Hough - L'Cl CHAPTER FIFTEEN Conclusion MIKHAIL Goanacnev was not riding an uncontrollable tiger China affords convincing proof that communist

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Unformatted text preview: L'Cl . CHAPTER FIFTEEN ' Conclusion MIKHAIL Goanacnev was not riding an uncontrollable tiger. China affords convincing proof that communist systems can be reformed in an evolutionary manner for fifteen years at least, and such a period would have brought the Soviet Union to 2000 and Gorbachev to his sixty-ninth birth- day. Moreover, there is no such thing as a pure planned or pure market system. and countries in middle stages of industrialization normally have more‘government regulation and intervention than they do at later stages. Modern Westem'economies always combine market and regulation: they are “mixed economies," we used to say. Similarly, democracy at its early stages normally is only half-democratic. Transition to a fuller market and more comprehensive democracy is always evolutionary and managed and takes decades. ' I lri-ekplaining why events in the Soviet Union evolved in a more liberal, market-oriented direction. One must look at changes in society and at the imperatives of postindustrial society and the global economy. But in ex- plaining why events in the Soviet Union took a revolutionary course, I follow Crane Brinton. Mancur Olson, and Theda Skocpol in pointing to the attitudes of those at the very top of the system and the decisions they made or did not make, not pressure from below. Most who advance this interpre- tation of the last years of the 19805 and the first of the 1990s focus on Gorbachev's ostensible indecisiveness or his weakness of character. But as 7 Ye got Ligachev has contended. Gorbachev was not inherently indecisive. He showed astonishing decisiveness 1n consolidating power within the Communist party, spurring demooratization, abandoning Eastern Europe,. and destroying the leading party organs and the party apparatus. 490 CONCLUSION The reason for Gorbachev’s indecisiveness on economic reform and federalism was intellectI‘Jal. He had no theory of how transition was achieved. He distrusted the bureaucracy that would have to manage a transition, and he had an exaggerated fear of its power. He did not under- . stand that a functioning market depends on government and law. Least of all did he have a feel for what Crane Bn'nton once called the subtle “line in on .pnot to be :actualpractice of governmentbetween force and persuasi _ drawn fermaias, by ‘sciettce' or textbooks, but by men ski“ d in no art of ruling.”' Because any theory of transition must require strong govem— ment action. Gorbachev's beliefs also prevented him from accepting others‘ theories of transition, notably those of Nikolai Ryzhltov and the economists associated with him. i Gorbachev‘ 5 views and those of his closest advisers seemed to flow from the anarchism in Marxism and from the Russian intelligentsia‘s traditional distrust of government, business, and the militaryL-even the nihilistic fea- tures of the intelligentsia‘s tradition}I Marx never recognized that manage- ment and entrepreneurship were useful in creating and maintaining capital- ism, and his vision of socialism was also noninstitutional in its vague combination of planning and the withering away of the state. Lenin under- stood the importance of organization, but his vision of the communist future was as anarchistic as Marx'sBoth understood that democracy was a state. that it ultimately rested on the use of force. But in rejecting any state, they were left with the anarchist conception of democracy. Marxism-Leninism was victorious in Russia in large part because it was so congenial to the mind-set of the Russian intelligentsia. American intel- lectuals developed and propagated the concept of a broad and good 'middle class that included professionals, businessmen, civil servants (not “bureau- crats"), military officers. and even skilled workers. Whatever one may say about this as a realistic view of American social structure, American intel— lectuals were building a coalition. They were emphasizing the similarity of the interests and values of various elite groups with one another and with the broader population, and they were including themselves among the elite groups. By so doing they were offering cooperation with the other elite :- Ill-u In u 1. Crane Brinton, The Anatomy ofRevalurt'on (Norton, [938). p. 66. 2. Jonathan Steele of the Manchester Guardian emphasizes the nihilism in the Russian tradition and in Gorbachev‘s reform in Eternal Russia: Yelrsr'n, Gorbachev. and the Mirage of Democracy (Harvard University Press,yl994), pp, 269-73. VO/SZ/TO TQOITLV 3T9 XVd 9T=ZT .LNEIWNHEIAOEJ-lfl stun 492 CONCLUSION groups rather than confrontation. This has proved a farsighted political strategy that has been very beneficial for American intellectuals. Members of the Russian intelligentsia. by contrast, have seen themselves as superior and isolated, alienated from all other groups in society. They have spoken of a conflict between state and society, but they have included only themselves andprofessionals in society. Capitalists (or the economic nomenklatura). bureaucrats. and the army have been described as enemies. and the noradithe people) as contemptible. A century ago the peasants were “the dark people." but by the 19805 the workers were viewed in similar terms. A perceptive Americanjournalist reported in 1981: My friends are convinced that sixty years of Soviet rule, which has taught schoolchildren to lie and destroyed civic virtue, have turned the Russian people into'a rabble. ripe for envy, violence. and demagogy, but not for responsible I citizenship. if the hated regime were to collapse ovemig‘nt, fierce nationalists would be more likely than enlightened liberals to replace it. if only because few enlightened liberals manage to develop in that soil. and few understand or want ‘ them. Even if something more humane were to arise. it would be torn apart by the _ dumb anger Soviet rule has incubated} in political terms this world view implicitly denies the broad coalitional strategy needed for evolutionary reform. It leads instead to the_situation bemoaned by Leonid Abalkin in the late 19805: economists and govem- merit officials saw each other as enemies (vmgr'). The view is compatible only with a policy of trying to destroy the position of other groups in the elite and hoping a good new society will emerge. For more than a hundred years this political strategy has been disastrous for Russian intellectuals. There are many lessons to be drawn from the story told in this book. The first, of course. is for Russian intelligentsia. In 1996 they were once more disillusioned with what they had created through their struggle in the 1980s. From their perspective, businessmen are Mafia. property is owned by the nomenklatura, bureaucrats are corrupt, and workers and peasants cannot be trusted to elect state governors because they would vote for the wrong candidates. Regions cannot be given powers 'of taxation because this would lead to the disintegration of Russia. Agricultural reform is impossible because the cities would starve. As a consequence, Russian intellectuals still are not thinking of coali- tions. They still are not developing reasonable strategies of transition to a 3. George Feifer, “Russian Disorders.”Harper's. February 1981, p. 54. I I I I I I I I CONCLUSION 493 democratic market society with reasonable concepts of the trade-offs and compromises needed in such societies. They still are not studying the experiences of China and the third world because they recognize only the most advanced countries in their most idealized form as models worthy of their attention. And once again other groups are thoroughly disillusioned with the intelligentsia, whom they now call democrats, besmirching a word _ that should connote responsiveness to people’s wishes—the opposite meaning from the one it has acquired in Russia. Although the intellectuals are beginning to be ignored and expelled from pow/er. Russia wiii not become a normal country until they become a constructive force in society. But there are also lessons for the West. The insensitivity of Gorbachev and his advisers to the institutional bases of the market and democracy had its counterpart in influential policy communities in the West, particularly among economists in the international economic organizations and the technical assistance organizations promoting democracy. The West lion— ized those Russian intellectual reformers who criticized all other groups as communists and nomenklatura and who espoused contemporary American institutions and theories. It encouraged them in all their worst characteris- tics. Moreover, it was Westerners who assured the Russians that the abrupt destruction of the old system would lead automatically to the rise of a good society with a fully functioning market. They talked of leaping a chasm in a single jump or the impossibility of moving from a British to an American traffic pattern by first having trpcks driving on the right side and then cars. When at the end of 1991Yegor Gaidar talked sensibly about taking a year to introduce changes, it was Westerners who insisted that he accelerate his program .4 The radical Russian reformers learned that it was necessary to lie to Westerners. to keep a double set of books, and to find scapegoats for the failure of their own (self-proclaimed wise) decisions. The result was that many Westerners retained ideas far more naive than those of the Russian radicals themselves. who were learning from mistakes. The basic problem for American analysts was that Western society has been too stable since World War 11. Its institutions, rules. laws, and incen- tive systems have come to be taken for granted. Economists and other social scientists assumed the permanence and stability of the macroeconomic 4. Anders Aslund, How Russia Became a Market Economy (Brookings. [995). p. 65. I I I l, I IV." r0/s3/To TQOITLV 3T9 XVd ZO=ZT lNElWNHElAOD—lfl T00 bill roles within which the actors playedfi Once it was concluded that the explanation for theslow economic growth in the West after 1970 was excessivelgovemment interference in the market, the invariable prescrip- tion was to privatize. reduce the role of government. get the prices right, and. ensure fiscal stability (or. perhaps, control the money supply). The govern- ing assumption seemed. indeed, to be the one expressed by the president of the CATO Institute in 1990 in Moscow: “Introduce freedomL and the market. will takecare of itselfli, The decline in overall rates of economic growth in the 19705. 19833. and l9905 has not clean; Similarly, as the great American political debates on the role of govern- ment and federalism that surrounded the New Deal and the desegregation movement receded from memory, the concepts of democracy and democra- tization also became very noninstitutional and ahistorical. Democracy was defined as individual freedom and free elections with competitive parties. and the implicit model was an idealized version of contemporary American democracy. The vision was not of democracy as it existed in nineteenth century England and the United States, let alone many of the democratizing countries of Asia and Latin America, which would have been more appro- priate for Russia. Indeed, it had little correspondence to real American democracy that scarcely solves problems such as entitlements or the deficit through shock therapy. ‘ Although the'word anarchism is discredited in the United States and has become essentially synonymous with terrorism. much of Western analysis, in fact. became anarchistic or semianarchistic if taken literally. The analysis was. of course. not meant to be taken literally: the rules, laWS, and incen- tives found in the United States were taken for granted. But when such a system had to be introduced from scratch, the need to give priority to the establishment of rules, laws, and incentives was forgotten. The same advice was given to Russians as was given to third World countries where these rules, laws. and incentives in large part already existed. In the Russian context the implicit anarchism of the analysis became all too real. West- emers tacitly assumed that rules, laws, and incentives would emerge like Athena from the head of Zeus. When the Russians asked for help on the transition to a market economy, Americans forgot the first crucial advice: 5. This was not always true at the microeconomic level. There was a keen awareness that changes in the tax and depreciation laws would affect incentives and therefore business decisions in major ways. get the laws right. get the short system right. get the political system right. think about incentives. ‘ Eventually the Robespicrres of the Second Russian Revolution will finally. be pushed from the scene. People are likely to come to power who understand the importance‘ol' the state, of clear and en forced rules, and of incentive systems that give managers a long-tenn perspective oriented toward production rather than seizure of property at any cost. In theory this is all to the good. A real market economy and a real democracy will never , ' ' ' " ' :I ' ' : ‘ :_i . A a ri 1-. l- 7 be estaolrshe - teasers use; the caste associates stood uy tne ‘ rulers are introduced. Yet the so—called reformers in Russia and their Western supporters have defined the market and democracy in very noninstitutional. antistatist terms. To the extent their opponents adopt the definitions of the reformers. they may be led to reject the general concepts of market and democracy. This would be a tragic mistake. It is for the West to begin developing theories that reflect the reality of Western and third world history, not doctrinaire models .based onrthe precorporate world of the early nineteenthth century. The West must put special emphasis on devising theories of economic and. political development that apply to countries at middle levels of development. for these countries in Asia will pose the greatest threats to peace in the first half of the twenty-first century. The Character of the Second Russian Revolution Neither the liberalization in .the Soviet Union nor the Second Russian Revolution was caused by the military buildup of the Reagan administra- tion.6 They were caused by changes in the attitudes and values of the Soviet elite and the rest of the population that were decades in the making, by the greater attraction for an educated population of what are called "Western values" and what Gorbachev called "universal human'values." As early as 1959 Edward Crankshaw noted major differences in attitudes between those in administrative work who Were younger than age thirty-five and ‘ those who were older. As the young men of the 1950s aged and rose into the middle and top levels of the elite. they brought with them their dissatisfac-j 6. By the same token. of course. events also proved wrong those American liberals who said that a hard-line American policy would make liberalization in Soviet domestic and foreign policy impossible. ' VO/SZ/Io TQOITLV 3T9 XVd €0=ZT tLNEIIlNHEIAOD—lll 200E 496 ' CONCLUSION tion with the old system, political culture, and values. Those who were younger were‘still more disenchanted. Many Westerners found-it difficult to accept that the Russians were a normal people‘and that education, urbanization, and occupational differen- tiation would change the attitudes of both the elite and the people as they had elsewhere in the world. The strong pressures being created in support of liberalization and democratization not only within the intelligentsia but . elm anaestheso-called panssratwere siren, far too little attention. : fimerican. conservatives in particular had profound misconceptions about the attitudes of those high in the Communist party and military hierarchies. The conservatives did not see an economically underprivileged and [politically repressed middle class or business class, but instead a privilegedlnomenklalura that was united in protecting its power and posi- tion; _ They did not see the differentiation that had occurred within the bureaucracy and failed to understand that individual bureaucrats often had fundamentally different interests from those of their institutions and would have unusual and attractive opportunities to pursue their individual interests in a time of change. , F In fact, the Russian people strongly supported democratization after l989.'When they finally turned against the "democrats." their responses in Jublic opinion surveys made it clear they were rejecting authoritarian dictatorship masquerading as democracy, not democracy itself. They were disillusioned by continued control of the regions by an economic policy that did not reflect public opinion and by the continued rule of the regions by the center, which Yeltsin had promised to end. The non-Russian republics have gained some independence, but not the Russian provinces. and that was and is a source of great resentment. Neither did the party and economic nomenklatura prove a solid bulwark defending the old system. Most of Gorbachev's radical advisers had worked for years in the Central Committee apparatus. Moreover, as Mancur Olson predicted, the hearts and minds of the people were less important to effecting revolution than the local Soviet government officials who controlled the purse and had the power to hire and fire. The war of laws between the Soviet and republican governments and the chaos it produced was created by local Com- munist party officials, not revolutionaries in the street And the defiance of the Baltic republics began in 1988 and 1989 when the Communist first secretaries were still in power, while the Ukrainian drive for independence was conducted by a party apparatus in which very little turnover in personnel had occurred or was to occur in the first years of independence. 1’. .l .v d] i '1. IIIIIIIIEIIIIHII CONCLUSION ' 497 There were many causes for discontent among the elite. The most prominent included the corrosive effect of education in destroying support for the restrictions on freedom found in the Soviet Union, and the growing dissatisfaction of the upper and middle elite with the gray egalitarianism of Soviet society and the low level of privilege in their lives in comparison with their counterparts in the West. The widespread travel abroad in the 1970s, including that of Gorbachev himself, was crucial. The exchange programs of the West were far more crucial in destroying communism than . .. . . .. . . a , . . . . r' :1 :- -.- . r. e :G A“ .__ - 11-25.: __-_ _§;n . n la: I seas-sis; 5-: one early :t-etls. m: :ncmasnagiy muercnua ed cine was also restive under the political dominance of those employed in the ggigi raw: 7 defense and heavy industry. The experience of the West and the Pacific Rim countries demonstrated to the elite that depression was not inherent in capitalism and that integration into the world economy was better for technological advance than was Soviet autarchy. Finally, the elite despaired of the Soviet system's ability to achieve a smooth and rapid transition to a service economy and the consumer benefits and social mobility associated with it. Their children and those of workers found upper mobility blocked by a System that best served the social mobility interests of peasants streaming into the city. . A final Western misconception of the Soviet elites' state of mind was that Marxism-Leninism had indoctrinated them in the need for authoritari- anism.T In fact. the doctrine actually was multifaceted. The young in the Soviet Union had, of course, not been told that Marxism-Leninism was authoritarian and that authoritarianism was needed. Instead, they were taught that communism was democratic and that theqessence of Lenin's nationality policy was the right of secession. Older leaders repeated such concepts cynically, but for the young they were the ideals that government was supposed to serve. and the ideals against which Soviet reality and later policy choices were judged. The young of the 1940s and 19505 were to become the middle-aged of the 19805. ' 7 V The changes in people's attitudes obviously did not lead directly to revolution or even liberalization. Soviet society in the mid-19805 was little different from what it had been at the beginning of the 1980s, but the social pressures of the earlier period had been only marginally reflected in 7. Most pointed to Lenin's What's to Be Done, with its image of a centralized party. its contempt for workers' "trade union consciousness," and its insistence that the party had the obligation to follow its understanding of the laws of history rather than reflect the workers' view of their interests. VO/SZ/TO rsorrtr its XVd r0:zr LLNEIWNElElAOD—lfl soon I I l tEi 493 Brezhnev's policy. Radical political change required achange in the people in power, which generally meant leaders with a younger outlook. A leader much older than Gorbachev could have introduced radical change (this happened in the Catholic Church with Pope John XXIII), but it was more likely to be introduced by a person whose values had been shaped in the- 19405 and the 19505 rather than in the 1910s and 19203. ‘ Why did liberalization give way to Gorbachev‘s transformation of the system and lead to its destruction in such a short time? The immediate reaso nrrwas that Gerbaehevrefused-tor-use enough force to ensure obedience to Sovies laws and to suppress separatism. An enormous amount has been written about the handful of deaths Soviet security forces caused in Tbilisi. Baku. and Vilnius, as if these acts somehow destroyed perestroika. But ' continuing such limited applications of force would surely have preserved the Union. After all. the Soviet population was thoroughly cowed in 1988. intellectuals responded to the Nina Andreeva letter of March 1989 with retreat until the letter was attacked in Pravda. If the momentum toward separatism had been stopped and obedience to central laws enforced, stabil- ity could have been maintained with few deaths or arrests. Martial law was imposed successfully and with little bloodshed in Poland in December l981, even though public pressure against the government was much greater. workers better organized, strikes more widespread, and the political and administrative chaos much more serious. It was crucial for Gorbachev to be firm about the limits of protest if he wanted perestroika to succeed. If any leader in any country indicates that he will not enforce laws or central authority, events will surely spin out of control. The logic of collec- tive action is based on the assumption that individual attempts to seize goods or power will be opposed by police and, if necessary, the army. If individuals and local government officials learn this resistance will not materialize. they have a strong self-interest to seize more and more goods and pOWer. Edward Banfield’s “rioting for fun and profit" is not far from Steven Solnick’s “colossal bank run in which local officials rushed to claim their assets before the bureaucratic bank closed for good."' Until the rioters and the officials seizing property and power are stopped, they will be joined 3. Steven L. Solnick, “Growing Pains: Youth Policies and Institutional Collapse in the Former Soviet Union." Ph.D. dissertation, Harvard University. 1993. The quotation is from the abstract on the computerized dissertation abstracts at the Library of Con— gress. The quotation from Banfield is in The Unheavenly City: The Nature and Future of Our Urban Crisis (Little. Brown, 1968). pp. 21 1—34. I ' .-.urmu.«m..._m..mh. . . cdwfiviusrdfi'” " CONCLUSIO'N ‘ " I 499 by others. It was Gorbachev's refusal to take responsibility for the minor application of force. not the use of the force itself. that undermined per- estroika. One reads Crane Brinton's words from 1938 with a feeling of familiar- ity. The Russian ruling classes. in spite of their celebrated Asiatic background, were by the late nineteenth century more than half ashamed to use force, and therefore used it badly. so that on the whole those on whom force was inflicted were ail-"isolated rather than recresrue-‘i Go: of the let-«t ciera --” rim liisfiini—"n - 5 v. . . . u _ ._. u—a‘ mwtsu u! .uu _-:..::..-r..i u. ruling classrto rule is the absence of this skill among its members. When these of them who [have] positions of political power [do] use force, they [use] it sporad- ically and inefficiently)J The most interesting question is why Gorbachev and his closest advisers refused to act to save the system At ‘- -.... m use level. the answer seems simple: they had lost faith in communist ideology, Lenin, and the command- administrative system. Moreover, it was not only the reformers who had lost faith. The so—called conservative leaders had ample opportunity to remove Gorbachev when the political situation in the Baltic republics deteriorated and when he tolerated the war of laws with Boris Yeltsin. If they had been as convinced of the virtues of socialism as earlier Soviet leaders. they would have intervened to prevent him from losing Eastern Europe. And, of course. no political behavior was more telling than that of the men who organized the August 1991 coup. They were the most conser- vative membersof the Politburo and Soviet leadership, but even they did not believe enough in the system and the country to use force to preserve it. Crane Brinton pointed to abandonment of the system by intellectuals as a crucial element in successful revolutions. HOwcver, hundreds of dictators from Stalin to General Augusto Pinochet in Chile demonstrate that one can rule handily with intellectuals in opposition. Revolution occurs when the elite begin to believe the disaffected intellectuals. I" 9. Brinton. Anatomy afRei'ohrrioii, pp. 66, 67. ’ I 10: In addition. the causal arrows between intellectuals and elite can go‘ iii both directions, for intellectuals may be driven by a desire for access to power and funding. This book has commented that many economists cunied favor. in the early 19305 it was a shock for me to discover the director of the Soviet Institute of the International [Workers' Movement beginning to focus the work of his institute on the Pacific Rim and integration into the world economy. At the time this seemed a clear sign thatthe director thoeght the post—Brezhnev leadership was not likely to fund the kind of work done by the institute in the past and there was little danger in the position he was taking. I 7 r0/SZ/r6' TQOITLV 3T9 XVd 170=ZT lNElWNHHAOD—lfl 1700 751 500 CONCLUSION At what pointldid Gorbachev lose faith and what were the reasons? In retrospect. his policy after'l986‘was basically consistent and its outcome predictable. whether or'riot he understood where his decisions were leading. Once he rejected retailprice'increases in December 1986. once he was repelled by the use of force that might be required if demonstrations broke outronce he thought that administered price increases would allow the ‘ s-bureau'CraCy to throttle reform. any kind of evolutionary transition was out ' ""of'thequestionf 7 ‘ . A 7 7 7 - It is likely that Gorbachev at first thought the changes he was instituting could be kept within bounds. Yeltsin was probably right in suggesting that n; at some point Gorbachev became demoralized. But the evolution in Gorbachev's thought will probably never be understood with complete confidence. He has written that be destroyed his annotated appointment books in December 1991 out of a fear of arrest. Vladimir Kriuchltov was calling Aleksandr Yakoviev a CIA agent. and many moderate reformers and conservatives wrote of being betrayed. The memoirs of Gorbachev and ‘ his advisers—Gorbachev's most of all—reveal little about their interrela- tionships, and concern for their mutual safety must be one reason. It is much - safer for Gorbachev and his advisers to say now that they were committed r to democracy and that they were surprised by everything that happened I except democratization. The complex relationship of leader and adviser makes analysis of Gorbachev's state of mind particularly difficult. It is possible that he was being honest when he told the Poles in 1988 that he had not originally thought of political reform as the central component of his program. But if his first priority was economic reform, that of Yakovlev. Anatoly Chemiaev, Georgy Shakhnazarov. and Ivan Frolov, his closest political advisers, was political. As discussed in earlier chapters, in December 1985 Yakovlev wrote a memorandum to Gorbachev calling for a split in the Communist party. and therefore for a multiparty system. In 1988 he told a new assistant that he thought Marx had been fundamentally mistaken. He later commented that he never thought the East European Communist parties would survive democratization. Chemiaev's first advice when he became Gorbachev’s personal assistant was that Germany should be al— lowed to reuniteult is possible that at early stages some of these advisers deliberately proposed actions that they were convinced would destabilize the system but hid these expectations from Gorbachev, who was more naive. And by the same token, it is likely that Gorbachev was hiding many of his inner thoughts from his advisers as well as from conservatives. LLLLLIII CONCLUSION ‘ 501 Yet ultimately Gorbachev chose his advisers and decided whom to keep and whom to let go. It was he who made the decision to cast aside relatively radical reformers such as Leonid Abalkin and Oleg Bogomolov, let alone the highly qualified reformers in the financial community who associated with Nikolai Ryzhkov. It was he who was attracted to the idea of full democratization rather than the more authoritarian economic reform that was found in Asia (and that he cryptically mentioned in his memoirs Without evaluatingi.” And when in late 1990 he became demoralized about the course of events and essentially shed Yakovlev, Eduard Shevardnadze, and Nikolai Petraltov, he could not bring himself to embrace the conserva- tives or even the moderate reformer Valentin Pavlov, whom he appointed as premier. As late as December 1991 Gaidar and his colleagues were extremely worried that the military would support the Union. but Gorbachev still Would not pay the price of declaring menial law. Gorbachev increasingly considered democratic processes the way to find difficult answers to the problems he did not know how to resolve. Defining democracy in very noninstitutional and consensual lerrns and believing the use of force was incompatible with it, he found himself helpless before those who defined politics and government in other ways. He was seeking consensus where consensus was impossible and had no sense of Brinton‘s “line in actual practice of government between force and persuasion."|1 The result was inevitable once he faced a rival who was certain what he wanted and was decisive in seeking it. The summer of 1990 was when the situation became revolutionary. and two factors were critical: Gorbachev's failure to insist on central control of finances and his emphasis on privatization. Gorbachev was at first oblivi- ous to the dangers of rising deficits and then was uncertain how to handle Yeltsin as the latter skillfully extended the central govemment‘s financial difficulties. His failure to oppose Yeltsin‘s attack on the treasury and to defend the central government's powor of taxation created serious doubts within the military and bureaucracy about the desirability of supporting him against Yeltsin. Valentin Pavlov was correct in considering as a turning point the confer- ence in the summer of 1990 at which Gorbachev refused to fight the newly elected republican governments over control of taxation. Historians are virtually unanimous in emphasizing financial difficulties of the old govem- ll. Mikhail Gorbachev. Memoirs (Doubleday. 1995). p. 494—95. 12. Brinton. Anatomy of Revolution, p. 66. TQOITLV z'"i9 XVd ‘ lfidiihifiiib‘iiiifi” VO/SZ/TO 90=ZT .jbz concnusION ment as a crucial element in all revolutions (“a rich society with an im- poverished government" was Brinton‘s phrase).I3 Never, however. has a government with total control over “taxation” because of its ownership of all property fallen into financial bankruptcy because it allowed local gov- ernmental units under its control to take control of tax revenue. (As Brinton's model suggested, the economic problems at this stage were minimal— an end to growth. yes, but nothing like the depression that began in mid-199l .) That is what happened from the summer of 1990 and the late summer of 1991 in the Soviet Union. Yet in the .longrun the emphasis on- privatization that began with MM, n,,., .9... . . flufllfitfl s {and ayzhaea s) £9935 ace reaches: its sea-5h: with SOO-Day Plan in the summer of 1990 was just as important. The Chinese privatized little state property, and even agricultural land was leased rather than privatized. Essentially they let the market grow up around the state sector. beginning first with agriculture and the services. In their enterprise zones. they permitted new cities to evolve out of small villages. Dace Gorbachev refused to have the price adjustments (or the combination of rationing and market forces) of the Chinese model that was necessary for Bagricultural reform and instead concentrated on decentralization of power to enterprises, he was driven almost inexorably to privatization as the path to market reform. _ 7 Critics of the SOD-Day Plan focused on the wild utopianism of its insistence that privatization be finished in the first 100 days or so, but the mere idea of universal privatization had a profound psychological impact on everyone. They took it for granted that the plan's timing was utopian. but if it and the Abalkin plan, which also emphasized privatization, were being defined as the two poles of the discussion, Gorbachev's centrist position was certain to feature'radical privatization spread over a longer period. If Yeltsin won, privatization would likely be more rapid. This had a particularly significant effect on the officials of the state apparatus. Once these with managerial experience saw that economic re- form was probable, most had a strong interest in it.“ The introduction of a private sector “amidst the very least raise managerial wages throughout the country. An opening to the world economy would give managers access to [3. Brinton. Anatomy afRevalutian. pp. 40-41. l4. For an analysis and documentation of this attitude in banking reform, see Joel Scott _l-lellman, "Breaking the Bank: Bureaucrats and the Creation of Markets in a Transitional Economy," Ph.D. dissertation, Columbia University, 1993. CONCLUSION 503 foreign currency and foreign bank accounts. ('1‘ he absence of access to bank acounts was the major disincentive for the large—scale corruption often found in the third world and in Russia after [991 but generally lacking in the Soviet Union before 1988.) Privatization would permit the accumula- I tion of unprecedented wealth. Once the alternatives were limited to the Abalkin plan and the SOD—Day Plan, any official could see what was coming and begin to position himself to exploit it. In the early stages, directors of enterprises took advantage of their increased independence to sell off “excess” and "outdated" equipment, often to the newly legalized cooperatives in which; not entirely by coinci- r - - .- . . . . . =.! . , r-r, E, __ n a“ g; 4'- - - n- d «-— - -. a . ..-: - . .-.. r-..-'-.=::.-=n snzarae. _ .a 33.4,. _ .nm uaflCc, shay ‘0'? than ifiiait‘u'ofi :13;- 3 Sufi..ut....5 Inna-Ivan. up. nvlvtbluu no... these takeovers were so much greater than they Were from normal invest- ment and production that. not surprisingly, these latter were neglected. The drumbeat of press criticism of the bureaucracy contributed to the speed of the change in attitude. Middle-level officials had long been keenly aware that their salaries were low even by Soviet standards and that their living standards. even with some nonmonetary supplements. were not remotely comparable to those of their counterparts in the West.” As first secretary of the Stavropol Gorkom in 1967, for example. Gorbachev had a one-bedroom apartment, which was not unusual.“5 The man in charge of all construction in Leningrad lived in a two-bedroom apartment in the 1980s. However. as he commented to me, he and other officials like him valued the prestige and sense of accomplishment they received. But once the state- owned media began to denounce the command-administrative system as well as the "conservative" and “privileged” bureaucrats. the bureaucrats not only lost this psychic income but had no reason to be loyal to the state and party that controlled the media. In short. the vaunted Soviet bureaucracy turned out to be a collection of “bureaucrats” with very different interests from those of the bureaucracy. Mancur Olson did not sufficiently recognize this point in his Rise and Decline of Nations, but he emphasized in “The Logic of Collective Action in Soviet-type Societies" that it applies even to officials who are loyal to the regime: _ f i 15. Yegor Ligaehev reported in 1939 that the average salary of partyofficials was 216 rubles a month. little more than the average salary in the country. Pravda. July 2. 1988, p. 11. 16. Mikhail Gorbachev. Zhizn'i reformy, vol. 1 (Moscow: Novosti, 1995). pp. lll. 11349; Memoirs. p. 78. VO/SZ/TO TQOITLV 3T9 XVd 90=ZT tLNElWNHElAOD—lfl 900E 04 CONCLUSION Just as it does not normally pay a typical individual to rebel. so it also does not pay for the typical policeman ogsoldier or bureaucrat who‘happens to be believe in the regime to go out of his ;way to help the regime survive simply because he favors the regime: It does not pay the typical official of a regime to carry out the orders of the leadership unless there is some incentive for him to do that separate from his belief in the established system." answerable: or the’private‘sector. his or her 'self4interest is intimately tied o the job. The employee’s supervisor controls the incentives and coercive seapons (that will determine the person’s future. The distinctive thing about rureaucratsin the communist world' was their limited ability to get away. which dampened their political behavior. '8 When they acquired the freedom cleave. their behavior changed. The Importance of Institutions and Incentives "The victors are never judged," a Russian proverb insists. and thelessons if the Second Russian Revolution will be drawn by those who see its Etimate consequences. If Russia quickly evolves into the normal country at Anders Aslund already envisions and if its foreign policy remains teaceful. the suffering of the 19905 will seem no more significant than that n the Great Depression of the 19305 in America seems to Americans fifty ears later. The same would have been true of the suffering during Soviet ollectivization if it had produced an efficient agricultural system. Those Westerners who see the Revolution of 1990—91 as successful are already luite callous about the enormous suffering it has caused.'9 But if pro-1996 economic policy produces some political disaster. West— rn advice will be damned as severely in retrospect as Western policy award Germany at the Versailles Conference and in the 19205. The same 17. Mancur Olson. “The Logic of Collective Action in Soviet-type Societies." animal of Soviet Nationalities. vol. 1 (Summer 1990), p. [5. l8. See Albert 0. Hirschman. Exit. Voice, and Loyalty: Responses to Decline in I'r'rrns. Organizations, and States (Harvard University Press. [970). - 19. For example. between 1990 and 1994. an extra l.5 million people died who vould have been alive if_on|y the already very heavy mortality rates of 1990 had been paintained. Jerry F. Hough. Evelyn Davidheiser. and Susan Goodrich Lehmann, The 996 Russian Presidential Election (Brookings. 1996). p. 94. if a person has rip possibility of leaving the bureaucracy for other CONCLUSION ’ ' ‘ 505 is true if post-1996 proSperity is seen as having been produced by a change in economic policy. not by the pro-1996 policy. If one excludes the extremely unlikely possibility that Gorbachev was determined to destroy the Soviet system from the beginning. however. one can at least draw lessons on the reasons that the path he chose did not result in the radical transformation within the system that he seemed to want. One can point to mistakes in the steps he took to achieve his goal. be it optimal or mngaided. and draw lessons for others who attempt policy change rn ' other situations. - First. it is clear that Gorbachev believed the defects of the Sovret eco- nomic system Were the result not of rational responses of officials to the incentives it embodied but of the warping power of those who benefited from the system. Thus he came to see the problem of reform not in terms of constructing a new incentive system but of overcoming the resistance of those fattening off the old one. And he fundamentally misjudged the indi- vidual interests and concerns of officials within the economic and state bureaucracies. He did not understand that these interests would be decisive. Second, because he was insensitive to the role of rules, laws. and incen- tives in shaping the behavior of individuals. Gorbachev was far too cavalier in assuming that new institutions. rules. laws. and incentive systems would spontaneously emerge to guide people to efficient and effective behavior. It was as if he assumed that the market was a part of the state of nature that needed only to be released from government fetters to function properly. lt existed already formed on the other side of the chasm if the leap were only made. In fact, a modern market is very unlike the bazaars of traditional socrety where a simple exchange of goods and money takes place. Bazaars may be able to develop more or less spontaneously. but a modern market depends on long-term investment and on contracts in which goods are delivered and paid for at a later date. These in turn require a comprehensive legal code. precise definitions of property, an efficient and predictable system of taxa- tion. an effective enforcement mechanism, a well-functioning and Just judicial system. and appropriate regulatory laws. A modern market is created by government and maintained by government. Serious foreign or domestic investment is impossible if government. democratic or nondemo- cratic. is not strong enough to govern and to enforce laws in a predictable way. ' ‘ Tire relationship between government. especially democratic govem- ment, and the market is complex. Government must not feel free to change TQOTTLIV 2T9 XVrI L0=ZT lNElItNHElAOEJ-lfl 20o VO/SZ/TO mm m -“ VIu—A-nl ulnar-- must.“ 3....-.“ ... CONCLUSION laws at its whim, or participants in the economy will lose all sense of predictability. Yet a democratic government that cannot change its laWS is a government in which the people have no power. Because most political ‘ struggle involves efforts by people to protect themselves from the market, the logical outcome is obvious: the majority in a democracy must develop some sense of restraint!" This precondition is the crucial reason that democ- racy is so difficult to achieve in societies with uneducated populations traumatized by transition to the city. The assumption that the complex market system that developed over ‘ centuries in the West wealaaevétapspentsneousryand quickly" in what had been a nonmarket economy ignores all the problems that stem from the lack of correspondence between rational individual action and collective action. Individuals respond to incentives, but they have little incentive to establish a collective good such as a framework of incentives unless they have the opportunity to set up one that is designed to provide them some particular advantage rather than serve the common In addition, the assumption that real progress comes only from most drastic destruction of institutions is profoundly alristorical. The experience of Germany and Japan after World War His often cited, but in both cases _.. a.-- .. CONCLUSION 501 advocating a rediscovery of the state have been highly critical of the work of Marxists and neoclassical economists and have insisted that the role of the state is cmcial in furthering economic performance. Adam Przeworski, speaking for an international group on studying East-South systems trans- formation, was typical in asserting concern at the antistatist bias of reforms in Latin American and Eastern Europe. Repeatedly we have been sounding an alarm at the prospect of a further weaken- ing ofstate institutions. Indeed. we have become convinced in the course of these analyses that several of the dangers facing new democratic regimes arerdue to the state to physical security. to establish condi- tions for an effective exercise of citizenship, to provide moral leadership, to mobilize public savings. to coordinate resource allocation, and to correct income distribution. The principal mistake of neoliberal prescriptions is that they under~ estimate the role of state institutions in organizing the public and the private life of groups and individuals. Without an effective state, there can be no democ- racy.13 These analyses; however, remain very general. First, those talking about the state often fail to define it, and the phrases strong state or afiecrwe state are ambiguous. Sometimes they denote an efficient administrative system, VO/SZ/TO TQOITLV 3T9 XVd 80=ZT _. occupying troops prevented radical conununist action and then the Mar- fishall Plan. a major program of state-directed economic assistance. provided “help in restructuring (Lincoln Gordon, a top administrator in the Marshall in other contexts an authoritarian regime that can suppress unrest, in still others a political leader with a successful economic policy. North, for Plan, has estimated that U.S. assistance from 1943 to 1952 totalled $78.5 billion in, 1996 dollars, $290 billion in terms of a comparable percentage of American GDP).2_l-The truly radical revolutions. whether they come from the right asin Iran or the left as, in Cambodia, normally have economic consequencesthat last for decades. The destruction wrought by the Ameri~ can Civil War left the. southemrstates economically backward for three- quarters ofacentury. t u r: i ‘ " , It is forthisreason that a large number of comparative political scientists have been writingabout *Fbringing the state back'in." The economist these| political scientistsrhavezfound mostlinstructive is Douglass North, who" emphasizesthe impact-of institutions—the laws, Organizational forms, and norms of behaviorilratshape’human henchmen: political scientists . . . a, 1?, it a, it: In 20. -V. 0. Key, Public Opinion and Arnericnn Democracy (Knopf, 1961), pp. 3—26. 2|. ‘Jcn'y Hough, interview with Lincoln Gordon, October4, I996. 22. Douglass C. North. Institutions. Imiflutionaerharrgq and Economic Perfor- mance (Cambridge University Press, I990). pp. 3.33.47. - r r ' ' example, has made little effort to examine the politics that form and change the institutions. Indeed, despite his attack on neoclassical economics, he has insisted that "fundamental changes in relative prices are the most important source of [institutional change]."24 Second, the analyses are ahistorical. Observers recognize that markets function differently in early stages of industrialization from the way they do in later stages, with the pressures for protectionism usually much stronger in earlier stages. Full-fledged Western democracy of the late twentieth century is very difficult to achieve at early stages of industrialization. Yet the analyses lack guidelines for what kinds of political and econonuc measures are appropriate at which stage, let alone information on how to implement them. The West does not have good theorres of transrtron any more than Gorfiachev had, and this is true for democratization as well as marketization. 23. Adam Przeworski and others, Sustainable Democracy (Cambridge University Press, [995), p. lllJ. Also see p. 12. 24. Nortthsrirurions, institutionalChange.and Economic‘Perfarmancg, Mun."- tLNEllllNHElAOD—lfl 800 751 ‘iil IIIIIII,[ 508 ' CONCLUSION To begin to remedy the deficiency. scholars can become more specific in their discussion of the state and of institutions. To this end. it is often conceptually more useful to define rules and laws as incentive systems. for this provides observers with greater awareness of the effect of concrete measures on the behavior of individuals. Incentives are, of course. not simply created by government action. Tradition or culture can be defined as rules and incentive systems. usually rational (or functional) at one time. that becotneitttbetided in habit. Development or modemizationcart be seen as a transition from rules and incentive systems appropriate at one stage of economic development (or established by force or tradition) to other rules and incentive systems appropriate in other economic circumstances (or established by force or the political process). There are many reasons the process of development is so complex. but one certainty ts that it confronts tndrvrduais with rules and incentive sys- tems that are changing and often conflict with each other. People must constantly decide how to balance them or choose between them. The incentive systems ieamed during childhood often diverge from those en- countered later. and a person may act either according to leanred rationality or according to newly created incentives. Finally. of course. a far-sighted person in such a society can respond to existing incentives or try to decide which may be changed throagh legislation or revolution. 0n long-term decisions (education, career. or investment choices), the latter considera- tions may be crucial. ' The continual adjustment in incentive systems. let alone the breakup of an entire old incentive system. multiplies choices. A person-is often forced to decide whether to play in the old game. or bet on a new one being established. or engage in collective action to try to change the mics of the game.” Small wonder that during a time of very rapid change many people may feel so anxious that they seek to escape from freedom. And small wonder that in revolutionary times leaders may be so overwhelmed with new information and new choices that they function in ways whose overall rationality is difficult to discern. even in retrospect. The uncertainties created as people decide when to be guided by the old incentive system and when by new opportunities make analysis intellectu- ally fascinating but difficult. Scholars have many choices. They may ana- lyze the effects of incentive systems on individual behavior. or they may 25. This is most obvious in nricroeconomic decisionmaldng where politics and economies most often intersect—the tax code. CONCLUSION 509 seek to determine the conditions likely to lead to one incentive system's superseding another. either in an existing political process or through revolution. The latter analyses obviously can and shonld lead to further analysis of the best ways to change or reinforce incentive systems to effect desired changes. such as how to transform communist and other systems into democracies with effective economic systems. In recent decades the rational-choice political scientists have concen- trated on how individuals respOnd to a preexisting inCentive system. yet they have a natural comparative advantage over psychoiogists and econo- mists in analyzing the effort to change the rules. laws. and incentive systems. Rational-actor analysis that takes the existing rules for granted closes the door on analysis of-change in the rules of the game and leads to a bias in favor of the status quo. However. any analysis that assumes collec- tive action is never rations! without side paymentsand coercion leads to the conclusion that the key determinant of societal decisions is that by which people reach a position in which they can provide side payments and exercise coercion. ‘ Since the struggle to change incentive systems inherently has a greater ‘ impact on outcomes than decisions made within them. it inherently is of ' more scholarly importance. The bigger the politics. the more basic the rules and incentive systems being challenged. The biggest politics. that produc- ing great revolutions. affects the most basic rules and incentive systems. These are the natural subjects of study for political scientists. From a policy point of view. the clear implication is that when one thinks of change. one needs to give even greater attention to the consequences of incentives for individuals during the dismantling of the old system. Too often economists focus on some ideal set of incentives in the new sysrem— or even in the ideal system. not the economic system that exists in the - United States. let alone Western Europe and Japan:6 One cannot assume that the immediate introduction of the "ideal" rules will have an optimal effect. For this reason analysts must always begin with the individual incentives within the existing institutional framework. Russia. China. and Poland all began from different starting points. which should properly have _ affected the strategy followed. The Polish shock treatment is blithely 26. Milton Friedman is more honest than many economists who are closer to_ his views about government than they would like to admit. He was frank in telling Russians that they should not adopt “American socialism" (his phrase). but should introduce real capitalism. VO/SZ/TO TQOITLV 3T9 XVd 60=ZT lNHWNHHAOD—lfl 510 ~ CONCLUSION praised without any thought that Poland always had private agriculture and developed a small private service and industrial sector in the 1970s. Poland went through ten years of painful price adjustments and privatization be- tween the Solidarity revolt of 1979 and the fall of East European communist regimes in 1989. an adjustment that required it to introduce martial law. Indeed. even since 1989 the shock treatment has been applied to industry verygtngeny; and or are check was. administered "not by govemmené tal policy but by the unwelcome decision by the Soviet Union abruptly to end its long-term trade relationships in the Council on Mutual Economic Assistance (Comecon). Democracy and Democratization No problem is more difficult to analyze from a rational-actor perspective than the character or even desirability of democracy. democratization, and dictatorship. I have turned repeatedly in this book to the work of Mancur Olson for illumination. for he has been peculiarly willing to think about the most fundamental questions and to accept the consequences of his logic a wherever it seems to lead him. He makes an enomrous contribution even when one disagrees with him. His analysis of democracy. dictatorship, and development provides an excellent starting point. but it also illustrates the problems that are encountered. 'r a - ‘ Olson's view of government is not romantic. . Revolution occurs. he argues. not because of revulsion against oppression orinjustice. but because r rulers lose control of the system of incentives and coercion. Government will arise not because of some voluntary social contract. but because it is "a stationary bandit." more efficient and acceptable than “roving bandits." If the stationary bandit successfitlly monopolizes the theft in his domain. then his victims do not need to worry about theft by others. If he steals only through regular taxation. then his subjects know that they can keep whatever proportion , of their output is left after they have paid their taxes. Since all of the settled - ’ bandit's victims are for him a source of tax payments. be also has an incentive to ‘ prohibit the murder or maiming of his subjects. It will also pay him to provide O'hcrrPu'bliC- goods whenever the provision of these goods increases taxable ' income sufficiently. . t - - . Later Olson expands this vision: “An autocrat who is taking a long view will try to convince his subjectsthat their assets will be permanently protected only from theft by others, but also from expropriation by the CONCLUSION 51] autocrat himself. lfhis subjects fear expropriation. they will invest less, and in the long run his tax collections will be reduced.’ '27 The logic of this argument seems to lead toward a defense of dictator- ship: “Any individual who has autocratic control over a country will provide public goods to that country because he has an 'encompassing’ interest in it. . . . The larger or more encompassing the stage an organization or individu l h s in society. the greater the incentive the organization or individual has to take action to provide public goods for society." Yet Olson'rejects this conclusion. The problem, he contends. is that the autocrat has an interest in maximizing taxation to the point that revenues fall. That equilibrium point can be high. Moreover, the autocrat may have a short time horizon and. if so. “it is in his interest to confiscate the property of his subjects. to abrogate any contracts he has signed in borrowing money from them, and generally to ignore the long-run economic consequences of his choices?" Only democratic societies. Olson suggests. will have a time span that extends across generations and will have an incentive to protect investment and keep taxes at an optimal level. Thus democracy is not only morally but economically superior. ' I Olson's analysis is comforting, but unfortunately it has two obvious ' problems. First, the level of taxation is northe only relevant variable in an analysis of democracy, dictatorship. and development. The real question is the purpose for which money gathered through taxation (and corruption) is used. Does it go principally to government expenditures that are consumed by the population or into foreign villas and foreign bank accounts for the autocrat. his friends. and family? Or does the extra money acquired by those close to the autocratic regime go primarily into domestic investment? If so. it may be extremely beneficial for economic growth even if the ways in which capital is acquired would not be countenanced in ethics textbooks. The fact that government is an efficient accumulator of large amounts of money may make it a natural source of early investment capital and growth. Marxists see the state arising as an instrument of the propertied class to protect their ill-gotten wealth. Olson’s image of the stationary bandit essen- tially reverses this image. at least if the stationary bandit and his men use ‘ their ill-gotten wealth in substantial part for investment. Instead of being . Jui 27. Mancur Olson. "Dictatorship. Democracy. and Development." Ari‘reifiéarr Polit- icalScience Review. vol. 87 (September 1993). pp. 568. 57L ' ' 1-" - - a 28. Olson. "Dictatorship. Democracy. and Development." p. 572., “in/SZ/ro TQOITLV 3T9 XVd 0T=ZT tLNEllllNHElAOD—lfl OTOE 512 ' CONCLUSION hired by the owning class. the enforcers themselves become the first large- scale owners.” This may. indeed. explain why rapidly industrializng coun- tries often have strong governments with large-scale corruption. Second. Olson‘s analysis of democracy is much too optimistic. Virtually all politics in a country such as the United States centers on people trying to use the state to obtain more resources than the market would give them. As .I. _ _ es from the public treasury or protection from market forces. They may achieve their aims through helping the representativies maximize their personal wealth. Olson contends that the accumulation of concessions to powerful interest groups in a lonngasting democratic state harms growth. But it is unclear why, in principle. these concessions are less harmful to economic growth than excessive extraction of wealth by the autocrat. . Although Olson emphasizes the power given large interest groups by the logic of collective action, a major purpose of democracy is to OVercome this logic. No action is more irrational than voting. especially in national elec- tions. for no political action is less likely to have an impacton the outcome. Yet thecosts of voting. especially in presidential elections where informa- tion costs are minimal. are so low that moral suasion and a sense of collective duty can usually overcome rational calculation. If the political leaders are driven by the desire for reelection to respond to the will of the voter. the worst problems of collective action are solved. The problem is that there is no guarantee that the democratic electorate will have a long time horizon. The voter may look for a maximization of current consumption over investment and thus seek lower taxes and con- done higher government expenditures and a foreign trade deficit. The aged in particular have a strong interest in focusing exclusively on social security and medicare. In fact, political science models generally show that the success of an incumbent party in presidential elections is correlated with an increase in per capita personal income. The success of 9. Ronald Reagan, who provided high short-term consumption at the cost of a deficit that restricted long-term growth. suggests that politicians often inherently un- derstand the validity of these models. ' . ._ L,...r:.., ...r_- illL-- a--r. -. 'D UC‘JIL'LL‘: WEI"! ELLEN—7! DUE!— DLL 29. For Soviet scholars who made this argument in the Brezhnev period. see the discussion of Leonid Vasilev's work in Jerry F. Hough. The Struggle for the Third World: Soviet Debates and American Options (Brookings. 1986). pp. 52-63. pill-Illilllli‘llll , Olson emphasizes, inTIterRirerand Decline ofNetiora large were“ groups , CONCLUSION 513 The time span of the water may be particularly short at early and middle levels of industrialization when standards of living and levels of education are low. Thus the populist tendencies of democratically elected leaders in the third world are legendary. Democracy at such stages is traditionally associated with inflationary policies, subsidies. and the protectionism of an import substitution policy. Some Latin American autocrats such as Augusto Pinochet in Chile have promoted economic growth. while others such asAnastasio Somoza in flee-ted fill-5'13; at least before the t980s. have Nicaragua have rapes-ins. more consistently followed the model of Juan Peron in Argentina. Finally. a basic assumption of democratic theory—that elected represen- tatives are driven by the desire for reelection—is too little subjected to examination. A representative driven by economic rationality will not find the salary of a representative compelling. Rather. the money to be earned through corruption, legal graft. and pleasing rich men or organizations who will provide more highly paid positions after government service may be far more decisive in influencing legislators than the fear of being defeated in the next election. Small wonder that Douglass North is found to complain. One gets eflicienr institutions by a polity that has built-in incentives to create and enforce efficient property rights. But it is hard—maybe impossible—to model such a polity with wealth-maximizing actors unconstrained by other considera- tions. It is no accident that economic models of the polity developed in the public choice literature make the state into something like the Mafia—or. to employ its terminology. a leviathan. The state then becomes nothing more than a machine to redistribute wealth and income. Now we do not have to look far afield to obseer states with such characteristics. But the traditional public choice literature is clearly not the whole story.m Rousseau rightly said that a ruler must make every effort to convert might into right. and the same point must be made in the economic sphere. The institutional framework that North has emphasized must be internal- ized in individual actors. with long-term interest. morality. and fear of punishment interlaced in a way that the individual does not distinguish among them but simply thinks "ought." The Protestant ethic may well have 30. North. Institutions. Institutional Change. and Economic Performance. p.ll40. The paragraph. however. illustrates the problem with conventional and nonconventronal definitions. The meaning of the first sentence is unclear when examined closely. Leaving aside other fundamental problems. it certainly does not mean simply "privatization." North defines “property rights" as “the rights indrvrduals appropriate over their own labor and the goods and services they possess" (p. 33). TQOITLV 3T9 XVd 0T=ZT VO/SZ/TO .LNEIWNHEIAOD—lfl ITO 515 514 CONCLUSION 1 CONCLUSloN been “I‘m-.191 in the 3311!! “€le 0f mflketimfion "(it Simply because 0f “5 - regimes. although the rogimes are “censtitutional” dictatorships that will “011 0f work 311d SEVIHE- bl“ 315° Walls" 1‘ Emphaslmd m6 concepts protect property and establish impartial judicial systems to enforce con- mc'flcmd the tracts and protect individual rights. As the experiences of Chile and some of rate. the economic, growth record of these promo of calling and professionalism. Communism also heavily ' concept of duty. To'tell Russians that they should simply follow self- - interest. and togive them the opportunity to fol regimes can be impressive- rical record. as Samu most basic of questions about property acquisition wh A second featum of the 11'.er oi Huntington has 15 extraordinarily Short 15 if luhdmcmai .lTli-iifike- E‘r’ifififii’fli‘i i5- ihiF—‘K- that ' reemphasized. is that the movement toward democracy has not been a emOllufl 15 never PM Of daily life 0" POhues .15 scarcely belicVablC-a' ‘ straight line. instead. there been waves: the first lona wave of democ- Becal-‘SE “‘5 ‘nlelfllfal V0”: W‘“_ne"°f have 3“ impad 0“ the final ratization from 1828 to 1926 (although as the experience of France iii-iii outcome of a contest. it is perhaps rational for voters to satisfy psychologi- ' hour interruptions); the first reverse wave from 1922 m 1943 to 1962; a second reverse wave from cal needs with their vote to 0 advance their economic 'rd wave of democratization since 1974. Huntington the: than to try t interests. Whatever the reason. matters such as abortion. crime in the distant , 1953 to 1975; and a an inner cili65.'and gun control play afar greater a role in politics than their wrote before the democratization in Russia. but even in the other cases. he tify' Clearly' howeverl may have cautioned that one cannot know whether the third wave of democratization will third reverse.n Moreover. democracy has sometimes been low such self-interest on the en their timehorizon "real" significance in the world Wouldjus a symbolic importance that is very real for the voters. _ be [wowed by n Thus the logic of democracy and dictatorship is inherently ambiguous, replaced by relatively Mg“ consfimfional dictatorships, sometimes by those Blecmme Wm take 3 in which rulers seek only to enrich themselves. and sometimes by those of the or Stalin‘ 5 Russia. a century of study of that focus on elite democratic institu- helhe‘ emotion 0‘ character of Hitler's Germany A. third feature of the historical record is that t. One is. therefore. left with ancient political systems has used definitions of democracy for it is uncertain whether a given dictator or a gitten w of its self-interest. w __ short-range or long-range vie :g symbolism will have a crucial impac wisdotns. The best ruler is an enlightened despot who sees his interest as improving the economic performance and security of his subjects (and thus cont-rich eme isolation from the masses. and the use of ‘3)- Uflfonunamyv deSPOlS as a group 53mm be tions to keep the masses quiet}?| Indeed. this definition of democracy is one on which. to some extent or another. the entire American pluralist school in ed.34 For reasons analyzed by William Riker. his long-term tax' return ' trusted to be enlightened; and the problems of collective action make it very difficult to remove one who proves to be unenligh fore. is the worst of all the forms of government ex the twentieth century has agre the approach strongly supports phasizing restraints on leaders r n of democracy. one em- a liberal definitio pulist or a Rousseauian ather than a po ntation of the people.35 tened. Democracy. there- cept for all the others. but to power who will end not when extreme populitits seem likely to come dam“??? and condilc? anngFssivfiPmig“ poucy' definition based on leaders‘ represe This is scarcely a satisfying intellectual analysis, but we are also left with _ ' the historical record. One feature of this record is that countries such as Haiti with a population that is 75 percent illiterate and desperately poor are 32. Samuel P. Huntington. The raw Wave: Democratization in the bare Twentieth e an electorate that makes long-term economic Century (University of Oklahoma Press. 1991). pp. 16—26. 280R. _ I 33. The seminal study for this line of analysis is Joseph Schumpeter. Fopirotirm, Socialism. and Democracy (Harper. 1942). The two classic works in political science d American Democracy. and Stein Roklran. Citizens, Elec— particularly unlikely to hav growth and the security and well—being of the- owning classes their top are Key. Public Opinion on e Processes of Democracy cites to the Comparative Study of th priority. In the early stages of industrialization When abusiness and middle [1 support dictatorial . lions. Parties: Approa ' (New York: McKay. 1910). ' I 34. See Robert R. Alford and Roger Friedinnd. Powers of Theory: Capitalism. The cut that this bers of that class ofte class is being formed, the mem Iy Press. I985). for the nrgum thematic" between the o: W. H. Freeman. State, and Dciiiocrney (Cambridge Universi 31. Harold D. Lasswell. Psychopathology and Politics (Viking Pfess 1930') pp . . . .. . . . - ' ' ' t t t. IRS-Bit. needs to be reread. It is becoming something of [commonplace that politics v'egg?‘svgl‘;:;efl ijcmmm again” Pawn“. A Cm 1- 5‘“ 3 “‘0”: “Cum” descflpllon Would be that politics is the y Theory of Democracy and the Theory of Social Choice (San Francisc r'- 1982). is the arena of the irrationa ’ process by which the irrational bases of society are brodghtfout into-the open.“ VO/SZ/TO TQOITLV 3T9 XVd TT=ZT lNElWNHHAOEJ—lfl atom 516 1 CONCLUSION An examination of the relationship of democratization and economic reform in Russia is more appropriate in a study of the period from 1991 to 1996. Yet two points canbe made. First, scholars must not simply extend to other places the"transition-toLdemocracy analysis that currently focuses on the mechanisms of transition in countries at an advanced stage of develop- mentin Latin America and southern Europe. Elite interests and calculations in earlier stages' of economic development need to be explored. In the etite,‘ 555E665 more eap—icrstien. Second, much more attention should be' given to the role of the state in democratization as well as economicdevelopment. but definitions must be more precise in the discus- sion‘fofits role and particularly of the relationship of the interests of ndividual bureaucrats (be they military officers or economic planners) to he collective interests of their own bursaucracy, the state as a whoie, and he economic elite. :uDespite the lip service given to the rediscovery of the state. the state has isappeared from literature not devoted to economic development. This is rue even in the models of a scholar working on democracy such as Samuel luntington. who used to take institutions seriously (figure 15-1). There is 0 state in Huntington's model. and thus'it leads to no questions about what est promotes economic development, education, and democratic values. It is often said. for example. that Ghana had a higher per capita income Ian did South Korea in the 19505 and that the subsequent flowering of outh Korea is the product of more effective market-oriented policies there. 0 doubt South Korean economic policy has been more effective than hana's (although the Korean policy scarcely was based on the assump- ns of the economic advice given to Russia). Yet in the 1950s virtually the Fore Korean population was literate when Virtually the entire population Ghana was illiterate. Surely this difference is more important than the milarity in their reported per capita income. Finally. the work both on the social roots of democracy and the process transition to democracy is marked by the relative superficiality of the alysis of the political system to which the transition is being made. emocracy is almost invariably defined in procedural terms: the choice of aders in competitive elections in which most citizens can vote and in 1ich participants can speak and campaign freely. Yet anyone who ltnOWs story and the contemporary third world understands there is no clean line tween democracy and nondemocracy. Many dictatorships have legisla- e bodies, and these bodies.,1ike the first European parliaments. are not IIWI’II‘I‘I‘I‘I HIIIIIII process. theways the problems of collectiveaction are resolved within an ' _ become a dogma. it is necessary to look at the experience of European 0 |_t CONCLUSION ' 517 s ‘ on Figure 15-1 . Economic Development and Democratization S A} I ‘ l—‘ more highly t? educated public 3 \‘ ’11 m .54 civil culture V m ' attitudes— __ _ _ f" it; high? 3‘" 5 mail Sailp‘fir: ‘itr. economic development mist-action. democratization f] competence I; D m / H I ———q______. lugu middle-class Source: Samuel 1’. Huntington. The Third Wave.- Dernamrlnerl'nn ln the Lore Nearlth Cenrury [Unlversity of Oklahoma Press. [99". p. 69. totally without influence. But like the early parliaments, they are more advisory bodies to the ruler than institutions with real power. Similarly. in some countries whose political systems meet the formal definition of democracy. the bureaucracy seems to rule; in others the military has a silent (and not always so silent) veto power. In countries that are formal democracies. elected politicians may respond very little to public opinion and may be absorbed with enriching themselves and serving those who can help them achieve this goal. It is not enough to define democracy in broad and loose terms that implicitly seem close to that found in Amen- can suburbs. I A From a policy perspective. the crucial questions of democratization are not those that deal with relatively benign stages of political development. but the democratization through which nuclear and'potentialnuclear pow- ers such as China. India. Indonesia. Pakistan. and Russia are passing. Democratization at that stage requires a sophisticated/examination of the interaction of the processes of establishing democracy and constitutional restraints on the majority. as well as those of national identity. delineation of country boundaries. and federalism. At a time when free trade has tLNEIWNHElAOD—lll countries that came to industrialization late. many of which developed l..fir..-..I.l§lhs_s 518 CONCLUSION totalitarian or semitotalitarian regimes at least in part in response to the exposure of urban villagers to the changes and competition of the world economy.“ The dangers are simply too great to allow the political and security issues involved in nation building to be abandoned to economists whose models do not include political considerations. The Implications for American Policy It is difficult to draw implications for American policy on the breakup of the Soviet Union because the breakup has been treated by many observers as an American triumph. Presumably the only lessons to be drawn are how ‘ to destabilize some other competing power or powers, and such a subject is politically too sensitive to disouss openly. The problem, however, is that the retrospective claims of the 19905 remind one of Senator Patrick Leahy’s advice about Vietnam: declare victory and withdraw. Those observers who quietly said that the Soviet-American confrontation was useful in preserv- ing European security now hail as a consequence of their farsighted policy the reunification of Germany they tried to stop. Those who created a huge American budget deficit for a military buildup they claimed was needed to stop a Soviet juggernaut heading for the Persian Gulf or the English Chan- nel now say they alone knew the Soviet Union was near collapse and that the Soviet military would not forestall Ukraine‘s independence. Similarly, the spokesmen for the Bush administration, while conceding they supported Gorbachev, did not loudly-proclaim that their goal was to help him preserve the territorial integrity of the Soviet Union. Yet as Bruce Berkowitz and Jeffrey Richelson have written, .1 By the late 1980s, U.S.-Sovietlrelations had improved significantly/.uxahd/ Gerbachev was seen as being'largely responsible. The Bush administration wanted to take these improvements in U.S.—Soviet relations even further. Under its policy‘of “moving beyond containment." the Soviet Union would be "inte- grated into the community of nations." . . . It was clear that US. leaders wanted Gorbachev to remain in power. . .. [The objectives were] establishing a long- terin partnership-with Gorbachev and preserving the integrity of the Soviet Union... . Had [President Bush's speech in Kiev in early August 1991} dis~ suuded the Ukrainians from total secession. it would now be viewed as a classic 3o.IEvelanDavidheiser, “The World Economy and Mobilizational Dictatorship: Russia 5 Transition, 1846—1917." Ph.D. dissertation. DukerUniversity, 1990. III CONCLUSION Ill - 5:9 example in which the United States demonstrated leadership and influenced events.“ Finally, there is no guarantee the ultimate political outcome will be benign. In December 1993, by a two—to~one margin, Russians were con- vinced that the West's economic advice represented a deliberate effort to weaken Russia. This margin rose to three to one in 1995 and more that that in 1996.1'! It is not in American interests that Russians have this perception, whether it is true or not.39 Politicians soch as Gennady Zyuganov and Aleksandr Lebed play to this popular feeling and feed it. There is no guarantee about their policies if they come to power. It may well be, of course, that the breakup of the Soviet Union will indeed some day be seen to have been best for long-term American inter— ests. Just as the road to hell sometimes takes a circuitous route, so the road to heaven can be paved with bad. intentions and wrong assumptions. But even if the outcome turns out to have been the best possible, the analogy with Russian roulette is appropriate. In Russian roulette, one wins five times out of six—maybe more if gravity makes it less likely that the bullet will stop at the top chamber. But if one loses, the result is catastrophic. Even if the likelihood of a reasonable long-ten'n outcome from the course of events in Russia is fairly high—as I believe it to the—America took a substantial chance that control of nuclear weapons would be lost or that a Russian leader not unlike Hitler would be produced by the kind of national humiliation and economic disaster suffered by Germany in the 19205. This outcome is still possible, and there has been no reason to take the chance. It is often said that the United States did not and does not have the ability to affect domestic policy in a country such as the‘Soviet Union. That is wrong. To the extent that the decisive factor in a disintegrating situation is the mind-set of the leader, the West can wield influence, especially when, as in the Soviet Union, the leader is eager to win Western approval. When stabilization funds are provided, the West is, in effect, often able to bribe 37. Bruce D. Berkowitz and Jeffrey T. Richelson. "The CIA Vindicated: The Soviet Collapse War Predicted," National Inrerest, no. 41 (Fall l995), pp. 41, 38, 44-45. 38. Jerry F. Hough. Evelyn Davidheiser, and Susan Goodrich behtnann, The 1996 Russian Presidential Electian (Brookings, 1996), p. 4|. , 39. This is the subject of another book. But so there will be no misunderstanding, I think that the IMF advice had the absolutely predictable result of wankening Russia-— likely for many years. Those giving the advice, however, Were deeply convinced that it would lead to the best results for Russia. VO/SZ/TO TQOITLV 3T9 XVd €T=ZT lNHWNHHAOD—lfl VTO 751 I: 35 520 CONCLUSION officials to take certain actions, especially if the officials can find ways to obtain part of the money themselves. ‘ _ It is impossible to imagine Gorbachev following the policy he did if he were told p by Westerners he respected that the Far Eastern models on economic reform and democratization were the correct ones. It is impossi- ‘ late to imagine a domestic coalition that would have formed in Russia to support the economic policy of the Russian govemment under Boris Yeltsin ' unless titwere'supported‘by the West fimeially. The West was not power; " less to affect developments in Russia; it was decisive. But even if we assume that this judgment is correct, what are its im- plications? The policies of the flush administration and the Clinton admin- istration were very similar. The State Department in both administrations followed policies similar to those of "from Vladivostok to Vancouver" (in Secretary James. Baker’s words} under the Bush administration and of "strategic partnership" under the Clinton administration.” These policies essentially defined the task as reintegrating-a healthy Russia back into the West. much as Germany was reintegrated after World War H. It was assu med that this required a democratic political system in the Soviet Union as well as a change in its foreign policy. The Treasury Department—or the economists specializing in foreign economics who moved back and forth between Treasury, the International Monetary Fund, and the World Bank—-basically argued that the Soviet Union and then Russia must end government regulation, privatize im- mediately, introduce market prices immediately through the release of controls (price liberalization), engage free trade in foreign economic rela- tions, and institute very tight monetary controls and a balanced budget. Whatever the virtues of that advice from an economic point of view (and this book has, of course, been very doubtful about those virtues), it clearly _ meant the destruction of the USSR, the dismantling of the state system of managing the economy before a new system could be introduced, and the possibility of a popular reaction in the streets that could have the most unpredictable political results. It was scarcely what would have been rec- ommended if political stability in a democratic society were the main priority. 40. "At East West Crossroads, Western Europe Hesitatcs.‘ ' New York Times; March 25, 1992. p. A10; and Elaine Sciolino, T'Reassuring Eastern Europe, Christopher Praises Hungary's Reforms," New York Times. October 22, 1993. p. All. CONCLUSION ' 521 Faced with these two sets of advice, the Bush and Clinton administra- tions accepted both. The Treasury Department and the economists in the international economic organizations defined the economic policy. Under Secretary of the Treasury Lawrence Summers went to Moscow in 1993 when Yeltsin wanted to dissolve the Russian Supreme Soviet and reap- pointed Yegor Gaidar as first deputy premier and support for a harsh economic policy, by all outward appearances an attempt to ensure Ameri— can support of ‘r’eltsin's political actions.“ When the fa ci t Vladimir Zhirinovsky won the ensuing 1993 Duma election, Strobe Talbott of the State Department spoke of "too much shock and too little therapy,“ but when the president went to Moscow in January, he supported the retention of the extreme monetarists (Gaidar and Boris Fedorov) and a continuation of shock therapy.” The State Department policy, with various deviations and inconsisten— cies, defined the strategic relationship with Gorbachev and Yeltsin, respec— tively, subject to the domestic political pressures for including Poland, Hungary, and the Czech Republic in NATO. When President Clinton traveled to Moscow in April 1996, he said that America's first priority was control over nuclear weapons and the safety of the nuclear materials.“ The economic collapse and the precipitous drop in investment was, of course, the chief threat to nuclear safety, but this point was not. made. Throughout this period the debates on American policy almost never dealt with potential contradictions between strategic and economic policy. President Bush was criticized for supporting Gorbachev for too long and President Clinton for the same sin vis-a-vis Yeltsin, but both criticisms were misplaced for lack of any reasonable alternative. Yet neither president was criticized for the policy to which he pushed his counterpart in Moscow. Both presidents were criticized for having excessive trust in the future foreign policy of Russia—bat by the very people that were most insistent Russia follow the economic policy most likely to bring a fascistlike leader to power. 41. Steven Greenhouse, “I.M.F. Delays $1.5 Billion Loan to Russia Because Re- form Is Stalled," New York Times, September 20, 1993, p. A3. 42. Peter Passell, "Russia's Political Turmoil Follows Half Steps, Not Shock Ther- apy," New York Times, December 30, 1993, p. D2: and Steven Erlanger, "Leading Russian Reformer Quits. Questioning the Cabinet's Policies." New York Times. Janu- ary 17, 1994.13. Al. ‘ 43. Michael R. Gordon, "Summit in Moscow Urges A—Test Ban," New York Times, April 21, 1996, p. Al. . IIIIIIIIWI‘IIIE‘IIMII_ VO/SZ/TO TQOITLV 3T9 XVd VT=ZT lNElWNHElAOD—lfl SIDE . H . 522 7. CONCLUSION Similarly. neither the scholarly norintelligenCe community wasuseful in helping their country and government follow a different policy. Specialists on the Soviet Union have been criticized for mistakes in prediction, but their greater sins are to be found elsewhere. Scholars Were‘almost always asked to be court astrologers. making predictions in apolitically acceptable manner. If they accepted. they and the editors with whom they dealt had to function within the court’s rules. and the rules are as complicated as those 7 aun—-nu way. Scholars too often—and this is self-criticism as well as criticism of others both in the past and at the present—were attracted to this role and allowed it to affect the way they studied the Soviet Union, the questions they asked and did not ask, and the conclusions they drew and the way they phrased them. Generalist scholars have been even less helpful. Political economists have largely adopted the perspectives and methodologies of the classical economists and have had little to add about the role of the political. Theo- rists on democracy have focused only on the late stages of democratization found in Latin America of the last two decades. while theorists of revolu- tion focus only on revolutions at the early stages of industrialization. The in Brezhnev's Soviet Union. They are also restrictive their 2 very geostrategists who wrote thousands of articles and books about the L” dangers to the United States of retaliating with nuclear weapons if the Soviet Union attacked Western Europe or even Minutemen missiles in South Dakota never say anything about placing a nuclear umbrella over Warsaw and Prague. Multiculturalists have damned the effort to compare countries at different times but at similar stages of development (Asia and Africa today and Europe in the eighteenth and nineteenth centuries). The paradoxical result is that they define standards of democracy and human rights as those found in the contemporary West. Although the'desire of those in the political sphere to make predictions for reasons of psychological self-assurance or political legitimacy is ex- traordinarily strong, it is striking how seldom these predictions are useful. All observers comment on the problem of a flood of contradictory or Delphic predictions, but the example of this book shows how the problem goes more deeply. ' Thus from mid-1990 to mid-199] any fool could see that the continua- tion of Gorbachev's toleration and even'encouragement of chaos would lead to the collapse of the Soviet system. The question was whether his policy would continue. and it was on that question that analysts differed. I thought Gorbachev would use his presidential power'to institute some form CONCLUSION - ' 523 Of martial law. The arialysts of the CIA associated with Robert Gates, who had always been skeptical about Gorbachev's intention to reform and then about his ability to do so, believed the military and the KGB would overthrow him. Those in the intelligence community who published Trends believed that the compromises struck between Yeltsin. Gorbachev. and Aleksandr Rutskoi would hold. perhaps ultimately because they assumed Rutskoi spoke for the military. The striking thing about these three predic- predlction: the territorial integrity of the Soviet Union was relatively safe. But what if the Bush administration had been told in January 1991 that during the following year Gorbachev would simply let Yeltsin take over industrial plants and all taxation. that the Soviet military would conduct. a coup vdthout using force. and that Russia would leave the Soviet Empire? Neithér the administration nor any serious specialist would have believed such a prediction. By the time the prediction became credible in late summer, it was too late for the administration to do anything. except perhaps encourage the military to stage a coup d’état. What the administration needed in 1989 and 1990 was contingency analysis. It needed to be told that the coonomic shock therapy advocated by the IMF. coupled with the American condemnation of the type of action taken by the Chinese in Tiananmen Square in June 1989 and the Western threats against Soviet action in the Baltic states, would, if Gorbachev heeded them. almost surely lead to the disintegration of the Soviet Union. In my opinion, the president should have been told that. if his priority was to avoid this disintegration. he should have tried to educate Gorbachev about the nature of American federalism and the slowness with which any country (including the United States) moves to democracy. He should have pointed to the success Of the Asian model of industrialization (and that of Europe in the past). with its high protectionist trade ban-lets, as the most appropriate industrial strategy until Soviet plants became as technologically sophisticated as Western ones. He should have warned that excessrve privatization would focus all attention on takeover politics and would destroy the system of taxation, which was based on state ownership of industry. He should have denounced the SOD-Day Plan for the nonsense that it was and warned for the reasons laid out in this book that destroyng the power of the local party organs would have terrible conseduences for the economy. He should have promised American aid if an incremental plan of transition were adopted. and he should have said that Premier Ryzhkov was closer to such a plan than was his radical economic adviser (whom, as may 9T=ZT VOVSZ/TO TQOITLV 3T9 XVd lNHWNHHAOD—lfl STOW 524 ‘ CONCLUSION be remembered, Ed Hewett correctly called a man with the views of Milton Friedman). - ' ‘ This posture in 1989 and 1900 would almost-surely have educated Gorbachev and his advisers about the problems of democratization and marketization enough to enable to them to find a path to reform that would have avoided the heavy economic costs of the policy that was folioWed (and ,7 literature 9f a f3$°i§li§fidfirl andthat wouldharre achieved the admini- stration's; goal of preserving the territoriai integrity of the Soviet Without any doubt. the last two paragraphs have produced dangerously high blood pressure among many readers. First, not everyone would agree that the ad vice I have prescribed was the best reform strategy for the Soviet leaders. The editorial writers of the New York Times, Financial Times, starkly different advice on economic reform, and they were not praising the gradual political liberalization in China. The West did not have a 'consensus theory of transition for communist countries, and the theories with the most support featured much of the anarchism to which Gorbachev was already . attracted. ._ Second. even if one assumes that President Bush agreed with everything El have said. he could not have advocated such action in public, and he could not have given such advice in private without seeing it quickly leaked to the press. To praise Japanese protectionism, to quote Abraham Lincoln's views on secession as relevant for Soviet behavior toward Estonia or Ukraine, to say the Communist party apparatus should be dismantled carefully, or to warn against rapid privatization would have been political suicide. The best President Bush could have done would have been to talk about the need for gradualism, the dangers of populism, the advantages of a strong president, the lessons of American federalism, the importance of the sanc- tity of laws, and the like. He should probably be criticized for not doing so earlier and more consistently. But when he did speak in gradualist terms in Ukraine in August 1991 and described the American political tradition in moving terms, he was severely derided for giving a "chicken Kiev" speech that did not promote Ukrainian independence. Only the most naive would argue that American leaders can isolate their efforts to influence developments abroad from their domestic political concerns in the United States. It would be equally unrealistic to suggest that they can develop theories of transition, as Gorbachev often said. "on the march." To alter the advice of the International Monetary Fund, President Bush would have had to force thrdugh a general change in its approach to I II I II 'I I I I I I I 'l,,'-__-___'-rn__ Washington Post, and Wall Street Journal were giving the Soviet Union - Mum-mu: MM mwun—u-mma_ CONCLUSION 525 dealing with the third world, and that Would have involved a terrific battle. President Clinton ivas successful in pressuring the IMF to lower its stand- ards in granting Rossia loans, but that was an entirely different matter than obtaining a change in the words and analysis that accompanied the money. Lord Keynes once said that those who most consider themselves practi- cal minded are the prisoners of some defunct economist. The point needs to be emphasized and,gcneralized.,Frameworks of analysis haven powerful impact events; are of the mics which. North has written. Whatever criticism may be made of those in the international economic community, they unquestionably have concrete advice to give and an understandablejustification for that advice. Whatever praise may be given those who emphasize the importance of the role of the state in economic life and who discuss the difficultrelationship of democracy and market, they talk in very general terms and have not developed concrete theories of transition that have concrete implications that can be explained in politically viable ways. The ancient wisdom is correct: you cannot beat something with nothing. It is thejob of scholars to develop frameworks of analysis with specific implications for policymakers and to try to ensure that they are constantly revised so as to remain as useful as possible. It is too soon to make definitive judgments about the long-tenn consequences of the Russian Revolution of 1990—91 and the Western policy toward it. But as those consequences become clearer. they will have the most profound theoretical results. They will become the center of a great scholarly debate on the relation of state and economy and of democracy and the market. In that debate it is necessary to move from generalities about the role of the state to more specific and useful analysis. Asia and Africa in the first half of the twonty-first century will be facing the same kinds of strains that Europe faced in the nineteenth and first half of the twentieth century, and it is vital that the lessons represented by Russia be absorbed. India and China have the same potential to disintegrate as the Soviet Union or the Austro» Hungarian Empire. Iran‘s experience shows that fascistlike leaders can come to power as easily in Asia as they did in Europe. and now it is possible for them to come to power in countries with nuclear weapons. It is only with historical perspective and insight, generalized in terms of the logic of the gradual development of constitutional restraints on govemment and elite support for democracy that the world will have some hope to avoid many of the same problems in the twenty-first century that tore it apart in the twentieth century. VO/SZ/TO TQOITLV 3T9 XVd 9T=ZT lNHWNHHAOD—lfl tro’ ...
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Hough - L'Cl CHAPTER FIFTEEN Conclusion MIKHAIL Goanacnev was not riding an uncontrollable tiger China affords convincing proof that communist

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