In January 1994, Yegor Gaidar left the government, turning down an offer of the post of first deputy prime minister. In a letter to the president, he wrote: ‘I cannot be simultaneously in the government and in opposition to it.’ I do not think that was the only reason for his departure. Gaidar had been proposing an acceleration of the pace of reform, but how can you accelerate a process that has already produced only dire results? In an article published in Izvestiya, Gaidar himself wrote of the ‘failure of democratic government’. ‘The country is in a state of profound crisis… there is no great national ideal, whether realistic or even utopian… There are no major goals, discipline has weakened, the situation is unstable, and opportunities for self-enrichment are immense.’ However, his article was devoted to claiming that the only people not to blame for everything were the perpetrators of shock therapy reform.
In an interview for Interfax, I expressed the opinion that the departure of Yegor Gaidar – and even possibly of other ‘figureheads of shock therapy’ – would change nothing, because the government had no clear strategy. ‘Still, nobody heading the government is thinking about what to do next or how to move the country forward, so we are doomed to political and economic drift with all its consequences.’ If those running the country ‘do not take the pulse of life, we can be certain that Russia must expect more political antics that may have serious social consequences’, I said. I made it clear that I was not advocating a return to the old system:
The transition to market relations must continue, but with major adjustments. Market relations should be developed through small and medium-sized businesses and tough laws should be passed to prevent monopolies. The main need, however, is to educate people to live in a free market economy, because otherwise it will be impossible to introduce market relations without force.
Economists advise, but the government is not listening
In February we convened a conference of major economists at the Gorbachev Foundation to discuss the economic situation and try to find a way out of the impasse in which the ‘victorious’ government found itself.
We wanted to hear the views of economists of different persuasions, from those who on the whole supported the president and government’s economic policy, to those who were critical of it. Participants included Academicians Leonid Abalkin and Nikolai Petrakov; corresponding members of the Russian Academy of Science Vadim Medvedev and Vladlen Martynov; four doctors of science: Sergey Glaziev (Chairman of the State Duma Committee on Economic Policy), Alexander Livshits (Analytical Centre of the President of Russia), Yevgeny Yasin and Andrey Illarionov; and other prominent academic economists and also journalists.
In my opening remarks, I urged the participants to engage in constructive dialogue:
This is essential, given the seriousness of the country’s situation, where there is still no sign of systematic measures to overcome economic deterioration. Somewhere there is a point at which a critical mass will be reached, followed by an explosion. Are we all supposed to sit and wait for that to happen, for everything to go to hell in a handcart, and first and foremost all those who instigated these reforms? In the longer term, everyone, including presidents and governments, come and go, but Russia remains. The country’s interests are our top priority. I invite you to join in responsible and comradely debate.
Participants in the discussion, despite all the differences in how they assessed the causes and nature of Russia’s profound economic crisis, did their best to present their view of how it could be resolved. Acutely critical assessments predominated. Thus, Sergey Glaziev, a former minister in Gaidar’s government who resigned after the shelling of parliament, said: ‘From my viewpoint, the economy has entered a catastrophically destructive phase, and what is being destroyed is the very industrial sectors we had hoped would spearhead structural change and have the potential for future growth. The deindustrialization we have been hearing about for the past two years is accelerating.’ He described the way privatization had been carried out as the most inefficient of all the alternatives, and forecast continuing recession ‘until such time as we see the emergence of effective property owners.’
Leonid Abalkin put it even more bluntly:
The current economic policy has run into a brick wall. It needs a radical change of direction, not only in the interests of the current administration’s self-preservation but to rescue reform in general. If we cannot secure a radically new approach to the strategy of reform, Russia will be set back not years but decades.
If we are to believe the law-enforcement agencies, there has been no liberalization of prices and trade in Russia whatsoever. It has been completely commandeered by criminal organizations in a stranglehold more rigorous than we had under the old administrative-command system. That relates both to the flow of trade goods and price formation. As much as 25–30 per cent of bank profits is spent warding off threats from illicit mafia organizations.
Andrey Illarionov criticized the ‘reformers’ from a different perspective: ‘As I see it, we are currently faced with a government entirely lacking any ideological underpinning or realistic plan of action.’ He saw inflation as the top priority: ‘It is immaterial which government is in power, what its policies are, or what speechifying accompanies them: while monthly inflation is hovering around the 20–25 per cent mark, it stands no chance of remaining in office. No government in world history has been able to.’
In respect of savings, Yevgeny Yasin said: ‘I believed from the outset that Gaidar was mistaken in refusing to do anything for savings. Simply to index them would have been unaffordable, but other solutions needed to be looked at, for example, indexing the savings of people of pensionable age. Although even that would have been costly.’
What of the future? Opinions were divided. Alexander Livshits did not anticipate catastrophe: ‘Russia is not doomed. It is all just going to cost us a lot and last for a very long time. The knock-on political effects that have been mentioned, the threat of dictatorship and so on, do not seem so self-evident to me.’ The majority of the discussants, however, agreed with Academician Abalkin’s view: ‘The reform and democracy can be saved, but only if there is a radical change of course.’
I spoke twice in the course of the debate. I said:
We all need to have the courage to admit where we miscalculated, where we made mistakes and went wrong. We need to re-examine some things and relinquish others, but not in order to come to a halt. On the contrary, we need to be able to move forward confidently. The last two years have been the most difficult for Russia, but I would not debar critical analysis of the preceding period. The process begun in 1985 of transforming the country, of embarking on profound change, was never going to be easy, smooth and error-free.
We will get nowhere by indulging in apologetics or point-scoring. This will lead only to endless disputation and strife, even among those who support reform. That is in the interests only of extremist political forces.
I do not go along with the attitude of some Young Turks who regard the generation of the 1950s and 1960s as hopeless and already consigned to the past. It is largely that supposedly irredeemable segment of the population that is now holding Russia together. We need a consensus that will protect reform and move it forward. That is very important. We have to get away from the old familiar stereotyping and a political culture restricted to the categories of Them and Us, the Whites versus the Reds, Blues, Blacks and Reddish-Browns.