This must have been a historical first: a summit involving two leaders who both are being pressured to resign. But the problems confronting Boris Yeltsin and Russia are enough to make one appreciate the luxury of being preoccupied by presidential sex scandals (or even presidential perjury scandals).
News reports from Moscow show scenes reminiscent of this country’s 1929 stock market crash, with frenzied men and women crowding outside banks trying to withdraw their savings as the country’s financial system crumbles. Except that the U.S. during the Great Depression had an immeasurably more solid economic foundation than Russia does today.
To many on the left, Russia’s meltdown is providing a golden opportunity to bash their favorite twin whipping boys: the free market and America. Russia, we are told, went too far or too fast in privatizing its economy; capitalism has inflicted worse misery on ordinary Russians than communism ever did.
Stephen F. Cohen, a professor of Russian studies at New York University–who, as a Sovietologist back when there was a Soviet Union, argued that the Soviet system could be reformed from within and changed into “socialism with a human face”–blames an “American crusade to transform Russia into a replica of American democratic capitalism.” Nation magazine editor Katrina vanden Heuvel takes umbrage at the U.S. president “preaching” to Russians, in the grip of a crisis, how to run their economy.
In a stunning comment which shows the leftist mindset of moral equivalency between Soviet Communism and Western democracy, she added that “It’s as if a Russian president had come to this country in 1933 during our Great Depression” and told us what to do. Would that be Stalin?
Actually, it’s far from clear that most Russians are worse off now than they were before the collapse of Communism. When vanden Heuvel says on a TV show, “Russia is now an impoverished nation, the majority of its citizens are impoverished,” she ignores the fact that this was also true under the Soviet regime. Especially outside big cities, such as Moscow, bare shelves were the norm and it was not unusual for people to get up at dawn to line up for bread and milk. Some of the trends cited as evidence of a post-Communist deterioration in living standards, such as the drop in life expectancy, actually date back to the Soviet era. And the official statistics do not capture the vast informal economy, often based on barter rather than money.
Be that as it may, to say that Russia’s troubles are the result of too much free market is a little like saying Clinton’s troubles are the result of being too straightforward with the public. The markets in Russia are “free” only in the sense that the financial oligarchy has free rein.
Entrepreneurship has been largely stifled by licensing fees, burdensome regulations, and lack of protection from organized crime. The new Russian “capitalists” are really the old bosses of Soviet industry who were in a position to get their hands on economic resources when the Communist system fell apart, and whose skills lie not in creating goods or services but in exploiting their ties to the government to stifle competitors.
As for younger “New Russians,” there are genuine business pioneers among them–but all too many engage in financial machinations that often resemble pyramid schemes more than stock market transactions. Juliet Johnston, a visiting professor at Dartmouth who is fortuitously writing a book on the Russian banking system, argues that Russian banks do not act like banks: They don’t grow their wealth by investing in industry. This differentiates Russian financiers from America’s 19th Century “robber barons.”
What’s more, the Russian state won’t cut off life support for mammoth enterprises which consume 50 percent more in resources than they produce in (unneeded) goods, and don’t pay taxes or repay loans. A report in The New York Times points out that Poland, which allowed such dinosaurs to die and their workers to set up small businesses unhindered by government, has one of Europe’s fastest-growing economies.
There is another important way in which Russia, whatever Cohen may say, suffers from not being more of a replica of American democratic capitalism: It is missing the rule of law and the moral principles that have always been the underpinnings of free markets.
Corruption is routine, at every level from the lowliest police precinct to the upper echelons of government. Most Russian businessmen not only lack any notion of giving back to the community but also believe, just as they were taught by Communists, that business is no different from a scam. When I was on a trip to Russia in 1992, a young man who had quit graduate school to go into business told me, “One of the hurdles I had to overcome was getting used to the idea that if it’s in my interest to deceive someone, I have to do that.” Nor is there any notion of deferred gratification: The idea is to get rich quick, take the money and run.
Giving more money to Russia at this point may be throwing good money after bad–money that will end up in the coffers of the same pseudo-capitalist tycoons. Perhaps, a few years ago, the United States could have given aid to Russia in a way that would have done more to promote genuine reform. Perhaps we have “lost” Russia. But it certainly wasn’t because we tried to make it too much like us.
