Beyond Economics

Over at Brad DeLong's site you can see a fascinating discussion of America's Russia policy in the 1990s between DeLong, Martin Wolf, and Lawrence Summers. One remark I would make is that to an extraordinary extent, all three participants are willing to accept the premise that the only goal of US policy toward Russia in the 1990s was a good-faith effort to induce Russian prosperity, with such efforts being hampered by political constraints, the objective difficulty of the task, and pure policy errors.

In the real world, though, this is clearly not the case. Foreign policymakers and presidents -- though perhaps not Treasury Department economists like Summers -- concern themselves with questions of power politics. A prosperous Russia was seen as good for the United States, but not nearly so good as a Russia that was disinclined to object too strenuously US policy at the UN Security Council and other regional fora and that was willing to concede to the United States an equal (or even greater than equal) share of influence in Russia's "near abroad." This is a big part of the story of the relatively uncritical backing the Clinton administration provided to Boris Yeltsin -- under his leadership, Russia didn't attempt to assert itself on the world stage the way that Vladimir Putin, bolstered by oil revenue -- has, and we wanted to keep it that way.

Naturally, this dynamic also tends to undercut political support for reforms. In a country like Poland that doesn't see itself as a potential geopolitical rival to the United States and that sees (distant) American power as a useful check on nearby Russian and German power, people are willing to accept the idea that American advisors are really there to help. Russians, though, had seen their country locked in a decades-long battle for supremacy with the United States. Now Americans show up, pushing economic reforms, and those who feel that the reforms have made them worse off naturally wonder if the Americans aren't deliberately trying to make Russia weak and poor.

Comments

You don't have to be a crazy neocon to think that it's disingenuous to refer to subjugating the people of nearby nations as Russia's "attempt to assert itself on the world stage." The people of Eastern Europe had half a century of Russia "asserting itself on the world stage," and I think that was enough.

Posted by too many steves | May 7, 2007 11:33 AM

You want to equate Putin's policies to Soviet domination of Eastern Europe? That seems a bit much.

Posted by Steve | May 7, 2007 11:39 AM

It's almost as if the study of international relations is separate from the study of economics.

Posted by otto | May 7, 2007 11:50 AM

Both the steves above bring up decent points (what is this, Inside Man?). However, that doesn't mean that we shouldn't take into account what the average Russian, Russian policy advisors, etc. feel and think. Russia has the population, the military, the nukes and the oil to remain one of the world's most powerful nations as long as its economy doesn't descend into Zimbabwe-like levels of poverty. They are going to take an interest, if you will, in what they consider their near abroad. This doesn't mean we shouldn't aid democratization when it occurs in those countries, but we will have to strongly engage Russia so that this doesn't become another contest between two large contintental nuclear powers. We have to recognize that our advice to Russia in the 1990's fucked them over and that when someone comes in and the economy gets better, the people are going to follow him.

Posted by Reality Man | May 7, 2007 11:57 AM

And see:

http://crookedtimber.org/2006/01/23/beware-of-economics-geeks-bearing-gifts/

Posted by minderbender | May 7, 2007 12:03 PM

The problem is however, that it is hard to trace a conscious decision to keep Russia economically down so as she won't be relevant in power politics.

I think this is hard to trace such a decision, because such a decision didn't exist. Moreover, a very good case could be made that it would be impossible to keep Russia down in any case and that over the long term, it would be better to help her reform and stand on her feet.

The bigger problem with helping Russia however is, I think, that there was a very small window to push the appropriate reforms. Unfortunately however, Russia had not only suffered the most from communism in her economic and institutional infrastructure - a fact which made the design of the appropriate reforms a herculean task- the political configuration bequeathed from her transition to democracy had turned her into a disintegrating state and where many actors held veto (or sabotage) power.

And while the US could have done more, I think that ultimately, the responsibility for the failure of the reforms stays with the Russians rather than the Americans.

Posted by Nick Kaufman | May 7, 2007 12:05 PM

In russia, new american overlords welcome you!

Posted by yoyo | May 7, 2007 12:21 PM

all three participants are willing to accept the premise that the only goal of US policy toward Russia in the 1990s was a good-faith effort to induce Russian prosperity, with such efforts being hampered by political constraints, the objective difficulty of the task, and pure policy errors.

Yep, that's DeLongism in a nutshell. Policy is made by experts who are motivated only by the public good. Disagreemetns are about means, not about ends, and are too technical for ordinary people to participate meaningfully. The purpose of democracy isn't rule by the people, but to ensure circulation of elites.

Of course DeLong doesn't think this is how things always work -- certainly not under Bush -- but he would say it's how they usually do, and more importantly, how they ought to.

Posted by lemuel pitkin | May 7, 2007 12:59 PM

Matt,

For a Jew you seem curiously ignorant of the Jewish role in the pillaging of post-Soviet Russia. From Jewish oligarchs to Jewish Harvard professors/economic advisors... is this just a coincidence?

Posted by Phil | May 7, 2007 1:21 PM

Russia's neighbors have honest and legitimate worries about Russia's intentions to them. This gives them good reason to seek the support of the US/NATO/EU. Matt Y seems to not give this as much credence as he ought to, but watch, say, the situation in Estonia now and you'll see some of it. (In particular, contrast the controversy over Estonia moving a memorial and grave of some WWII solidiers with the essentially similar move of a monument and remains in the Moscow region at nearly the same time- both had some spontanious protests, both w/ some police reactions against them. But, the protests in Moscow died down and those in Estonia flared up. Why? In part because the protesters in Estonia were, it seems, meeting with and getting support from the Russian embassy in Talin. (Estonian state web pages were apparently also attacked by computers w/ Kremlin IP address). And the Estonian embassy is blockaded by the brownshirt movement "Nashi" that is a tool of the Kremlin. Similar is the actions of Russia in Georgia and Moldova. It's not silly of those places to feel real worry about Russia. And, it's unreasonable for the average Russian to feel as if they have a right to mess with these countries. (Most of them do. In this they are no more crazy than, say, the US bombing the ports of nicaragua or saying they would bomb it if they bought MIGS, but no less, either.) None of this is to support the simplistic vision of Delong or Summers, but to point out that Matt Y's view is also too simplistic.

Posted by Matt (not the famous one) | May 7, 2007 1:27 PM

1)VERY good catch, Minderbender! I was searching for that crookedtimber article -- I remembered it from a year or so ago when I looked into why Larry Summers abruptly resigned from Harvard. I couldn't remember enough details --just that Larry was left covered in shit. I wonder why Brad Delong's article doesn't have the words
"Andrei Shleifer " anywhere??

hee hee hee

2) Re the question of whether Harvard's economists fucked the Russian people, well-- they fuck us common Americans all the time , so why not foreigners as well?

How do you think Harvard got a $25 Billion endowment -- compound interest on the slave trade profits of the 1700s only goes so far.

3) Mr "National Interest" doesn't hand out highly paid corporate sinecures, lavish "consulting contracts" or $100 million dollar grants/endowments. Mr "National Interest" don't hand out shit.

Posted by Don Williams | May 7, 2007 1:30 PM

I think it's a bit hard not to admit that Summer's and Sach's advise to Russia fucked them over, even if they didn't think it would hurt overall. Russia opened up its current account and started privatization too fast without the necessary institutions, practices and processes in place.

Posted by Reality Man | May 7, 2007 1:40 PM

I've written maybe 10,000 words in defense of Harvard President Lawrence Summers's much-denounced speech on why women haven't achieved gender equality with men in elite universities' math, science, and engineering departments. But that doesn't mean he's without flaw. Indeed, it looks like Summers was peripherally involved in the Scandal of the Century, the looting of post-Soviet Russia, or at least he dragged Harvard through the legal mud in a misguided attempt to protect his best friend, superstar Harvard economist Andrei Shleifer, who had gone over to the dark side.

Back in 1993, my elderly father would rant that those Harvard consultants who were advising the Yeltsin government on liberalizing the post-Soviet economy were ripping off the Russian people. Being a true believer back then in the Magic of the Free Market, I pooh-poohed his concerns.

Well, my dad was right and I was wrong. We all understand the superiority of the free market these days, but in any kind of market, it still matters very much who owns what. The "reform" of the Russian economy turned out to be one of the great larceny sprees in all history, and the Harvard boys weren't all merely naive theoreticians. Veteran economics journalist David Warsh's EconomicPrincipals.com reported in 2004:

"The US government's long-running wrangle with economist Andrei Shleifer and Harvard University over Harvard's ill-fated Russia Project in the 1990s was resolved last week, in the government's favor.

"A Federal judge ruled that, by quietly investing on their own accounts while advising the Russian government, Harvard professor Shleifer and his Moscow-based assistant Jonathan Hay had conspired to defraud the US Agency for International Development (USAID), which had been paying their salary."

Harvard had to pay $26 million and Shleifer $2 million in fines. This scandal was apparently the straw that broke the back of Summers' presidency -- the rebellion by esteemed mechanical engineering professor Frederick H. Abernathy over Summers' sheltering Shleifer apparently convinced the professors who don't give a damn about political correctness to turn on Summers.

Posted by Steve Sailer | May 7, 2007 2:20 PM

It should be noted that the Harvard boys' personal corruption isn't the same with the failure of the reform program.

Posted by Nick Kaufman | May 7, 2007 2:41 PM

So of you might be interested in this 1998 article in The Nation re Harvard's involvment in Yeltin's "reforms". See "The Harvard Boys Do Russia" at http://www.thenation.com/doc/19980601/wedel

Posted by Don Williams | May 7, 2007 2:54 PM

People interested in this may find this audio interview
http://name99.org/blog99/?p=95
with Yegor Gaidar interesting.

Obviously he is interested in justifying himself, but he mentions a number of aspects of the situation as it unfolded that I've not seen mentioned elsewhere, to explain what happened and why. He seems to feel that, even given the unsatisfactory nature of the current Russian economy, what was done was about the best that could be done given the hand that was dealt.

Posted by Maynard Handley | May 7, 2007 3:00 PM

Re Steve Sailer's comment that "This scandal was apparently the straw that broke the back of Summers' presidency -- the rebellion by esteemed mechanical engineering professor Frederick H. Abernathy over Summers' sheltering Shleifer apparently convinced the professors who don't give a damn about political correctness to turn on Summers."
---------

Ha ha ha ha ah

My understanding is that Harvard's faculty developed a deep concern about Russia's downtrodden only after Larry Summers started suggesting that Harvard's humanities faculty should get off their tenured butts and start working for a living.

When Summers started questioning the value of some of Harvard's programs.

Recall, for example , his clash with Afro-American Studies Professor Cornel West-- see
http://chronicle.com/free/v48/i19/19a00801.htm .

I think that some of Larry Summer's ideas for Harvard's "Curriculum Reform" were a threat to some privileged people.

See http://www.nytimes.com/2003/08/24/magazine/24SUMMERS.html?ex=1377057600&en=ad07c27697972a5b&ei=5007&partner=USERLAND

A quote from Summers:
---------
''The idea that we should be open to all ideas,'' he said when I saw him in mid-July, ''is very different from the supposition that all ideas are equally valid.''

Posted by Don Williams | May 7, 2007 3:13 PM

Actually, it occurs to me that Matthew could tell us whether Larry Summers or Summers' opponents were correct in their debate over curriculum reform at Harvard.

Should Harvard give greater "value added" to its students, given that it takes 4 years of their lives and around $200,000 in tuition?

Not being a Harvard man, I can't drag in quotes from obscure authors in 16th century France. Instead, I have to resort to an ill-bred, lowly empirical approach.

That is, to point out that Forbes List of the Richest Men in America is remarkably devoid of Harvard men.

Most of those self-made billionaires did not attend Harvard. How is that possible? Actually, most of them are college dropouts who never even bothered to apply to Harvard.

Bill Gates did attend Harvard but quickly dropped out. Warren Buffet , the second richest man in America, applied to Harvard Business School but was rejected. Three of the people in the top 10 list are heirs of Sam Walton -- who studied at the University of Missouri. Rather far from Harvard Yard, eh?

Yet the Ameican political system is such that one who is without wealth has little more freedom than one of BF Skinner's laboratory rats. If you ever become effective , you are subject to economic retaliation /loss of job unless you have independent wealth.

So is the best way to become a philosopher king to go to Harvard, read Plato, and run up a huge debt? To graduate and discover that survival requires that you beg to become a paid propagandist on some political campaign? Of --if the gods want to really crap on you -- a blogger?

Would it not be better to go to the University of Missouri and learn how to be a focused money-grubber?

Posted by Don Williams | May 7, 2007 3:45 PM

Of course DeLong doesn't think this is how things always work -- certainly not under Bush -- but he would say it's how they usually do, and more importantly, how they ought to.

I bet he wouldn't.

When he was having his little tiff with Chomsky what he seemed most pissed about was the insinuation that economic policymakers didn't believe in their own snake-oil. I think he probably does believe in his own snake-oil to a certain extent on free trade, but he doesn't seem to believe it's possible he got his jobs because what he believes is useful instead of him being brilliant and right.

Posted by Ed Marshall | May 7, 2007 4:23 PM

he doesn't seem to believe it's possible he got his jobs because what he believes is useful instead of him being brilliant and right.

Isn't that what I said? DeLong beleives that politics usually is, and always ought to be, a debate between well-meaning experts, not a conflict of interests between organized groups. In other words, he believes that he and his freinds get their influence because they are brilliant and right, not because they are useful to someone.

I've been reading his stuff on mailing lists since before he even had a blog, but I'm thinking in particular of this post:

My natural home is in the bipartisan center, arguing with center-right reality-based technocrats about whether it is center-left or center-right policies that have the best odds of moving us toward goals that we all share. The aim of governance, I think, is to achieve a rough consensus among the reality-based technocrats and then to frame the issues in a way that attracts the ideologues on one (or, ideally, both) wings in order to create an effective governing coalition.

Couldn't put it much clearer than that.

Posted by lemuel pitkin | May 7, 2007 5:43 PM

I am sorry, but Delong being brilliant and right isn't useless.

It's being brilliant and right on questions of public policy that maximize people's welfare and prosperity in socially not individually rational ways.

While what is collectively rational is indeed a big and perhaps impossible to get a consensus on question, the fact also is that interest group politics has the downside of particularistic policies that favor the few and organized at the cost of the many and unorganized.

Posted by Nick Kaufman | May 7, 2007 5:55 PM

Don,

"That is, to point out that Forbes List of the Richest Men in America is remarkably devoid of Harvard men."

This is true, but I don't think it does justice to the benefits of an undergraduate degree from Harvard (and, to a lesser extent, other Ivies) for a career in politics or political journalism -- for example, I doubt Matt would have his current job at The Atlantic at his age were he a U Mass grad.

Interesting about Buffett being rejected by Harvard's b-school -- I had never heard that. I do know that he went to U Penn undergrad for three years, but went back to U. of Nebraska to graduate, and then studied under Ben Graham at Columbia.

Posted by Fred | May 7, 2007 6:51 PM

1) Re Warren Buffet being rejected by Harvard Business School, see this Salon bio from 1999:
http://www.salon.com/people/bc/1999/08/31/buffett/index1.html

2) Warren Buffet recently gave away about $30 BILLION of his fortune to charity. Harvard's total endowment --built up over 250+ years -- is less than that. Nice to know that Harvard Business has such expertise in "investing" and "executive decision-making".

3) Re Warren Buffet's brush with the Ivy League as an undergrad at Penn Wharton's School, here is how one source describes the experience:
"In 1947, a seventeen year old Warren Buffett graduated from High School. It was never his intention to go to college; he had already made $5,000 delivering newspapers (this is equal to $42,610.81 in 2000). His father had other plans, and urged his son to attend the Wharton Business School at the University of Pennsylvania. Buffett stayed two years, complaining that he knew more than his professors. When Howard was defeated in the 1948 Congressional race, Warren returned home to Omaha and transferred to the University of Nebraska-Lincoln. Working full-time, he managed to graduate in only three years.
Warren Buffett approached graduate studies with the same resistance he displayed a few years earlier. He was finally persuaded to apply to Harvard Business School, which, in the worst admission decision in history, rejected him as "too young". Slighted, Warren applied to Columbia where famed investors Ben Graham and David Dodd taught - an experience that would forever change his life. "
Ref: http://beginnersinvest.about.com/cs/warrenbuffett/a/aawarrenbio.htm

Posted by Don Williams | May 7, 2007 7:39 PM

I recently finished reading the latest edition of Benjamin Graham's The Intelligent Investor, and there is a gracious remembrance of Graham in the forward by Warren Buffett. In addition to being a great investor, Buffett is also a felicitous writer: even his essays on arcane aspects of accounting are surprisingly readable.

BTW, some of you may be interested to hear Buffett's preference(s) for President: Hillary or Obama. He has donated to both and thinks both would make good Presidents. That's what he told Liz Clayman in an interview (why CNBC can't get someone smarter than Liz Clayman to interview Buffett, I have no idea. To paraphrase a line from The Onion about Sean Hannity, Liz Clayman asks the questions other reporters are too smart to ask).

Posted by Dave | May 8, 2007 2:14 AM

Matt,

For a Jew you seem curiously ignorant of the Jewish role in the pillaging of post-Soviet Russia. From Jewish oligarchs to Jewish Harvard professors/economic advisors... is this just a coincidence?

Phil

Well, of course Jews try to destroy civilization while enriching themselves and ritually murdering Christian children. I think that Matt doesn't mention it because he assumes that it's a constant beyond the control or purview of public policy. I think that the kinds of questions Matt is more interested in is institutional ones, like why the Jews were given such a free hand without more accountability, not the (predictable) results once such a free hand was given to such a race.

Posted by Julian Elson | May 8, 2007 6:24 PM

Have you seen Fiddler on the Roof, Julian? Those Russian fuckers owed us big-time.

Posted by Steve | May 8, 2007 6:30 PM

Posted by Peter Odum | June 4, 2007 2:45 AM