The Wall Street Journal
April 5, 1998

The Other Slavic Conundrum

(Mr. Caryl is the Moscow bureau chief for U.S. News & World Report.)

Russia is a titanic mess. How it managed to fall so far is a puzzle that will occupy the pundits for decades to come. But the U.S. foreign-policy establishment is already hotly debating one particularly thorny question: Namely, how much of the mess was America's fault? It's a question that seems particularly germane at a moment when Russia has just received a new lease on life from the International Monetary Fund -- under the peculiar circumstances of a NATO-led war against a country that enjoys Russian support.

Official Washington, of late, has replied in no uncertain terms that "Russia was never ours to lose." If only it were that simple. Obviously Russians must bear the primary responsibility for their own mistakes (or, to be precise, those of their leaders). Yet the fact of the matter is that the West had plenty to win in Russia -- which was precisely why we spent the better part of the past decade pouring billions of dollars into the place while studiously overlooking some of its most obvious bad habits. The stakes were high, and for good reason. A democratic, peaceful and prosperous Russia would have been the crowning achievement of a tortured century that began with yet another, albeit far less promising, revolution.

Janine Wedel's admirable new book, "Collision and Collusion" (St.Martin's Press, 286 pages, $27.95), is not only about Russia. Strictly speaking, it is a study of Western aid programs to the countries of the former Soviet bloc in the postcommunist era. As Ms. Wedel shows, this was not a trivial effort. By her count the industrialized countries committed $80 billion in various kinds of aid to these countries. Much of that money consisted of so-called grant aid (mainly technical-assistance projects designed to give Easterners urgently needed know-how), and it is this piece of the pie that she focuses on.

Her task is not an easy one. This was a gargantuan and in some ways utopian undertaking, the biggest planned knowledge transfer in recorded memory. It ranged from power-lunching suits from Harvard who supervised the biggest privatization effort in history (in Russia) to earnest tree-huggers who gave Hungarian friends advice on cleaning up the environment (and, perhaps more important, on fund-raising and lobbying). It was a process inescapably marked, as Ms. Wedel puts it, by successive phases of "triumphalism," "disillusionment" and "adaptation" -- in other words, by all-too-human alternations of euphoria, mutual exasperation and sober acceptance of real-world limits.

Some of her discussion is a bit on the technical side, more about procedures than principles, but Ms. Wedel, an anthropologist who moonlights as a journalist, is good at conjuring up the sense of adventure and psychological complexity that ensued as West and East got to know each other up close. She carefully charts the misunderstandings and cultural collisions as Western aid-givers tried to impose their own terms of reference on societies they were usually poorly equipped to understand. Much of this discussion, while illuminating, is aimed more at policy wonks than at lay readers.

It is the fourth chapter of this book, about Russia, that should be declared obligatory reading. Ms. Wedel shows how officials in the Clinton administration, in the early 1990s, made the fateful decision to channel aid to a key sector of Russia's economic reform program -- the gigantic and ambitious program of privatization -- via a small coterie of Kremlin civil servants around the "young reformer" Anatoly Chubais. The reformers ultimately succeeded in transferring the lion's share of the state-owned economy into private hands, but they did so using methods that were overtly corrupt. (The auctions for some of the most lucrative companies were won, at fire-sale prices, by the same banks that ran the auctions, for example.)

On the U.S. side, the Clinton policy makers bypassed the usual public bidding process in the name of "national security," awarding consulting contracts to a select group of Harvard economists with contacts to the Chubais circle. Ms. Wedel wonders whether "the strategy of focusing largely on one group" furthered "the aid community's stated goal of establishing the transparent, accountable institutions so critical to the development of democracy and a stable economy."

In fact, rather than broadening ownership and creating a new middle class, Chubais-style privatization boosted a tiny group of business tycoons into positions of unparalleled dominance -- with all the distorting effects that became so vividly obvious in the financial collapse last August.

Ms. Wedel argues, convincingly, that the lack of accountability on both sides ultimately compromised all those involved. Today, Mr. Chubais is perhaps the most hated man in Russia -- and the favoritism shown him by his Western backers has blackened their reputations among Russians, perhaps irrevocably. Aid, it would seem, can hurt as well as help. It's a lesson that readers of this excellent book would be well advised to contemplate.

No longer available on the web at Johnson's Russia List, #3227, 6 April 1999.

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