the “weak” Soviet society using the political system performed in the very odd way that science literature on state/society relations; it did” (Ticktin, 1998, p. 84). in so doing, they not only illuminated additional perspectives on Soviet society, The Lack of Comparative or Theo- they also used the Soviet case to contribute retical Context to further theory-building regarding the Most strikingly lacking in much of implementation stage of policymaking. this work was a sense of comparative or Yet far too many other works theoretical context. Scholars rarely applied harnessed a theoretical perspective in the a rich body of conceptual literature to the study of Soviet society only in their echo Soviet experience, a literature potentially of Soviet sociological theory (Connor, applicable as a tool for “identifying symp- 1972). Indeed, this observation reflects a toms, for differentiating trivia from essence, major characteristic of most of the and for determining what in fact is unique Brezhnev-era work on Soviet society: it to a particular society” (Connor, 1975, pp. relied almost completely on published 80-81). By and large, it seems that the source material from the Soviet Union. 91 And Soviet sociology, until the 1960s a impressive results through creative use of politically suppressed field of study, re- non-traditional techniques: Mars and mained such a limited discipline that “its Altman (1983), for example, living among findings did not add up to a coherent Soviet Georgian émigré communities in picture of what Soviet society is like … the Israel for months at a time to achieve by now massive quantity of surveys and anthropological insight into the cultural studies produced by Soviet sociologists still bases of Georgia’s second economy, or do not provide a basis on which one can, Gerschenkron’s (1978) use of Soviet novels without difficulty, attempt to delineate the as a window onto broader trends in Soviet essential characteristics of Soviet society and society. But these innovative efforts were the social institutions (and their interrelations)” exception rather than the rule. (Hollander, 1976, p. 78). Soviet sociologists, The Intelligence Community like their Western counterparts, investigated the individual components of their society The Central Intelligence Agency has in intimate detail, being permitted to do so come under sharp public criticism since because of the value to the regime of their the Soviet collapse for its perceived findings. They kept Soviet leaders informed myopia in failing to predict the events of about social forces and moods, and in 1991, or more broadly, for consistently particular about trends that had to be ascribing to the Soviet regime more “managed” or even “accommodated” in staying power than it actually had. On order to maintain a veneer of stability (Katz, matters pertinent to the subject of this 1971). But to assemble those pieces into a paper, however—the underlying social larger mosaic would have been politically aspects of the Soviet system—CIA analy- suicidal for a Soviet scholar. ses appear to have outperformed the vast Western scholars could claim no such majority of the scholarly community. excuse. Some rightly decried the problems From the mid-1970s through the early with “official” data, which was by turn 1990s, CIA documents presented a incomplete, inaccurate, or deliberately complete catalog of the social pressures misleading (Hollander, 1991). Gitelman plaguing Soviet society—social and accurately summarized the limitations of, for economic inequality, shortages of food example, summary statistics and survey data. and other consumer goods, consumer “Aggregate data reflect large glacial move- frustrations, crime (including the shadow ments without revealing the turbulence that economy), ideologies in competition with may be beneath them” (1983, p. 38). But the Soviet ideal (religion, nationalism, there were other options, largely left materialism, cynicism), and problems underexplored. In general, the academic involving women, the family, housing, community favored Moscow-based news- health care, and alcoholism (CIA, Na- papers and scholarly journals, frequently tional Foreign Assessment Center, August leaving unmined information and insights 1979; CIA, Office of Soviet Analysis, to be gained from Soviet books and regional December 1982, August 1985, and April newspapers (Armstrong, 1975, p. 86). In 1986). The CIA also correctly identified addition to open Soviet sources of any kind, the interrelations between these social there were also the waves of émigré inter- pathologies and the protracted, painful view studies (Gitelman, 1977 and 1983; deceleration of the Soviet economy, Millar, 1987; Millar and Donhowe, 1987) including the economic bases for and of course, the sometimes highly insight- ethnonationalist tensions. In most cases, it ful journalists’ accounts and interpretations cited the economy as the root cause of the of daily life (Smith, 1976 and 1990; Kaiser, wide array of social ills (CIA, Office of 1976; Shipler, 1983). Other scholars achieved Soviet Analysis, December 1, 1982, p. iv, 92 34); frequently it also highlighted the change nor the emergent system he is negative synergistic relationship between fostering is likely to cope effectively with the economic and social spheres. newly mobilized popular demands and the The intelligence community also, deepening economic crisis” (Director of however, committed some of the same sins Central Intelligence, November 1989). It is as the academics. Pre-Gorbachev, its difficult to find any academic analysis more economists neglected some of the funda- definitively prescient than that. mental social dimensions of the economic Lessons Learned deceleration (CIA, July 1977). As late as 1988, it focused too heavily on elite politics Fortunately, the bulk of today’s scholar- and understated the role of society writ ship on post-Soviet society and politics seems large as a critical factor in the success or to have learned from the mistakes—perhaps failure of Gorbachev’s reform efforts (CIA, better characterized as omissions—of the July 1987; Director of Central Intelligence, past. Consequently, much of the current December 1988). generation’s work on Russia, particularly that And, like the academic community, of younger scholars, already incorporates the dominant faction within the CIA many of these suggestions: could not bring itself to imagine the 1. Don’t let area studies wither away. complete downfall of the Soviet system. Even though the Soviet studies Viewing the economy as the nexus community failed to see the forest, its around which all social problems re- description of the trees was, on the volved, the intelligence community whole, comprehensive and insightful. continued to prognosticate around policy The current wave of disinterest in options available to the Soviet regime for Russia, evidenced by dying high mild, moderate, or radical economic school and college-level language reform and the implications of those programs and decreased government policies (CIA, February 1987; CIA, Office funding for study of the post-Soviet of Soviet Analysis, September 1989). world, threatens the development of a By November 1989, however, at least “next generation” of scholars and some within the intelligence community analysts whose experience and skills were beginning to grasp the scope of the give them an all-important instinct for situation and the underlying social factors the region. The most recent swing of driving it. An “alternative view” presented the academic pendulum has moti- within a fairly conservative 1989 National vated graduate students away from Intelligence Estimate posited that “the next identification with the study of any two years are likely to bring a significant one geographic region, toward the progression toward a pluralist—albeit narrow methodologies of individual chaotic—democratic system, accompanied departmental disciplines. But the by a high … degree of political instability, ability of the academic and intelli- social upheaval, and interethnic conflict … gence communities usefully to In these circumstances, we believe there is a monitor the post-Soviet world significant chance that Gorbachev, during depends on the continued reproduc- the period of this Estimate [1989-1991], will tion of students and junior faculty progressively lose control of events. The willing to immerse themselves in the personal political strength he has accumu- interdisciplinary study of it. lated is likely to erode, and his political 2. On the other hand, even the most position will be severely tested. The essence interdisciplinary of area studies of the Soviet crisis is that neither the political specialists should not isolate them- system that Gorbachev is attempting to selves from the tools of their primary 93 disciplines. The time for atheoretical Goldman’s time on the faculty at “reports from the field,” involving Moscow State University). Compre- little more than translation and hensive and accurate insight develops organized presentation of Russian- only from extended contact with a language printed sources, has come society, and the scholarly and intelli- and gone, particularly now that so gence communities should endeavor to many excellent Russian scholars are cultivate that instinctive “feel” for contributing to the Western scholarly Russia not only within their own ranks, literature. The theoretical prisms but to consult with others (journalists, provided by political science, sociol- businessmen, “third sector” workers ogy, economics, and even psychol- and volunteers) who have spent ogy (a field whose absence in the significant time “in country.” study of Russia is sorely noted) can 5. Don’t assume that current trend force otherwise too-narrow, special- lines will extend into the indefinite ized treatises to come to terms with future. Perhaps this, at core, was the the broader, more significant politi- most significant error Sovietologists cal and social implications of their committed in the decades before own findings. 1991. The Soviet studies community 3. Moscow is not the only game in correctly identified literally every town. It seems almost trite to include aspect of the social pressures that that observation in this list, given the contributed to the regime’s collapse. significant number of excellent recent But it could not bring itself to studies of Russian regional trends and imagine a future other than dramatic developments (and the degree to change within the confines of the which the major funders of Russian existing system. Perhaps a borrowing studies, and the U.S. government from the business world and its itself, are rewarding a focus beyond “scenario planning” or “strategic the capital). But the dangers here forecasting” methodologies would echo those of the study of the union be in order (Ringland, 1998; republics during the Soviet period: Schwartz, 1991; van der Heijden, students of the regions must integrate 1996). By adopting explicit tech- their findings with trends at the niques encouraging the identifica- federal level. This is particularly true tion of key driving forces that might of scholars who become experts in lead to plausible but radically novel one or two specific regions. futures, scenario forecasting— 4. There’s no substitute for being employed with some success by the there. Again, this seems like a rather Royal Dutch/Shell oil company in obvious lesson, particularly given the preparing (in advance) for the oil significantly enhanced opportunities shocks of the 1970s and the collapse for long-term residence not only in of the Soviet Union in the early Moscow, but also across Russia, since 1990s, and also with great energy the late 1980s. But it is important to and imagination today by Russia’s remember that the most successful Club 2015—encourages unconven- prognosticators of Soviet decline tional thinking of the sort that both were the ones who invested months integrates the constituent parts of a or years of their time living in the society and polity into a coherent USSR, and who lived outside the whole, and entertains at least the world of foreigner-designated hotels possibility that unlikely paths will and restaurants (such as Marshall coalesce as the way into the future. 94 References Bronson, David W., and Barbara S. 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She is also 1988, pp. 26-41. grateful to Richard Dobson, Arthur Miller, Sternberg, Hilary A., “The Human Rights and several participants in the “U.S. Movement in the USSR,” Problems of Assessments of the Soviet and Post-Soviet Communism, May/June 1976, pp. 82-84. Economy” conference, for valuable com- ments on an earlier draft. This is an abridged Taagepera, Rein, “National Differences version of a significantly longer conference within Soviet Demographic Trends,” Soviet paper. For the full paper and complete list of Studies, Vol. 20, No. 2, 1969, pp. 478-89. sources consulted, please contact the author Teckenberg, Wolfgang, “Labour Turnover directly. and Job Satisfaction: Indicators of Industrial 2. It must also be acknowledged here that a Conflict in the USSR,” Soviet Studies, Vol. vast array of potentially important source XXX, No. 2, April 1978, pp. 193-211. material—unpublished work, conference Tempest, Richard, “Youth Soviet Style,” proceedings, etc.—is not readily available. 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100 Panel Three Summary: “Understanding the Underlying Social Aspects of Soviet and Post-Soviet Russia”

Yuri Levada, Editor-in-Chief, Russian GDP, which Igor Birman described in his Public Opinion Monitor Bimonthly, Moscow struggle to denounce American specialists on the issue, and the Russian economic Judyth Twigg, Associate Professor, situation today. Department of Political Science, Virginia Levada next described the last Commonwealth University, Richmond decade of Russian development through Discussants: the prism of public opinion data pro- Arthur Miller, Professor, Department of duced by his organization, the Russian Political Science, University of Iowa Center for Public Opinion and Market Research (VCIOM). Richard Dobson, Research Analyst, The first conclusion is that the changes Russia, Ukraine and Commonwealth of the past decade are irreversible. While Branch, Office of Research, U.S. Depart- half of respondents say that conditions were ment of State better before 1985 and Gorbachev, more Chair: than three-quarters (76 percent) say that it is impossible to return to those conditions. Kari Johnstone, Title VIII-Supported “In my mind, this finding is the most Research Scholar, Kennan Institute important measure of public opinion,” The third conference panel examined stated Levada. Furthermore, of those who how well we understood society in Soviet agree that conditions were better in the past, and post-Soviet Russia. While methodolo- two-thirds agree that it is impossible to gies have changed from the indirect sleuth- return to the past. Of those that disagree ing of the Soviet era to the more direct conditions were better in the past, fully 92 measurements of public opinion polling in percent say such a return is not possible. post-Soviet Russia, the scholars and analysts Living standards have clearly fallen, with from both eras painted remarkably accurate 70 percent of respondents finding it difficult pictures of conditions in both societies. (to varying degrees) to earn a living, and only Interpreting the pictures proved to be the 23 percent responding that their situation is difficult problem. Whether in terms of improved or unchanged. As might be ex- focusing on the “forest” or “trees,” or pected, the median age of those in difficulty is reconciling contradictory polling informa- higher than those who claim success. Levada tion, measuring society has proven no less cautioned that public opinion data is not challenging, and no less important, than proof, but merely an illustration. interpreting the economy. In the political realm, public opinion In the following summary, only data shows a remarkable disconnect conference panelists listed on the agenda between the popularity of President are identified by name. Vladimir Putin and the unpopularity of his Yuri Levada opened by saying that government. This indicates that Putin may in the twentieth century, Russia had be the president of hope rather than result, undergone two major revolutions. The reasoned Levada. For example, only 14 first was the amazingly swift collapse of percent think that Putin has successfully the tsarist regime, and the second was the solved the country’s problems, whereas 43 likewise amazingly swift collapse of the percent express hope that he will be able Soviet Union. Neither revolution, Levada to do so and 34 percent think that there is stressed, had been predicted in advance. simply nobody else to rely on. Regarding A similar comparison can be made one of the most pressing problems facing between the unpredictability of Soviet the Russian government, the war in Chechnya, the public is growing tired, with 101 60 percent favoring a political solution and that the Soviet studies community missed only 33 percent favoring a continuation of the boat when it came to the study of the war. social issues during the Brezhnev and Various polls have demonstrated Gorbachev periods. It is true, continued some complex Russian attitudes towards Twigg, that much of the work on society the U.S., according to Levada. Approval focused on elite processes, even as the ratings of the U.S. have fluctuated from very field moved beyond the totalitarian model low levels following the Yugoslav and to more comprehensive models like the Kosovo crises, to high levels following the pluralist and corporatist models. This terrorist attack of September 11, and back work largely neglected society as a whole, to low levels in 2002 in the wake of the but it is absolutely incorrect to indict the Olympic medal scandals and trade disputes Soviet studies community for failing to over steel and chicken. “This data shows take note of the tremendous changes in us that public and mass media opinion, and Soviet society during these decades, Twigg even a part of government opinion, about contended. Scholars in the field did assess the United States are easily swayed in in gruesome detail the significant patholo- Russia,” stated Levada. More alarmingly, gies and dynamics of the society, and nearly 50 percent of the Russian popula- many of these studies were stunningly tion agreed in late September 2001 with detailed. the statement that the terrorist attacks in Scholars did a good job in docu- New York and Washington “served menting the difficulties in the Soviet America right for the bombings in consumer economy. Study after study Hiroshima, Iraq, Vietnam, etc.” Data from documented the low living standards in February 2002 show that a minority of the Soviet Union as compared to the West, Russians felt Russian-American relations the high degree of consumer frustration, to be substantially closer, and that most the economic consequences of that Russians are concerned about further frustration in terms of labor productivity, outbreaks of terror and do not view the and the second economy. These studies U.S. campaign in Afghanistan as a success. showed a Soviet population that was quite “It seems to me,” Levada concluded, “that actively engaged in efforts to beat the the action of September 11 was very system with which they were so highly important but did not create a turning frustrated. Sociologists and political point in the general relations between the scientists wrote on the privatization of U.S. and Russia.” thoughts and values, the need to live a life Judyth Twigg stated that her paper permeated by constant lying, and the was a study of Western assessments of Soviet implicit undermining of the regime’s society during the Brezhnev and Gorbachev legitimacy as a consequence of all this. periods, drawing upon books, monographs, Another segment of the literature articles, and other sources available from the produced by the field looked at the plight period 1965-90. The goal was to assess the of Soviet women. Scholars documented assessments and compare the performance the rampant misogyny of Soviet society, of the academic community with that of the the stresses of the dual responsibility for intelligence community on the basis of work and family, the insufficient institu- whether these communities comprehended tional and financial support for the care of the magnitude of the social challenges and children, healthcare, and a host of other correctly assessed the policy implications of problems afflicting Soviet women during those challenges. this period. Some of the retrospective studies on Some of the most striking successes the performance of Sovietologists claim of scholars on the Soviet Union were in 102 the fields of health and demographics. “In a few scholars made attempts to integrate particular, we can point to the study done by research from different fields to draw Chris Davis and Murray Feshbach on infant broader conclusions. Second, many of the mortality, where through very clever massag- studies produced by Sovietologists were ing of available statistics they were able to structured similarly: beginning with a predict after the Soviets had stopped pub- historical account of the issue at hand, lishing mortality statistics that there was followed by the main substance of the book indeed a rise in infant mortality through the or article that drew almost exclusively from late 1970s,” stated Twigg. This study was so Soviet sources, and then concluding with a important that it alerted Soviet authorities to section, drawing again from Soviet sources, what was going on, prompting Soviet chronicling the policies that the Soviet demographers and economists to claim, government had pursued as coping strate- “Feshbach saved thousands of infant lives in gies. “This is not to say that these reports the Soviet Union.” Similarly, Twigg contin- were not important or insightful—they ued, Vladimir Treml’s work on alcohol were,” Twigg stated, “but many of them consumption was equally detective-ori- failed to draw the broader social or political ented in piecing together fragmentary data. implications of what they had to say.” Third, The study yielded important information there was a lack of comparative or theoreti- on health and manpower consequences of cal context. As one Sovietologist wrote, alcohol consumption, as well as the state according to Twigg, “the Sovietological budget’s reliance on alcohol-derived community took for granted the uniqueness income. Other quality of life issues, includ- of Soviet politics and the futility of compar- ing housing, urban transportation, educa- ing it with other political systems.” tion, health care, drug abuse, and crime, Many of the Sovietological studies were also well documented. that were theoretical in content or ap- The work that Sovietologists per- proach did so only in echo of Soviet formed on the Soviet republics and the sociological theory. Soviet sociologists nationality question was unlike most of the produced work of great use to their other studies on Soviet society in that it political leaders in keeping track of forces actually did ask the big picture question, and moods within Soviet society. Yet they argued Twigg. It asked whether ethnic were politically constrained, if not re- stresses and strains would lead to the pressed. To assemble the pieces they downfall of the Soviet Union. Yet while the produced into a larger mosaic would have question was at least asked, the focus up been difficult or even suicidal for a Soviet until 1989 was not on the probability of a scholar. Western scholars did not operate downfall, but instead on the Soviet Union’s under those constraints. considerable staying power in terms of the While many Sovietologists claimed a non-politicization of national identity, lack of data as an excuse, Twigg contended, Moscow’s cooptation of the regional elites, they left under-explored many approaches and Moscow’s physical instruments of to data collection. The academic commu- control. Still, Twigg concluded, at least the nity largely favored Moscow-based news- question of the possibility of regime change papers and scholarly journals as their was asked in this field of Sovietology. source material, leaving aside information Why did few of the scholars in the that could have been gained from books, field venture beyond their specific subject regional newspapers, émigré studies, and matter to assess the broader political even from the sometimes highly insightful implications of their work? Twigg identi- accounts of Western journalists. fied three factors. First, scholars were The track record of the intelligence compartmentalized from each other; only community, in contrast, was relatively 103 strong, stated Twigg. The CIA-produced studies wither away. Doing so would analyses in many instances outperformed threaten the development of a next what was going on in the scholarly generation of scholars and analysts with community, cataloguing accurately and skills and an instinct for the region. Tying fully from the mid-1970s through the this lesson to the debate from the first early 1990s the social pressures that panel, analysts need the right impression- plagued Soviet society. The CIA went ist tools to know what questions should further and correctly identified the inter- be asked, and the methodological skills to relations between these social pathologies apply to those questions. and the protracted painful deceleration of Third, Moscow is not the only game the Soviet economy. Like the academic in town for studying the region. This community, the CIA could not bring itself seems self-evident now—an already- to imagine the complete downfall of the learned lesson—but was hardly men- Soviet system. Yet an otherwise conserva- tioned in the first panel, Twigg noted. tive 1989 National Intelligence Estimate Fourth, there is no substitute for presented an alternate view that read: being on the ground. The most successful “The next two years are likely to prognosticators of Soviet decline were the bring a significant progression toward ones who invested months or years of a pluralist albeit chaotic democratic living in the Soviet Union and who lived system, accompanied by a high outside the world of foreign or designated degree of political instability, social hotels and restaurants. Comprehensive upheaval, and inter-ethnic conflict. and accurate insight develops only from In these circumstances there is a extended contact with a society and the significant chance that Gorbachev, scholarly and intelligence community during this period of estimate 1989- should endeavor not only to cultivate that 91, will progressively lose control of instinctive feel for Russia within their events. The personal political own ranks, but to consult with others like strength he has accumulated is likely journalists, businessmen, third sector to erode and his political position workers and volunteers who have spent will be severely tested. The essence significant time in the country. of the Soviet crisis is that neither the The final and fifth lesson is that it is political system that Gorbachev is important not to assume that current attempting to change, nor the emer- trend lines will always extend into the gent system he is fostering is likely to indefinite future. This may have been the cope effectively with newly mobi- most significant mistake that Sovietologists lized popular demand and the committed during the decades preceding deepening economic crisis.” 1991. In terms of borrowing method- Twigg offered five lessons to be ological tools, one example comes from learned from the track record of Soviet- the business community and the scenario ologists in studying Soviet society, some of forecasting methodology that enabled which have in fact already been learned, Shell Oil Company to prepare contingen- as is evident in today’s scholarship on cies for the Soviet collapse back in the late post-Soviet Russia. 1970s. It is a method that is now being First, scholars studying the region employed by the Club 2015 of Russian should not isolate themselves from the businessmen. These kinds of unconven- tools of their primary disciplines, whether tional ways of thinking about problems political science, economics, or sociology. encourage an approach that both inte- Second, it is important not to let area grates what is known and permits think- ing about unlikely paths into the future. 104 Arthur Miller stated that he wanted increasingly indicate a preference for a to pick up on some of the themes identi- strong leader over a Western-style democ- fied by Levada and Twigg utilizing evi- racy, according to University of Iowa data. dence that his own program at the Uni- If democracy is going to develop in versity of Iowa has been collecting not Russia, there must be institutionalized only in Russia, but also in other republics pluralism. Yet Levada’s data shows that of the former Soviet Union. there is not much respect for the broader When talking about economics, Miller government, including the Duma, minis- began, one has to remember that official tries, and other agencies. statistics are one set of evidence, and another One aspect of political life that important set of evidence, as Levada demon- certainly needs further development is strated, is how the public views the situation. that of Russia’s political parties becoming According to University of Iowa data on the more responsible and responsive to the perception of the national economy from public. There is good literature that 1992 to 2000, in every year except 2000 the suggests that Russians view parties as the percentage of individuals saying the economy fan clubs of those individuals that started was worse than the previous year was higher the parties. However, Miller stated, our than the percentage of people saying that the data shows that people are now starting to economy had improved. In 2000, the identify with parties politically. percentages were almost equal. What are the lessons from the Despite the perception of hardship panel’s papers? First, Miller concluded, is that these figures indicate, the support for the importance of using as many sources economic reform over this period remains of evidence as possible. Second, public very high. Only in the last couple of years beliefs and official statistics do not always of the survey range is there a growing match up. It is important to compare percentage saying that economic reforms official statistics with survey results to see should be cut back. The gap in support where they differ and where they con- between young and old is not as large as verge. Third, democracy requires institu- might be expected: even the elderly, who tionalization. Institutionalized pluralism is are feeling the brunt of economic disloca- vital to the development and consolida- tion, are still supporting economic reform. tion of democracy. Finally, no matter how On the public’s desire for govern- good or bad statistics or analyses happen ment involvement in providing jobs and to be, in the end the leaders make deci- security, there is an interesting trend, sions, not scholars or analysts. stated Miller. Back in 1992, the percent- Richard Dobson began his com- ages were almost equal between those mentary by stressing that he was not a saying the government should be respon- spokesman of the State Department, and sible and those saying the individual that the views he expressed were his alone. should be responsible. Closer to the Beginning with Twigg’s paper, current period, respondents saying that Dobson stated that he disagreed with a the government should be responsible number of points. Dobson stated that he (i.e. favoring a return to Soviet practice), disagreed with Twigg’s assertion that increased dramatically. Surprisingly, this scholars neglected Soviet society in their trend is also seen among younger people. analyses. There were innovative ap- Miller noted that Levada spoke about proaches to learning about Soviet society as democratic tendencies in Russia in terms early as the 1959 study The Soviet Citizen: of confidence in Putin as opposed to his Daily Life in a Totalitarian Society, which government. While Russians do not want drew upon interviews with citizens dis- to give up their new freedoms, they placed from the Soviet Union by World 105 War II. Many aspects of pre-war Soviet being narrowly compartmentalized and not society, including work patterns, education, addressing larger issues? Perhaps, stated social mobility, and attitudes towards the Dobson, but good scholarship does not political system, were laid out in this work. always require generalization. The impor- Dobson found it curious that Twigg tant thing is for scholarship to be sound; it is approvingly cited Moshe Lewin, who up to others to synthesize the findings to wrote in 1988 “Western scholars ignored assess their implications for society. the vast changes of the Soviet social In response to Twigg’s observation system, urbanization, industrialization, the that research was lacking in theory and growth of the professional and intellectual comparative perspective, Dobson stated classes and diagnosed only stagnation and that was only partially true. The 1959 study decline. This misguided orientation has mentioned earlier combined the totalitar- led them to oversimplify a very compli- ian model of elite-driven society with the cated picture and to misinterpret transfor- industrial society model describing how mations that have taken place in the evolving divisions of labor and economic USSR over the last half-century.” Lewin, organization shape societies. Both of these Dobson argued, also accused Western models, in turn, are comparative constructs scholars of over-reliance on the totalitar- showing how Soviet society was like and ian model, ignoring the complex history unlike capitalist societies. and social fabric underneath the Soviet Dobson stated that he agreed political system. “Quite frankly,” declared broadly with Levada’s ideas and wanted to Dobson, “I think this is bunk and I think emphasize some of them in particular. that it should be stated as such.” First among these was Levada’s contention It is also important to give attention that the disintegration of the Soviet system to the historical context in which scholars and empire was completely unforeseen. work, Dobson stated. There seems to be a Secondly, Russia’s democracy remains suggestion that these scholars were inept shaky, in part because there has been no or blind—how else could they have not tradition of pluralism and opposition to understood the magnitude of the social the regime. Civil society has a limited changes that were occurring and their capacity to stand up for its interests, and in profound implications for the Soviet this light Levada’s warning of the danger Union? The idea that a revolt by the of a “managed democracy” is important. leaders of the three most populous On the issue of whether Russians republics would lead to the dissolution of prefer democracy or authoritarianism, the USSR surely would have seemed Dobson again expressed his agreement crazy in 1980, but would not have in 1991. with Levada’s findings. Levada cites data Different standards should be applied to showing that two-thirds or more believe analyses written at different times. that “a strong leader can do more for the After re-reading some of the work country than the best possible laws.” The between 1985-91, continued Dobson, much State Department’s Office of Research of it appears astute and prescient, even if obtained similar results in its surveys over they did not predict the break-up of the the years, stated Dobson. However, he Soviet Union. For example, the 1991 cautioned, the question about the need collection edited by Harley Balzer, Five Years for a strong leader appears to tap support that Shook the World: Gorbachev’s Unfinished for an effective leader that gets results, Revolution, elucidated the complex changes rather than an authoritarian leader. that were underway and also acknowledged As evidence of this restrictive the uncertainty of the outcome. reading for support of a strong leader, Should scholarship be criticized for Dobson pointed to some additional 106 survey data. When asked whether restor- Lewin’s comments about scholars’ sup- ing order in Russia is so important that posed neglect of Soviet society. Just the they would support a leader who would use opposite conclusion was drawn in her military and security forces to establish a paper, as she stated in her remarks: “it is dictatorship, a majority opposed the idea of absolutely incorrect to indict the Soviet a dictatorship while no more than a third studies community for failing to take note were in favor. In another survey, respon- of the tremendous changes in Soviet dents were asked whether it was permis- society.” Twigg stressed that her point was sible for a leader seeking to establish order not that scholarship in specific subject to do any of the following: 1) cancel sched- areas was inadequate—it was that scholars uled elections; 2) ban meetings and demon- did not move beyond that understanding strations; 3) establish censorship of the mass to see the broader economic and political media; 4) disband the Parliament and rule implications of that very good work that by decree; or 5) limit opportunities for travel was done on Soviet society. abroad. “In repeat surveys,” stated Dobson, In response to the comment that we “the majority of people say that each of need to understand the historical context these authoritarian measures is impermis- in which scholars worked, Twigg disagreed sible. Only about one-fifth of respondents with the implication that scholars at the say that they are permissible. It is difficult to time should not be expected to have gage support for an authoritarian leader understood the magnitude of the changes without analyzing nuances of the data, that were occurring. Scholars did under- which is possible using multiple measures.” stand the magnitude of changes that were Panel Chair Kari Johnstone gave occurring. The problem was the lack of the panelists an opportunity to respond to speculation on the political impact of the each other before opening the floor to changes underway. There was such specu- questions. lation in the 1991 volume edited by Balzer, Levada, adding to his earlier re- Twigg readily conceded, but literature marks, stated that in his view the conflict from 1991 was not considered in her paper between communism and anti-commu- because “by that point glasnost had made nism is resolved and the current question everything quite evident and people were is what type of market system should be starting to put the bigger mosaic together chosen. This question may not be for the and draw these larger conclusions.” current or next president, but rather for On the question of whether research this century and the next century. Levada was too narrowly compartmentalized and, agreed with Dobson that Russians are more importantly, whether or not the much more respondent to one leader scholarship was sound, Twigg emphasized than to a democratic system; but at the again that she felt the scholarship was same time one leader can be successful, as both sound and overly compartmental- the recent rule of President Putin demon- ized. Dobson’s criticism was that it was strates. Political competition may not be up to others to carry out the integration of between the various parties at present, the sound scholarly material into an and the president is therefore influenced assessment of the broader political and through different channels. “It is not an economic implications. Twigg’s response ideal situation,” concluded Levada, “but was that there were too few people maybe nothing else is possible right now.” carrying out that integrative process. Twigg responded to the points Finally, on whether the scholarship raised by Dobson in commenting on her of the era was atheoretical, Twigg agreed paper. She regretted if it seemed her to look again at the literature, especially conference paper approvingly cited the 1959 study using the totalitarian 107 model in conjunction with models of well. In fact, that may be exactly the industrial society that Dobson cited. problem,” cautioned Miller. Nevertheless, Twigg contrasted the Dobson stated that there was less Sovietological work with the last decade’s disagreement between Twigg and himself study of Russia, which “has been quite than he thought. Since Twigg had failed rich, not only in its descriptive tone, but in to label Lewin’s arguments as bunk, he its theoretical tone as well.” Scholars like thought that she had interpreted them as Michael McFaul, Steve Solnick, and an astute observation. Twigg agreed to Kathryn Stoner-Weiss are not simply using revise her paper to avoid that interpreta- the theoretical tools of their disciplines to tion. illuminate the Russian case, but also are Johnstone opened the floor to using their knowledge of the Russian case discussion at this point. to illuminate theory and contribute to Igor Birman began the question theory building, Twigg argued. and answer period by requesting that the Commenting on the data presented panelists address more directly the issues of by Miller, Twigg was struck by the result did/does the West understand the Soviet that the difference in responses between Union and Russia. He added his appre- young and old is not as pronounced as ciation for Twigg pointing out “that as early might be assumed. Twigg noted that as 1989 somebody said that maybe there those results were similar to data she had are problems with the Soviet economy.” found in countrywide surveys in the health Dobson stated that one conclusion sector, in which the older doctors and that he had drawn from thinking about health officials expressed positive orienta- what was learned and unlearned relates to tions towards market-oriented health the totalitarian model. This model for reform and younger ones are more in favor describing the Soviet Union was harshly of returning to the Soviet system. Two criticized and pushed to the side of possible explanations for this result are, scholarship in the 1960s and 70s. The first, that the older generation remembers irony is that if scholars had kept their how bad the Soviet system was, and, focus on the totalitarian model the second, that age brings the older respon- coming collapse would have been easier dents seniority that gains them personal to foresee, because it was between 1987 benefits under the market system. and 1991 that the totalitarian model broke Miller returned to the issue that down in the Soviet Union. By 1990, Dobson had raised of effectiveness versus Gorbachev had lost control of the situa- authoritarianism, stating that his data tion, and without centralized control disagreed with the evidence that Dobson there was a breakdown in the system. presented. Miller stated that his data shows Even though there was a lot going on in that not only are Russians more likely than society, ultimately it came down to col- those in other East European societies to lapse within the ruling elite. prefer authoritarianism, but those that Levada pointed out that there had indicated a preference for a strong leader been plenty of speculation about the are less likely to support other democratic ultimate failure of the Soviet Union. In the norms. It demonstrates a tendency to want 1920s one prediction was that the Soviet to follow a strong leader rather than be state would end because of a conflict supportive and think about pluralistic between Russia and Ukraine. Another competition. “I think that it is very short- prediction stated that the Soviet Union sighted in terms of development to think would perish in a conflict with communist that just because people today have a lot of China. “It seems to me,” concluded faith in Putin that things are going to go Levada, “that the cause of the fall of the 108 Soviet Union was not economics, the with Russian elites, he interprets Putin’s weakest part of this great body was not its high approval ratings as disillusionment stomach but its head. Its political head with Yeltsin’s rule, and not necessarily as was weak and this crashed in the end of attachment towards any policies Putin may the 1980s and early 1990s.” be advocating. An audience member suggested that Twigg responded that if data is poor Twigg refer to unpublished conference or misleading, then you have an even proceedings, as there were ideas expressed greater need for incisive methodological during conferences that never found their tools to cope with the poor data. way into print. Twigg agreed to do so. Robert Campbell noted that Dobson A former Foreign Service officer referred to the Harvard Interview Project that commented that in his experience some resulted in the 1959 study, and asked whether individuals and institutions fell into a trap of anyone had considered the Soviet Interview thinking that the Cold War would last Project from the early 1980s. forever because the Soviet Union was the Dobson answered that soon after culmination of Russian history. Those who the project was completed opportunities specialized exclusively in Soviet studies had to do research in the Soviet Union had the most difficulty in breaking out of the eclipsed the study, which was a very Sovietological mode, believing that the expensive project by social science Soviet Union was unique and could not be standards. Another reason that the study comparatively studied with any other did not achieve great prominence was that society. Others, who in addition to their it largely confirmed what was already background in the Soviet Union had known. It was also less integrated than studied pre-revolutionary Russia or had the 1959 study. experience in other parts world—often time A Russian scholar questioned chaotic parts of the world—were able to Levada on measuring attitudes towards deal with the idea of change much better democracy in Russia, arguing that these than those who were a bit too specialized. attitudes are fragile. He feared that a A former ambassador commented consensus among political and economic on the character of Soviet studies in the forces in Russia could combine to trans- United States, noting that during the form Russia’s political system into an 1960s and 70s students who were stron- authoritarian system. gest in the quantitative aspects of political Levada replied that he agreed with science, sociology, and other social sci- that concern, pointing out that it is difficult ences tended to gravitate towards other to measure the degree of democracy areas of the world that did not pose the within a country. Levada related how a data collection problems presented by the French diplomat recently asked him how Soviet Union. While working in the close Russia was to being a democracy government during the 1980s, he noticed after ten years of transition. Levada asked that different camps argued over the in turn whether the diplomat thought that quality of data as well as the nature of Russia was closer to democracy than assessments in marshalling support for France was under the Jacobin dictatorship their points of view. He stated that his after the French Revolution. The diplomat experiences speaking with people in laughed and said that it was difficult to say. Russia and other former Soviet republics Levada then asked how many years had supports Levada’s contention that people France needed to build a democracy after believed that they “had it better” before the French Revolution. The diplomat 1989, but realized that it was impossible to responded that it took more than one go back to that time. Finally, after talking hundred years, though he tried to explain 109 that Russia is in a different situation. Still, Twigg added her concern that the Levada concluded, it is a useful compari- promising emergence of a quasi-civil son to make in trying to understand the society in Russia in the form of over two state of Russian democracy. hundred thousand non-governmental Miller commented further on the organizations (NGOs) may be threatened question of democracy in Russia, address- by the Putin regime trying to create a ing the issue of party formation and party “top-down” construction of civil society. loyalty. When asked in general about Birman declared that the project political parties or the government, Rus- interviewing Soviet émigrés was terrible. sians will express negative orientations. Yet One example of its reasoning was that Soviet if asked whether there is one party that trade was so bad because those working in best represents their views, 70 percent will the trade industry were paid too little. In say there is, and that figure is rising. This is response to Levada’s earlier argument that the not a measure of support for political Soviet Union collapsed for political and not parties, just an indicator of whether indi- economic reasons, Birman asked what was viduals feel there is a party that represents the cause of that political turmoil? “What them. The problem with this high re- [the Soviet elite] saw abroad compared to sponse, however, is that there are 30 to 40 what they had, and especially Star Wars, parties. You have to have fewer parties so [showed them] that they could not compete, people can make sense out of that party that their economy did not allow them to. space and be responsible, Miller argued. That is why they collapsed.” Eventually, in the development of institu- Levada replied that argument has its tionalized pluralism, political parties ought own logic, but repeated that the Soviet to be one of those institutions that develop. system was a pyramid standing on its head The next question from the audience (the elite), and when this head became returned to the issue of Russia’s supposed weak the county collapsed. He reminded desire for a strong leader. One interpreta- the audience that in the Soviet period the tion is that it is in the Russian mentality to operating practice was that political matters desire a strong leader because of Russia’s are more important than economic matters. history. Is that enough of an explanation? Miller returned to the question of the Levada responded that surveys “strong leader.” He noted that everyone throughout the past decade show that wants a strong leader, but in the U.S. you have Russians desire a strong leader, one that alternative power centers, such as indepen- would manage the various elites, gover- dent governors and the private sector, with nors, and other officials. Putin has at times independent sources of revenue. The NGO tried to play this role, but an autocratic sector is important, but it lacks independent leadership in Russia is no longer possible revenues and this makes it a very limited because the mechanisms of coercion are no thing. Therefore the question for Russia is longer in place. Stalin had a strong base in whether independent power centers are the party and the KGB, Levada pointed something we can look forward to. out, and China’s system is likewise built on Levada stated that Putin has tried a strong dictatorship and caste system. from the beginning of his rule to manage Miller added that if you ask people the local governments and oligarchs, but in the U.S. whether they want George has met with limited success. He must Bush to be a strong leader, they will of have come to some arrangement with course say yes. The real question is not them, Levada surmised. Another approach whether a president is a strong leader, but to understanding the idea of a “strong whether there are other checks and leader” is to consider the leaders during balances in the system. World War II in Russia, Germany, En- 110 gland, and the U.S. All four were strong important notice to all of us that it is very leaders, but in different senses. This is the easy to turn Russian sympathy to hate.” question facing Russia with Putin—in After two weeks of negative press, Presi- what sense will he be strong? It is an dent Putin stepped in to try to stop those open question, and answers will come on feelings from spreading. a case-by-case basis. Johnstone gave each of the panelists Twigg turned the discussion to the an opportunity to make a concluding issue of Western policymakers’ perceptions statement. about Russia. She noted that Peter Dobson said that in his view, the Reddaway’s comments from the second scholarly community was doing quite well in panel implied that Western policymakers the 1980s, though he was less familiar with the seemed determined to view Russia results of the intelligence community. One through rose-colored glasses, and that this helpful development during this period was has been borne out in her personal the development of sociology in the Soviet experience. She related an exchange Union, which provided much more detailed following a recent briefing to members of information on the particular problems. Congress on Russian social conditions that Finally, it was not Western scholars’ adherence was weighted 75-25 negative to positive. to the totalitarian model that led them to fail to The first question she received from a appreciate what was going on in Soviet society. member of the House thanked her for her Instead, they abandoned that model and did “presentation that focuses on the positive not see it as a key ingredient of the system and things and gives us reason to see the good were therefore unprepared for the changes things that are happening in Russia.” initiated under Gorbachev that dissolved the This exchange, Twigg continued, levers of control. highlights a difficulty in the interactions Miller disagreed in part with Dob- between the scholarly community and son, stating that in his view the academic policymakers. “There is a real tension there community had blinders on it and many because there is a perception that if we paint scholars saw what they expected to see a picture that is too formally negative we will based on their own preconceptions. drive funders to think that Russia is a lost There were exceptions, but in general the cause and therefore abandon their support of academic community failed to predict studies or research about Russia. I think what happened and scholars were caught there is some real implicit pressure on up in terms of the methodology and scholars to try to put something of a rosy face orientations that they brought with them on the comments that we make so we to the work that they were doing. provide a reason for the study of and funding Levada concluded that plenty of of assistance to the region to continue.” questions remain to be discussed, and The final question from the audi- thanked the panelists and audience for ence asked whether any of the panelists their input into his work. saw a purposeful placement of stories in Twigg reiterated her assessment that the Russian media that advanced feelings the scholars got the trees right in exquisite of anti-Westernism or anti-Americanism. detail and largely missed the forest. The Levada responded that the media surprising finding was that the intelligence had played a very unpleasant role during community actually got a much more the latest wave of anti-American hysteria comprehensively correct picture than the in Russia in February 2002. The media bashing of intelligence would lead one to were denouncing America with the expect. The encouraging news is that permission of the ruling elite. “In my many of the lessons to be learned from the mind,” Levada cautioned, “it was a very failings of Sovietology seem to have already been taken to heart by the scholarly 111 community engaged in the region. Keynote Address: The Honorable James Schlesinger Chairman, MITRE Corporation, and Senior Advisor, Lehman Brothers

112 113 Keynote Address by The Honorable James Schlesinger Introduction by Blair Ruble, Director, Kennan Institute Blair Ruble This conference has wrestled with He was head of the Bureau of the the battle of ideas that took place in the Budget (which later became OMB), he past and is taking place now and that has was chair of the Atomic Energy Commis- influenced policy towards Russia and in sion, Director of the Central Intelligence the past the Soviet Union. We’ve heard Agency, Secretary of Defense, and the deeply divided opinions about what nation’s first Secretary of Energy. He played happened on the ground in the Soviet at many moments in past years a critical Union and what happened in the U.S. role in shaping policy towards Russia. Dr. government community broadly defined. Schlesinger, we welcome your thoughts on I think it is safe to say that a number of what lessons may have been learned and old debates continue and are taking new more broadly in general. form, and I think that is healthy. Among The Honorable James Schlesinger the issues raised were: How do you see Thank you. One of the 19th century the forest for the trees, how do you Anglican bishops observed that the only wrestle with measurement issues, and thing we learn from history is that we learn what is the role of intuition? What is the nothing from history, and that observation art of understanding a complicated society caries us back to Hegel who had an earlier and place like Russia, and what is the formulation of that. I might use that as an science of it? These are large questions introductory note. This is less of a keynote, where perhaps the biggest lesson to be I suppose, than an endnote, and it is learned is that there are no easy answers. appropriate to be here at the Wilson The time has come to try to put all Center. He was not only the only president of this in a broader perspective, and we with a Ph.D., he was the only president that thought the perspective that would be landed troops in the Soviet Union; that did most useful is from someone who has had not occur during the Cold War. The debates to wrestle with receiving all this informa- you have had for the last few days—they tion and making sense of it and at the will go on to the third generation. same time helping to form government This was a remarkably good set of policy. And this is particularly appropriate papers, I found them interesting and because the Woodrow Wilson Center revealing. I will proceed with some initial commemorates our only president to observations; I will then talk a little bit hold a Ph.D., somebody who was the about the Soviet era, followed by some president of a college and a university and words on the transition and what we see someone who was president of the before us today. United States—Woodrow Wilson. And My interest was primarily the therefore we try to reflect here on how geostrategic questions, the geostrategic one goes about trying to bring together competition. How could an economy the world of ideas and the world of public apparently as limited as that of the Soviet policy. Our keynote speaker Dr. James Union mount such an impressive military Schlesinger has probably done that as well capability directed at the United States and as anyone in Washington today. the Western world? This is a reflection of He has wrestled with turning what some of the papers referred to as the information into analysis in his younger structural distortions of the Soviet days as a scholar at the RAND Corpora- economy, and once it shifted over into a tion, and he has wrestled with these issues market economy those structural distor- in major policymaking positions. He has a tions became quite destructive for very distinguished public service career. 114 the prospects for the Russian people. days wrote back to Moscow, he followed When I was Secretary of Defense I spent a Lenin’s advice—“tell them what they great deal of time talking about the want to hear.” Otherwise, his career was adverse trends and the growth of the likely to be shorter and less prosperous Soviet military budget, as opposed to the than he would have hoped. It is hard to post-Vietnam steady shrinking of the go against the prevailing institutional view American military budget, and this was and that is particularly hard when evi- reversed in later periods. dence is skimpy, because it is under those So let me start with some initial circumstances that the challenger of the observations that bear on the question of institutional view has very little to go on lessons learned. William Shakespeare, other than his gut feelings which will be well-translated into Russian, by the way, substantially demolished by the prevailing says “what a piece of work is man! how keepers of orthodoxy. noble in reason! how infinite in faculty!” Over time, institutional views tend He overstated, as is frequently the case. to harden. If you take a typical presiden- There are clear limitations with regards to tial administration, it comes into power in the faculty of the human being. If we January, and they’re kind of exploring turn to the intelligence issues; normally, what they’re supposed to be doing. But intelligence tends to be reasonably good over two or three years, one discovers that for dealing with routine events—that is, in the views of that administration tend to dealing with a world that is slowly evolv- harden, and there is less room for chal- ing, unchanging. Intelligence communi- lenges, including challenges of the intelli- ties have difficulties in dealing with gence community bringing in new turning points. If the question is “why information. Over time it becomes more did the Soviet Union collapse and did we risky and more difficult to challenge the foresee it?” then the answer is that we prevailing views. And we have seen that were not likely to grasp that kind of happen in the interpretation of the Soviet catastrophic turning point. Almost every Union. Fifty-five years ago I was a major change comes as a surprise. student studying physics, and the physics Why is that? Because official views instructor said one day to the class some- develop in institutions, and neither thing very profound that I have never societies as a whole nor institutions expect forgotten. He said: “All my life, I have change. We tend to see things as continu- been enormously impressed by the ing on an accustomed track, and we tend infinite power of the human mind to resist to extrapolate from previous trends and the introduction of knowledge.” And current times into the future. Indeed, we regrettably, that tends to afflict institutions. vary between a normal belief that things What are the lessons learned as we will not change very much, and, as we look at the past? First of all is the harden- have experienced in the post 9/11 world, ing of institutional attitudes: these tend to that everything has changed as a result of harden into axioms that are very hard to the attacks on the World Trade Center and challenge. Second lesson—treasure your the Pentagon. That is a substantial exag- mavericks. Third—since we don’t know geration, by the way. Institutions and what the future is it is useful to have the societies develop a mainstream view, and kind of scenario building that has been institutions, government institutions, do associated originally with Shell and later not welcome whistle blowers or maver- with the RAND Corporation. icks. Mavericks represent a challenge to Let me turn to my second subject, what holds a typical institution together. which is the Soviet era. Mr. Medish, in When a KGB operative in the good old one of those interesting papers that were 115 distributed, says that the pictures that we missile gap. And before the missile gap, have of other countries tend to reflect our there was the bomber gap. We were own emotional needs. That is, and this is estimating what it was the Soviet Union not his phrase, that our viewing of a could produce if they were organized for society like that of the Soviet Union tends production of missiles. It was a critical to be kind of a Rorschach test in which issue during the 1960 election. That we ourselves interpret what they are period ended with the first flight of the doing in terms of what we are about. And Corona satellite. Actually, it began to this was dominated over the years by the disappear with the flights of the U2, but fears in the United States that, as the U2 ended suddenly and not glori- Khrushchev said, “we will bury you.” ously. Through the Corona satellite we Were they capable of burying us? What began to get good estimates, not specula- kind of economic growth did they exhibit tion, about production in the Soviet on the one hand and how impressive was Union and deployment by the Soviet their military establishment? Was it Union of military capabilities, including substantial enough to overrun Western their missile force. What we found in Europe, for example? It is remarkable 1961 after the Kennedy administration how little we knew about the Soviet came in having advertised the missile gap Union in 1945. At that time, it was still, as was that the Soviet Union had deployed Winston Churchill had previously de- four ICBMs. This was far less than had scribed it, “a riddle wrapped in a mystery been speculated previously. inside an enigma.” We had the illusion of Prior to the flights of the Corona, we Lincoln Steffens, who had returned from tended to exaggerate Soviet capabilities. the Soviet Union and said, “we have seen After the flights of the Corona, we tended, the future and it works.” And certainly as frequently as not, to underestimate there were illusions associated with our those capabilities. For example, we wartime alliance with the Soviet Union. became convinced, as we strove to lure the By 1947 those illusions had pretty well Soviets into détente of our definition, that dissipated. Stalin had turned down the the Soviet Union was only trying to match offer of economic assistance, not only to us: Since we had deployed 1000 Minute- the Soviet Union, but also to its newly men, and the Soviets wanted to match us, acquired European satellites, in particular they would build up to 1000 Minutemen Czechoslovakia and Hungary. In 1948 and would stop, having matched our there was the Czech coup. And so our capabilities. Somewhat to our surprise, attitudes in those years shifted from the since we had come to this interesting illusions of 1945-46 to the belief as conclusion, the Soviet Union continued represented by George Kennan’s article to deploy ICBMs reaching a total of 1656 that we must contain the Soviet Union. before the SALT I agreement. It is interesting, as I said, how little Let me point to several defects that we knew. We were at that time estimating existed in this period. The intelligence production in the Soviet Union by agency was working on a giant computer picking up clues from those who had model of how the Soviet economy seen factories, estimating factory floor worked. And that giant computer model space in the Soviet Union, and from that, acquired a life of its own, so that instead based upon our own capacity for produc- of looking at what was actually going on, tion, estimating production in the Soviet we tended to interpret everything through Union. There was very sparse informa- that model of the Soviet economy. Ma- tion. That dearth of information is the dame Roland (I heard a reference to the father, or mother if you prefer, of the French Revolution earlier) said, “Oh, 116 Liberty! What crimes are committed in thy Soviet Union was spending an amount name?” Well, here was “Oh, Computing! equal to that of the United States before What crimes are committed in thy name?” you got to procurement, research and Through this model we were grinding out development and the like. detailed calculations about the Soviet I thought that was an important Union, and we were failing to look at the point. I went on to point out that in terms realities. Modeling is something you think of tank production, we were estimating that you understand, but don’t really that the Soviets were turning out some- understand, and that’s when it’s particularly thing like 3600 tanks a year, we were dangerous. That, incidentally, applies to turning out 300; that the Soviet produc- climate models including the weather tion of aircraft, however inferior they were forecasts that we get daily. The model in terms of avionics to the U.S., that they acquires a kind of mesmerizing quality. were turning out something on the order And this tended to mislead us. of 3 or 4 times as many aircraft. And thus Let me turn from the economy to their procurement account had to be military expenditures, about which I substantially larger in dollar terms than know somewhat more. When I got to be was ours. And so, as we went through this the Director of Central Intelligence, the with the CIA staff, we slowly got up to the intelligence community was estimating point where it was clear that their defense that the Soviet Union was spending 6-7 expenditures, in dollar terms, have got to percent of its gross national product on be 150-160% of what we are spending, defense expenditures. And the intelli- even though they didn’t spend as much gence community said that despite the on operations and maintenance as we did. smaller size of the Soviet economy, that in I said, “Go fix it.” That was 1973. I then dollar terms (that is, pricing out Soviet moved to the Department of Defense, and military capabilities in U.S. dollars) their immediately that challenge was forgotten. expenditures were roughly equal to our Andrew Marshall came to the Depart- own. ment of Defense as Director of Net Assess- I had an experience that was akin to ment. He stayed on the case, and by 1976 that of Mr. Birman in his written com- we had an adjustment in the estimated ments in which he said, “the picture is military expenditures of the Soviet Union. It ultimately wrong.” This was just a misin- was plain that this was basically a society terpretation of what was going on in the with a war economy, because they were Soviet Union. And early on, when I was straining off all their best resources into DCI, however briefly, I sat down with the defense-related activities, including, of staff, and I said, “how many people do the course, the nuclear establishment. From that Soviets have under arms?” Well it was one can learn several things. First, that an something in excess of four million. And institution tends to be defensive about what how many do we have under arms? Well was previously produced; it has a vested something just over two million. And if interest in its previous product. When it is you price that in dollar terms, what does challenged, it has to find someplace to hide, that imply? It implies that in terms of U.S. and if it is going to change, it will take years dollars, the Soviets are spending double to change. what we are spending on personnel. At The collapse of the Soviet Union that time we were spending about over 50 was largely a surprise to us. Ms. Twigg in percent of our military budget on person- her paper pointed out that there was an nel. So right there, if you just looked at alternative view expressed at the CIA that the personnel account, you came to the was sort of an afterthought. Some of these conclusion that in dollar terms that the people had this strange view that 117 Gorbachev might run into some trouble depends on having a moral framework that after awhile. It was not the mainstream sustains the market economy; whereas the view. We were ignoring during that period textbooks all talked in terms of compara- clear signs, though not what is sometimes tive statics. You move from one equilibrium interpreted as hard evidence—that is, smoothly to another equilibrium. This in a published data and whatnot. Whether true world that was undergoing rapid change or false, it is published and you can read it. and had the problem of the dynamism of We were ignoring clear signs of serious transition. Which reminds me of a story— problems in the Soviet Union. For ex- how many economists does it take to ample, Moscow is a kind of gossipy place, change a light bulb? Answer: None, and when one went there one found because if a light bulb needed changing younger members of the communist party the market would have already arranged saying at dinner parties: “We cannot go on for it to have taken place. this way.” That incidentally is reflected in Some of us followed the lead of Gorbachev’s attitude when he took over. former President Richard Nixon, who And then, in 1983, we had Ronald wanted to have something for Russia that Reagan’s development of Star Wars, which was akin to the Marshall plan. Now we had an immense impact in the Soviet recognized that this was vastly different Union. And the impact was not that we from the Marshall plan itself in Western were likely to deploy a missile defense Europe, and it required vastly more very quickly; in fact, the kind of defense imagination. The European economies that Mr. Reagan was talking about was basically understood the underpinnings of basically beyond our reach…not basically the market economy. What they needed, beyond our reach, beyond our reach. basically, was additional capital with which But what happened was that in the they could restore their prewar econo- Soviet Union, with all the difficulties that mies. The Russian problem was much were developing, the reaction was “good more severe, that is they did not have the Lord, here is another field we are going to underlying institutions, they lacked the have to compete with the Americans, and rule of law as we understood it, they did we just can’t do it. Our economy is just not understand double entry bookkeep- not that flexible; the American economy ing, they did not understand profit and has greater flexibility” and so on. loss, they did not understand corporate Let me talk a little bit about the governance. And so it was plain that if we transition after the collapse in 1991. With were to help Russia in this transition, that the best will in the world, we were of the thing that we could do was provide remarkably little use to Russia as it went technical assistance just in explaining through its problems. Our contribution these rudimentary elements, such as how was that we sent to Russia textbooks balance sheets work and what a statement describing the infinite beauty of the of profit and loss was. workings of the free market. This to a We did not provide that; we sent society that had previously been over- them textbooks and a bunch of experts whelmed by an ideology—that is, the that explained the processes of develop- Leninist ideology. And so, they are looking ment and so on. Robert Galvin, who at for a new ideology and we were sending that time was the head of Motorola, had them the ideology of Milton Friedman. what I thought was a brilliant idea. Which The problem was that the market is that the president of the United States economy depends upon substantial call upon each CEO of each Fortune 500 institutional underpinnings. So, as Adam Company and ask them to invest $1 Smith in one of his books suggests, it million in Russia. And the consequence 118 of that, if they were serious about that, represented by Shell. Normally what we would be that they would begin to convey expect and normally what occurs is a some of the rudiments of how a market continuation of present trends. Our great economy works, and this would be a kind difficulties occur when we reach turning of seed corn. Nothing ever came of it, points. And typically institutions find it regrettably. The United States at that time very hard to forecast turning points. What just lacked the imagination and, if I may are the lessons that we have unlearned? say so, we, too, were exhausted after the The hardening of institutional attitudes. Cold War. So we were satisfied with the We are not hardened in our institutional soothing myths of the period that the attitudes towards Russia today, although market economy is something that was some people were until recently. But we self-operating. are hardened in other attitudes, whether it Privatization took place in Russia; is with regards to China, or possibly one of the papers referred to Proudhon’s towards the Islamic world. These will observation that “property is theft,” and become rallying points not only for whether or not that is generally true, it institutions but the society as a whole. does appear to be true in the case of Will we do better? I wish I could be Russian privatization. We were into the optimistic, but I do not think so. We are era of the robber barons in Russia, not missing the forest for the trees, just as in too dissimilar in some ways from the the 1950s, 60s and 70s. We tended to robber baron era in our country 130 years forget about the realities of the Soviet earlier. Thomas P. Huntington, whose economy, because we were working from Huntington library you can visit in this computer model we had ingeniously California, made this interesting observa- devised and that pumped out information tion: “Whatever is not nailed down is with regard to the Soviet effort on de- mine, whatever I can pry up is not nailed fense, which was misleading, to say the down.” Good guidance. So we were faced least. Mr. Levada had a formula that he with disappointments, and I think there quoted in his paper: “we wanted to make are now some danger signs, as we heard in it better, but it turned out like always.” the third panel. But Russia in some ways As I said at the beginning, the only seems to be getting on track now, and I thing we learn from history is that we shall leave it to others to describe that. learn nothing from history, whatever the What do we learn from all of this? Harvard historian had to say about “those The ability to forecast future events is who fail to learn from history are doomed quite limited, if perhaps alleviated to to repeat it.” Let me stop there. some extent by the scenario building

119 Panelist Biographies

120 121 Anders Åslund is a senior associate at in History and Literature from Harvard the Carnegie Endowment for Interna- University. Prior to his work at RAND, tional Peace in Washington, D.C. since Dr. Becker was the U.S. Representative to 1994, and is an internationally recognized the United Nations’ Expert Groups on specialist on post-communist economic the Reduction of Military Budgets in transformation, especially in Russia and 1974 and 1976, as well as a consultant to Ukraine. He has served as a senior the U.S. Arms Control and Disarmament economic advisor to the governments of Agency in the 1970s. He served for 18 Russia, Ukraine, and Kyrgyzstan. From years on the Military-Economic Advisory 1989 until 1994, Dr. Åslund was Professor Panel to the Director of the Central and Director of the Stockholm Institute of Intelligence Agency and as a consultant to East European Economics at the the Soviet Affairs office of the Directorate Stockholm School of Economics. Before of Intelligence. Subsequently, he was a that, he served as a Swedish diplomat in member of the DCI’s International Kuwait, Geneva, Poland, Moscow, and Economic Advisory Panel. While at Stockholm. A prolific writer, Dr. Åslund RAND, Dr. Becker was also a visiting has authored six books and edited nine. professor at UCLA and served as Director His most recent book is Building of the RAND/UCLA Center for Soviet Capitalism: The Transformation of the Former Studies, Associate Corporate Manager in Soviet Bloc (Cambridge University Press, the International Policy department, 2001). Dr. Åslund has a B.A. from the director of the RAND Committee on University of Stockholm, a M.Sc. in Soviet Research and Associate Director of Economics from the Stockholm School of the National Security Strategy program. Economics, and a D.Phil. from the Dr. Becker has conducted extensive University of Oxford (St. Antony’s research on Soviet economic planning, College). He is a Member of the Russian policy and behavior, as well as military Academy of Natural Sciences and an economics. He is the author of two books, Honorary Professor of the Kyrgyz edited and coauthored three others, as National University. He has also been a well as numerous articles and RAND research scholar at the Kennan Institute monographs. and a guest scholar at the Brookings Institution. Robert Campbell is a Distinguished Professor of Economics, Emeritus, at the Igor Birman, a Soviet economist, University of Indiana. He received his immigrated to the United States in 1974. Ph.D. in Economics from Harvard He has worked as a consultant to the University in 1956, and in addition to his Pentagon and other U.S. government long-term position at Indiana University, agencies. During the second half of the Dr. Campbell has taught at the University 1990s, Mr. Birman was an advisor to the of Southern California, the University of Russian Parliament. He is the co-founder California at Berkeley, Stanford University and editor of Russia magazine, and has and Harvard University. His specialty is authored, coauthored, and edited 14 analysis of the former centrally planned books in 5 languages. economies and the problems of trans- forming them into market economies. Dr. Abraham Becker is a Senior Economist, Campbell’s publications in the area Emeritus, at RAND in Santa Monica, (eighteen books and monographs and California. He received his M.A. and more than forty articles and chapters in Ph.D. degrees in Economics from books) cover both issues of the economy Columbia University, and an A.B. Degree as a whole and sectoral specialties such as 122 research and development, energy affairs, from the Kennan Institute, National and telecommunications sector in the Security Education Program, and the USSR and its successor states. In recent Berkeley Program in Soviet and Post- years he has combined research and Soviet Studies. publication on problems of the transition with advising and consulting on economic Yuri Levada is the Editor-in-Chief of transition, both for western donors and the Russian Public Opinion Monitor contractors and for governments and Bimonthly. Before joining the Russian institutions in the former Soviet Union. Public Opinion Monitor in 1994, Dr. Levada conducted various forms of public Richard Dobson is a Research Analyst opinion research for over 28 years at a specializing in public opinion polling for number of different institutes in the the Russia, Ukraine, and Commonwealth Russian Academy of Sciences. After Branch of the Office of Research, U.S. receiving his Ph.D. from Moscow State Department of State. Before joining the Lomonosov University in 1955, Dr. State Department, Dr. Dobson worked for Levada worked as a researcher at the 16 years as a researcher for the U.S. Institute of Sinology of the USSR Information Agency. Dr. Dobson Academy of Sciences. From 1960-68, Dr. completed his undergraduate work at Levada served as Senior Researcher and Stanford University, and earned his M.A. Research Chief at the Institute of in Soviet Studies and Ph.D. in Sociology Philosophy, where he completed his from Harvard University. He taught at the second Ph.D. in Philosophical Sciences in University of Colorado at Colorado 1965. Dr. Levada also worked as a leading Springs for several years and has been a researcher at the Central Economic and National Fellow at the Hoover Institution Mathematical Institute of the USSR and a resident scholar at the Kennan Academy of Sciences from 1972-88, and Institute. later joined the Soviet (now Russian) Center of Public Research (VCIOM). Kari Johnstone is a Research Scholar at While at VCIOM, Dr. Levada held the Kennan Institute at the Woodrow numerous administrative positions and Wilson Center in Washington, D.C. Dr. served as Director in 1992. Dr. Levada’s Johnstone received her Ph.D. in Political articles dealing with public opinion Science from the University of California research have been published in Russian, at Berkeley in 2001, specializing in Post- German and French journals and he Communist Politics and International recently completed his book, From Relations. While at UC Berkeley, Dr. Opinion Toward Understanding (2000, Johnstone held numerous positions, Russian). including Head Graduate Instructor in 1996. In addition to her studies at Mark Medish is a partner in the public Berkeley, Dr. Johnstone has studied at law and policy practice group of Akin, various institutions throughout Eastern Gump, Strauss, Hauer & Feld, L.L.P. in Europe and Russia, including Charles Washington. He is also a principal in University in Prague, Lviv State University Hampshire Partners, L.L.C., a joint in Ukraine and the Pushkin Institute in venture of Akin Gump and Multinational Moscow. She has also worked as an OSCE Strategies, Inc., focusing on sovereign Election Observer of the 1998 and 1999 advisory services and direct equity elections in Slovakia and Ukraine. Dr. investment in emerging markets. Before Johnstone has been the recipient of many joining Akin Gump, Mr. Medish served in grants and fellowships including awards the Clinton administration as special 123 assistant to the president and senior Nikolai Petrakov is Director of the director of the National Security Council Market Economy Institute of the Russian (NSC), where he assisted the president Academy of Sciences. Dr. Petrakov and national security advisor Samuel R. received his Ph.D. in Economics from Berger in forming and implementing U.S. Moscow State University in 1972, and foreign policy toward Russia and the NIS. subsequently taught there before joining He also served as Deputy Assistant the Russian Academy of Sciences in 1990. Secretary of the United States Treasury Dr. Petrakov also served as an economics from 1997-2000. Mr. Medish received his advisor to Mikhail Gorbachev and helped B.S. in economics from Georgetown draft the unimplemented “500 Days” University in 1984. He received his M.A. Soviet economic reform program in 1990. in Soviet studies in 1987 and his J.D. in His scopes of scientific interests are 1990 from Harvard University. Addition- economic-mathematical modeling, and ally, he did graduate work in philosophy the theory and methods of economic and economics at the University of policy realization in the conditions of Oxford, Merton College, where he was a market management. Dr. Petrakov is the Fulbright Scholar in 1985-86. He has also author of more than 200 scientific held Luce, Mellon and Shintaro Abe publications, including 9 monographs. scholarships. He was a visiting research fellow at the Japan Institute of Interna- Peter Reddaway is a Professor of tional Affairs in 1990-91. He clerked on Political Science and International Affairs the D.C. Court of Appeals in 1991-92, and at the Elliot School of International Affairs is a member of the District of Columbia and Department of Political Science at Bar. George Washington University. He was educated at Cambridge, Harvard Arthur Miller is a Professor of Political University, Moscow State University and Science at the University of Iowa. He London School of Economics, where he received his Ph.D. in Political Science was also a lecturer in Political Science from the University of Michigan in 1971, from 1965-85. From 1986-89, he served as and taught at Ohio State University, the Director of the Kennan Institute of the University of Michigan, and the Univer- Woodrow Wilson Center in Washington, sity of Chicago before joining the Iowa D.C. In over 20 years of academic teaching faculty in 1985. Dr. Miller is the author of and research, Dr. Reddaway has authored the book Public Opinion and Regime or edited six books and numerous articles Change: The New Politics of Post-Soviet dealing with Russia and the former Soviet Societies (Westview Press, 1993) and Union. He has received many grants and numerous articles dealing with measuring awards for his academic work, including public opinion. Dr. Miller has received grants from the Woodrow Wilson Center, wide acclaim for many of his articles, and U.S. Institute of Peace, and the National was awarded the American Political Council for Soviet and East European Science Association Jack L. Walker Award Research. Dr. Reddaway has also held for the article entitled “Emerging Party numerous administrative positions, Systems in Post-Soviet Societies: Fact or including Director of the Russian and Fiction?” Dr. Miller has also been the East European Studies Program at George recipient of many grants and fellowships, Washington University. including awards from Fulbright, U.S. Department of State Bureau of Educa- Blair Ruble is Director of the Kennan tional and Cultural Affairs, and the Institute of the Woodrow Wilson Center National Science Foundation. in Washington, D.C., where he also serves 124 as Co-Coordinator for Comparative dent-elect Carter, and was charged with Urban Studies. Dr. Ruble received his the responsibility of drafting a plan for the M.A. and Ph.D. degrees in Political establishment of the Department of Science from the University of Toronto, Energy and a national energy policy. In and an A.B. degree from the University of August 1977, he was appointed as the North Carolina at Chapel Hill. Before nation’s first Secretary of Energy and later joining the Wilson Center, Dr. Ruble served on the President’s Commission on worked for the Social Science Research Strategic Forces. Dr. Schlesinger has Council and the National Council for received nine honorary doctorates and is Soviet and East European Research. He the recipient of the National Security has edited eight volumes, including two Medal, as well as five departmental and reference works and six collections of agency medals, and is a fellow at the articles, and is the author of four National Academy of Public Administra- monographic studies. Among his most tion and a member of the American recent works is Second Metropolis: Pragmatic Academy of Diplomacy. Pluralism in Gilded Age Chicago, Silver Age Moscow, and Meiji Osaka (2001). Dr. Judyth Twigg is an Associate Professor of Ruble’s articles have been published in Political Science at Virginia Common- numerous journals around the world, as wealth University. She received a Ph.D. in well as The New York Times, The Washington Political Science and Defense/Arms Post, and USA Today, and he has appeared Control Studies from MIT, an M.A. in on a number of television and radio news Political Science and Russian Studies from programs in the United States, Britain, the University of Pittsburgh, and a B.S. in Russia, and Japan. Physics from Carnegie Mellon Univer- sity. Her recent work has focused on James Schlesinger currently divides his health conditions and health policy in time between the Center for Strategic and Russia, with publications in Europe-Asia International Studies (CSIS), where he Studies, The American Journal of Public Health, serves as counselor, and the investment and Post-Soviet Economics & Geography, banking firm of Lehman Brothers, where among others. She is the co-editor of he serves as senior advisor. Dr. Schlesinger Russia’s Torn Safety Nets: Health and Social received his Ph.D. in economics from Welfare during the Transition (St. Martin’s, Harvard University in 1956, and served as 2000), and she is currently working on a assistant and associate professor of monograph titled Critical Condition: The economics at University of Virginia until Politics of Health Care Reform in Russia for 1963 when he joined the RAND the University of Pittsburgh Press. Dr. Corporation. While at RAND, Dr. Twigg has received numerous grants from Schlesinger served as a senior staff the National Council on Eurasian and member and later as Director of Strategic East European Research, the Social Studies. He has held numerous govern- Science Research Council, and IREX and ment positions including, Assistant and has served as a principal investigator for a Acting Director, Bureau of the Budget study of social cohesion in Russia under (later the Office of Management and the auspices of the Russia Initiative of the Budget), and Chairman, Atomic Energy Carnegie Corporation of New York. Dr. Commission. In February 1973, he was Twigg has advised several agencies of the named Director of Central Intelligence, U.S. government on Russian health and and in July 1973 he was appointed U.S. social issues, including the Department of Secretary of Defense. In 1976, Dr. Defense, Department of State, and Schlesinger served as assistant to Presi- Congress. 125 Mikhail Zadornov is a Deputy in the Russian State Duma. Dr. Zadornov received his Ph.D. in Economics from the Institute of Economy of the Russian Academy of Sciences in 1988. He has worked as an expert in the Planning and Budget Commission of the USSR Supreme Soviet, and as a member of the State Commission for Economic Reform for Economic Reform of the Council of Ministers of the RSFSR, and also participated in drafting the “500 Days” program. Dr. Zadornov was elected to the State Duma in 1993 and served as the Head of the Committee for Budget, Taxes, Banks and Finances from 1993-97. From November 1997-May 1999, he served as Minister of Finance of the Russian Federation and was later appointed as Special Representative of the President of the Russian Federation in relations with international monetary institutions. Dr. Zadornov also served as the First Deputy Prime Minister of the Russian Federation and as Special Counselor to the President of the Savings Bank of the Russian Federation. In December 1999, he was re- elected to the State Duma, where he is currently head of the Subcommittee for Monetary Policy.

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