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Boris Yeltsin and the lessons he taught us about 'hawks'!

By Jeff Schubert - posted Friday, 27 April 2007


So much has been written about Boris Yeltsin since his death that another article seems superfluous. This is particularly the case as nearly all the articles have had the same theme: that of a man who played an important roll in the fall of communism, but was temperamentally incapable of taking the lead in creating a balanced Western-style democratic-capitalist society because he was essentially an instinctive revolutionary rather than a thoughtful administrator or builder.

Yet, there is more to the story of why the economic reforms went so wrong!

Yeltsin seems to have had a pretty simple view of how a modern society operates. He was virtually a sitting duck for much of the extreme advice that he received - both from Russians and foreigners - because it fitted his instincts.

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Psychologist, Daniel Kahneman (who won a Noble Prize for economics) and Jonathon Renshon, in discussing the drivers of foreign policy have written the following:

Modern psychology suggests that policymakers come to the debate predisposed to believe their hawkish advisors more than the doves. There are numerous reasons for the burden of persuasion that doves carry, and some of them have nothing to do with politics or strategy. In fact, a bias in favour of hawkish beliefs and preferences is built into the fabric of the human mind.

Yeltsin was getting plenty of “hawkish” and often careless advice.

In my first trip to Moscow in 1991, prominent economic journalist Mikhail Leontyev virtually lectured me over dinner on the how a market economy worked and on why radical action was needed in Russia. Being an experienced “market economist” I certainly knew that action was needed, but could see that Leontyev knew little about a modern capitalist society - with its legal and administrative frameworks - and was virtually proposing a disaster. I tried to argue with Leontyev, but it was useless as he was totally convinced that he was right.

Leontyev, however, was not alone. He was in the same “hawkish” camp of such “reformers” as Yegor Gaidar and Anatoly Chubais - and they were equally as ignorant as him. They wanted to pull the existing system down so that a new one could be built virtually from scratch, and do it quickly so that communism was firmly buried.

But it was not only the Russians!

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The following year I was again in Moscow and met with Professor Richard Layard, of the London School of Economics, who was advising on economic reform. He told me that he and a colleague had boarded a Moscow bound plane in London with the idea that reform had to be carried out gradually and with care. However, by the time they had arrived in Moscow they had decided that it would be best to implement reform as quickly as possible, including the use of “shock therapy”. They thought there was a “less than 50 per cent chance of this working”, but that it was “worth a try”!

I was stunned. It was Layard’s first trip to Russia, but flush with enthusiasm he was willing to disregard his ignorance and offer such “hawkish” advice on the basis that it was “worth a try”.

The following year, 1993, IMF first deputy managing-director, Stanley Fischer, said of the conflict with parliament under Ruslan Khasbulatov: “If Yeltsin wins, then the reform program can succeed. If he loses, then that’s it for reform.”

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About the Author

Jeff Schubert is an economist, business consultant and writer. He is author of Dictatorial CEOs and their Lieutenants: Inside the Executive Suites of Napoleon, Stalin, Ataturk, Mussolini, Hitler and Mao. He is a regular commentator on Russian affairs and now lives in Moscow. Jeff is also the creator of The Little Pink Ant. His websites are: www.jeffschubert.com and www.thelittlepinkant.com. The also blogs about Russia at www.russianeconomicreform.ru/

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