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Yegor Gaidar Is an Economist and Was Russia's Acting Prime Minister on Whose Watch the First Reforms—Most Notably Price Liberalization—Were Introduced

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Yegor Gaidar Is an Economist and Was Russia's Acting Prime Minister on Whose Watch the First Reforms—Most Notably Price Liberalization—Were Introduced Yegor Gaidar 1 Yegor Gaidar is an economist and was Russia's acting prime minister on whose watch the first reforms—most notably price liberalization—were introduced. In this interview, Gaidar recalls his path as an economist toward embracing markets, his tenure as Russia's first prime minister, and assesses the outcomes of a decade of economic and political reform in Russia. What the Future Holds: The Clandestine Meetings of Soviet Economists INTERVIEWER: Set the stage for what things were like in the late '80s, when you and your colleagues got together at the retreat outside of St. Petersburg. What was the economic situation in your country and what were you as economists thinking might be happening the Soviet Union? And what were you discussing at that weekend? YEGOR GAIDAR: The economic situation by 1986 still on the surface remained stable. Of course there were fundamental long-term problems with the Soviet economy, which were well known. There was an acutely low competitive ability, the ineffective use of resources, a high dependence on income from the transport of energy products, and the obvious worsening state of affairs in the world oil market. To this were added the attempts of the new team of Gorbachev and [Nikolai] Ryzhkov to bring about a political "speeding up" to cause economic growth, which was very dangerous, it seemed to us, because there weren't the objective prerequisites for it. There were a combination of several unpleasant and dangerous processes, still in their early phases, in a general crisis condition of the economy. There was the anti- alcohol campaign, which brought about the crisis in the budget income. There was the attempt to speed up capital investment without having a financial basis for it. [There] was the fall in the price of oil. [There] was the fall in the amount of revenue from unprofitable imports. It was clear that macroeconomic stability, which was ineffective and was a characteristic feature of the Soviet Union, was now in danger, and there would be serious financial problems which, in conditions of an economic deficit, would inescapably lead to sharp tension in the consumer market, to an increase in queues, to a disappearance of goods from the shelves. But all that was at the very beginning. Along the way there was the new team of Gorbachev and Ryzhkov, who obviously wanted and were willing to achieve something. It seemed to us that there was a window of opportunity to correct the economic policy and transfer it to a Yegor Gaidar 2 more rational course, to achieve some kind of reasonably well-thought-out changes which would allow the creation of the basis of a gradual increase in the effectiveness of the Soviet economy, the basis of the introduction of market mechanisms. INTERVIEWER: You felt at the time that socialism could be reformed? YEGOR GAIDAR: We started at the point that political stability in a totalitarian regime would be preserved. We, like the majority of people in the Soviet Union and the West, didn't believe in a short-term political collapse of the totalitarian regime of the Soviet Union. We considered that there was hope for a gradual liberalization of the regime. We considered that there was hope that a politically liberalized regime would at the same time bring about a more well- thought-out industrial and economic policy, something like Hungary in 1958 or like China in 1989. We supposed that these market reforms within the framework of socialism would gradually give a base for a full-scale market economy. We imagined that this would be a long process, and that it would take not a few months but a few years. It would be a gradual reform, a gradual changing, but [creating a] more or less stable totalitarian regime in a gradual transformation to a market—or at least that is the way we saw the political picture in the coming years. As you see, we were seriously mistaken. INTERVIEWER: When you say "we," who are you talking about? YEGOR GAIDAR: I am talking about the majority of those who participated in the seminar in Zmeynaya Gora, and those who later on took an active part in reform in Russia. That would be myself, Anatoly Chubais, Sergei Vasiliev, Pyotr Aven, Sergei Ignatiev, and many others who participated in the seminar. INTERVIEWER: For people who don't know, what kind of people were you? Were you politicians or academics? YEGOR GAIDAR: We were academics or teachers. Some of us worked in the system of the Academy of Sciences. Some worked in universities and institutes. We were 30-year-old researchers or teachers who were involved in the study of the Soviet economy who knew approximately how it functioned, who knew its weak points. Some of us were recruited into Yegor Gaidar 3 giving advice on economic policy—more or less demanded by the authorities—but we were first of all academics. INTERVIEWER: Were your ideas at the time considered radical within the Soviet establishment? YEGOR GAIDAR: Within the framework of the Soviet establishment, our ideas were considered at the time more than radical. They departed from the region of politically acceptable ideas. Some of our discussions were behind closed doors; we didn't even speak of it [to] all the participants of the seminar because we didn't trust everyone to an equal degree. They were not in the full sense of the word revolutionary, but they were far outside the realm of political permissibility. INTERVIEWER: I read a story where it said that you went around the table and said that you will either end up running the country or in jail. Could you tell us about that? YEGOR GAIDAR: It's true. It was a joke of the sort that in Russia we call cabbage. After the official program of the seminar ended, we had some leisure time in the evening and it was there that people were telling jokes. I was one of those who did, and I [talked about] the basic analysis of the development of the crisis of the type of a "crease"—there was such an official report about the crisis of the "crease." I said that in the further development of the crisis of the "crease" there are two scenarios. The first scenario in the development of reform in Russia was called the top end. There I described in detail the role the process of implementing reform in Russia would take and mentioned the very serious role that Chubais would have. The second scenario was called "the crease." That one described the jail term and the kind of food that the participants of the seminar would get with that development of events. The Worldwide Appeal of Socialism and the Command Economy INTERVIEWER: Could you talk about the appeal that communism and state control of the economy had, not just here, but around the world? You saw the flaws in the system, but a lot of people, not just in this country, but around the world, did not. What was the appeal that socialism had? Yegor Gaidar 4 YEGOR GAIDAR: First was the attraction tied to objective problems of the market political economy, particularly its earlier stages. Capitalism and the market at the same time showed, absolutely unprecedented in world economic history, a flow of incomes and benefits and led to the radical change in all social structures and system of relations beginning with social and ending with the family, population structures, demographic structures, such changes that human history didn't know. As the Chinese correctly say, "God forbid that you live in times of great change," like the ones we know now. And the government was always on the crossroads. These changes and the social organizations gave a powerful wave of protest against earlier capitalism. Marxism and socialism were a more consequential and clear embodiment of that process, all the more since the capitalist heaven gave the impression of the boundlessness of human technological possibilities—"See what it is possible for a person to do." At the same time, [in] the background of that mass of unresolved problems in the country, and because it was evident by the institutions that produced this growth and wealth, millions of people were attracted by the idea of negating the global institutions that had produced contemporary economic growth, which produced contemporary imperialism. That's the first thing. To the second was added specific Russian problems in pursuing industrialization. The country was not able to provide the group of institutions which would allow growth. There was no developed economy. There was no well-rooted system of private property. There was no developed civil society dealing with labor and catching up with Europe. And there were major contradictions that Russia went through in the first World War. They were faced with the chaos of revolution, quite often with a totalitarian regime with a powerful ideological defense. Finally, the third [was] socialism with all of its cruelty in the stages of industrialization, [implemented] at the expense of a colossal robbery of the peasants and the millions of innocent people who died when the Kulaks [a supposed wealthy peasant class] were put off their land and died in Stalin's camps. But [the government] supported industrialization, and from a purely economic point of view was in keeping with the path to that stage. Then it would be the foundation of big estates of millions of peasants, where they could get grain and give the peasants short rations and sentence them to starve to death, and with exported grain buy baking factories from America and Europe.
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