Russia's Paranoid Schizophrenia and The Clueless West

The West's contribution to the totally unprecedented challenge of conversion of the Soviet Union to a democratic and market-based society was, in my view, spotty at best. I say this as one who was involved in projects in Russia, Ukraine and Poland and very aware of projects in Estonia, Rumania and Moldova.

I also deplored at the time the unrestrained triumphalism that proclaimed: "we're number one - nyah, nyah nyah, we won the cold war." That wasn't helpful. Especially in places like Ukraine where people, especially elderly pensioners, were suddenly plunged into poverty by policies we pushed. So-called "shock therapy," for example, was pushed by policy makers who had no idea what the previous seventy years had put into place. The idea of "privatizing" a complex industrial establishment by issuing coupons to the citizens so they could buy shares in crumbling enterprises was a disaster in the making.

One of the most disappointing viewpoints at the time was that of USAID, whose bureaucracy was certain we knew what to do because, after all, we had privatized railroads and coal mines in the UK under Thatcher, tin mines in Bolivia and such like. They were, in short, clueless.

The folks the big six accounting firms sent out to do this gargantuan task were, for the most part, recent MBA's who didn't speak any local language and who were ignorant of the context. Bright, energetic, but ignorant.

We could have done better. Germany did do better. The Germans managed the conversion of East Germany not perfectly, but well enough. One reason Estonia is doing pretty well these days is that the Germans managed that conversion. Czechoslovakia, Poland and Hungary had the advantage of pre-war experience in a market-based system.

Not only did the people we sent not have a background in Soviet economics, they had no background in Western Europe. They thought the American Way was the Only Way.

Let's do better next time.

I've been reading the news from Ukraine with dismay.

Didn't we win the cold war? Didn't we do away with Communism? Didn't George W. Bush look into Putin's soul and see someone we can do business with?

The truth is, our cold war conflict with the Soviet Union had little to do with Communism except in the minds of our own paranoid capitalists. In fact, in the opinion of the last Prime Minister of Russia before the October (Bolshevik) revolution, the Soviet Union didn't have a socialist or communist system at all - it was a case of State capitalism.

Anyhow, I wish the Ukrainians well. I have probably read more articles on the developing crisis than most Americans. I have collected links to a number of articles, mostly from the NY Times, but also from other sources. Please take your time and read them.

http://www.nytimes.com/2014/03/15/opinion/trudolyubov-putins-honest-brokers.html?hp&rref=opinion

http://www.nytimes.com/2014/03/15/opinion/mccain-a-return-to-us-realism.html?action=click&contentCollection=Opinion&region=Footer&module=MoreInSection&pgtype=article

http://www.nytimes.com/2014/03/16/business/crimea-through-a-game-theory-lens.html?ref=international

http://articles.latimes.com/2014/mar/04/opinion/la-oe-walker-ukraine-nato-expansion-20140304

http://www.nytimes.com/2014/03/14/opinion/getting-ukraine-wrong.html?action=click&module=Search&region=searchResults%230&version=&url=http%3A%2F%2Fquery.nytimes.com%2Fsearch%2Fsitesearch%2F%3Faction%3Dclick%26region%3DMasthead%26pgtype%3DHomepage%26module%3DSearchSubmit%26contentCollection%3DHomepage%26t%3Dqry347%23%2Fukraine%2Bwest%2Bmistakes%2F

http://www.newyorker.com/talk/financial/2014/03/24/140324ta_talk_surowiecki