-Caveat Lector-
/** labr.global: 360.0 **/
** Topic: Creating 'natural' capitalism In Russia **
** Written 3:03 PM Sep 2, 1999 by [EMAIL PROTECTED] in cdp:labr.global
**
<< Creating 'natural' capitalism
By William Pfaff
THOSE who doubt the power of ideas will learn something from a report
on the former Soviet Union and Eastern Europe issued by the UN
Development Programme, the world's largest agency for multilateral
development cooperation. The report, possibly the harshest ever issued
by a UN authority, says that the Western-led effort to transform the
former Soviet bloc's economies by wholesale privatization has plunged
more than 100 million people into dire poverty and stripped millions
more of any form of economic security.
This was done on the advice of the Western community of professional
economists in universities, international agencies and governments.
True, there were arguments among he professionals for or against "big
bang" privatization - doing it all at once and leaving the survivors to
sink or swim. But few, if any, among the economists argued that the
Soviet-style state and its industry should be carefully dismantled in
stages, with empirical attention to the consequences, above all the
consequences for the public.
The Western economics profession was at the time, and largely remains,
committed to its own version of the romantic fallacy, which is at least
five centuries old and concerns the "natural" perfection of man, whom
society allegedly corrupts. They believed that humans are natural
capitalists. By destroying socialist obstacles to capitalism in Eastern
Europe and the former Soviet Union as rapidly as possible, they
believed that people would spontaneously respond by creating capitalist
prosperity.
Alan Greenspan himself has admitted that he (or "we," as he says)
assumed that communism's collapse "would automatically establish a free
market entrepreneurial system." He assumed that capitalism was "human
nature." It turned out, he says, to be "not nature at all, but
culture." Culture is not the economists' department.
What was created was a disaster, the equivalent for that region, as The
Times of London has said, of the Great Depression. Anton Kruiderink,
the UNDP's regional director for Europe and the former Soviet Union,
quotes World Bank figures in his foreword to the report.
In 1989, 14 million people in the former Soviet block lived on less
than the equivalent of $4 per day. During the first five years after
communism's collapse, that population figure rose to around 147
million. There are exceptions to the traumatic destabilization of
society that followed in Russia. Poland and Slovenia are in good shape
today, but they were advanced societies before World War II. So were
the Czech Republic, Hungary and the Baltic states, which the UNDP says
have made noticeable progress.
As for the rest of the region, life expectancy has fallen by four years
or more. Tuberculosis and diseases linked to malnutrition are back on a
large scale, as is suicide. Social structures - including educational
systems, which in Soviet times were among the few real assets of the
region - have been devastated.
Education is essential to any hope people have of climbing out of this
pit. The transfer of state assets to robber capitalists, generating a
black economy, has devastated tax collection and the ability of
governments to reconstruct what has been destroyed. The findings of
the UNDP report can surprise no one who has read the newspapers during
the last decade or followed the Western debate over policy for Russia
and the former Soviet bloc states. Yet the sheer scale of the disaster
must shake even those who criticized the policy from the start.
The West has been implicated in another way than simply by giving bad
advice. There were more reports last week of suspected Russian criminal
money-laundering through Western financial institutions, this time
through what had been considered the eminently respectable Bank of New
York. The sums cited in the investigation are $10 billion since early
last year, $4.2 billion alone through a single account from last
October to March 1999. Ten billion is half the total that the
International Monetary Fund has loaned Russia over the entire period
since 1992.
The power of ideas is great, above all when they are bad ideas. Yet
there is very little that can be done about intellectual fashion, or to
loosen the grip of politically favoured ideologies. The one principle
that can and should be defended in making public policy is to do as
little harm as possible. One cannot govern with entirely clean hands.
(That, as France's Charles Peguy observed many years ago, would mean
with no hands.) But governments should not recklessly press on
beleaguered foreign societies "reform" programmes that clearly will do
much harm in the short term, when
the justification for those programmes is the contested and unproved
theory that miracles will take place in the long term.
It is essential to look before leaping, and to question the application
of any theory, however seductive. The conventional wisdom of any given
period is nearly always wrong.-Dawn/IHT Service
[Source: DAWN Internet Edition:
http://www.dawn.com/daily/19990901/op.htm#3]
** End of text from cdp:labr.global **
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