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Review of some literature on post-communist - post-Soviet economic "reforms," and their social and economic consequences

By Alan F. Fogelquist, Eurasia Research Center, 4 December 1998

In the light of recent dicussions on the Cenasia List - I present a quick review of some literature which reveals the complexity and inadequacy of reform efforts in the FSU. A reading of just some of the literature below will raise many questions about simplistic formulas for reform. It is in the light of having read such literature and much more that I made my earlier more or less spontaneous and perhaps overly caustic exposition.

Two works which represent the viewpoints of western advisors to the Russian and other Post-Communist Tansiton governments are.

Anders Aslund, How Russia Became a Market Economy, Brookings 1995 Jefferey Sachs, wingthye Woo and Stephen Parker, Economies in Transition, MITk 1997. In Russian similar views are presented by Yegor Gaidar in several works.

All of these books have a common two common characteristic. They go into considerable detail on the evolution of macro-economic policy, prices and exchange rates, and on the other hand very little detailed examination of what was happening in Russian enterprises as these policies were introduced, resisted, reintroduced etc.

These authors for the most part have attributed Russia's woes to the resistance by members of the old nomenklatura to reform and the failure to continue the anti-inflationary monetary policies introduced by Gaidar in the first three months of the reform. Aslund's book is particularly good for a detailed tracking of the policy changes and changes in aggregate prices during the first four years of the reforms.

A SECOND GROUP OF WORKS:

This group of works is more heterogeneous both in the professional background of the authors and the scope and focus of each study. All of these works combined provide important insights into issues not covered or only superficially and cursorily addressed by authors of the first group several of whose authors participated in a major way in the forumalation of Russian macro-economic policy and at the same time to the neglect of problems in the microeconomy and sectoral levels. A thorough review of this literature and literature which provides information on the response of individual enterprises and industries to the reform policies is needed, I believe, to have a complete and balanced view of what happened. All of this appoints to severe deficiencies and neglect of important dimensions of economic reality in the works of the first group of authors.

Some works which analyze things from a different point of view casting light on the peculiar problems of Russian industry and Russian enterprise organizaton are:

Amsden, Alice; Kochanowicz, Lance Taylor: The Mrket Meets it s Match: Restructuring of the Economies of Eastern Europe. Harvard University Press.

The above work is particularly important because it both points out some theoretical defficiencies in the assumptions of western advisors on economic reform and gives some detailed information on the exact technical and organizatonal problems of industrial managers and their industries at the time of the reforms. These specific problems of industry were not addressed at all by the macro-economic oriented reformers. They are part of the reason for industries's often unexpected responses to reform.

A general work which adopts an entirely different view from that of Aslund is Marshal Goldman: Lost Opportunity: Why Reforms in Russia have not worked.

There are reports by the Russian industrial organizations which Aslund and others in his school consider to be biased, but which present important facts and address important industrial issues which are left out of the studies of Aslund, Sachs, and Gaidar.

Other works which also deal with problems of industry or particular industries and enterpises plus other issues such as the social and distributional consequences of Russian policies are:

Linda J. Cook. Labor and Liberalization - Twentieth Century Fund, 1997.

Lynn D. Nelson and Irina Y. Kuzes - Radical Reform in Yeltsin's Russia, M E Sharpe, 1995

Bertram Silverman, New Rich New Poor New Russia, ME Sharpe1997

A book which analyzes the connections between particular advisors, western universities, and Russian and East European "reform" politicians is:

Janine R. Wedel. Collision: The Strange Case of Western Aid to Eastern Europe 1989-1998.

In Russian there are numorous articles and pieces by Grigoriy Yavlinskiy challenging the wisdom of the reform course adopted. Yavlinskiy is accused by the first group of thinkers of 'neglecting money' but presents some interesting evidence about how the Russian economy and society are different form western and developing market econmies and hence the unpredictable behavior of enterprises and the economy as a whole.

There are numerous monographs and works in Russian addressing the particular problems of Russian industrial competitiveness in particular branches of industry.

One such study is by Ekspertnyi Institut - Konkrentosposobnost' Rossiiskoi Promyshlenost' - Moscow 1996

A book which takes a comprehensive comparative analytical view of Post Communist reform and adopts positions similar to those of Amsden, et al. is

A D. Hekipelov. Ocherki po ekonomike postkommunizma. Rossiiskaya Akademia Nauka - Institut mezhdunarodnykh ekonomicheskikh isledovaniia. Moscow 1996.

A book in English which analyzes the special problems of Russian military - industrial enterprises is:

Clifford G. Gaddy. The Price of the Past: Russia's Struggle with the Legacy of a Mlitarized Economy. Brookings Institution Wash D. C. 1996.

On Central Asian Econ Reform for a view of viewpoints of local architects of ecnomic policy there is:

Akezhan Kazhegeldin. Ekonomicheskaya politika v period podavlenia inflatsii i stailizatsii proizvodstva, 1994-1998 Almaty - Valery.

These are just a few works which provide ample empirical evidence on problems over looked by key western advisors on macroeconomic policy like Aslund and Sachs. All of these point to a conclusion that the understanding of these two in particular was over simplified and that there were many aspects of economic and social reality that were of critical importance but simply overlooked by people with this orientation. Later some of these authors have introduced new elements in their explanation of what has happened that were absent in their original policy formulations.

There is much information in Russian and Central Asian newspapers and journals which provides evidence of the peculiar institutions, and conditions at the regional, local, branch, and firm levels which should have been factored in to the policy formulations.

A tentative conclusion based on a reading of such literature and many more professional and journalistic reports, is that there were serious defficiencies in the thinking of severral key reform advisors from the west. They simply didnt have enough information about the Russian and FSU economies, histories, societies and political social and military forces to produce policies that were successful and humane.

Little attention was paid to creating social safety nets for the losers in the transitional period. The outcome in terms of human suffering of the transition period has been enormous.

At the very least the first group of authors can be said not to have adequately considered real political and social consequences of the policies they were recommending with such confidence in 1992, 1993, and 1994.

Recently some of these authors are blaming current problems of the CIS on the "Mafia" factor as a kind of all purpose exogenous factor completely independent of macro-economic policy.

I believe there are plenty of grounds to criticize key western policy advisors in the macro-economic sphere who at the top levels contributed to Russian and FSU economic policies. There is enough contradictory and complex evidence to quibble and debate about this issue for decades with no definitive resolution in sight. All this points to a need for more research on important but inadequately addressed factors other than aggregate policies.

Incidently I have checked the work The State of Working America 1996-1997 and it shows, based on US Labor Department and other statistics not only a growing inequality in family income but a constant decline in real hourly wages in the United States since 1979. Other investigators may have other statistics, but these particular authors as well as Robert Gordon, and James Galbratih and Kevin Philips show decline in the hourly earnings of workers in the US.

I believe that all of the above is directly relevant to the problems of Central Asian - Post Communist political and economic development. I have chosen mostly Russian examples because the Russian cases has been more thoroughly reviewed and much of the literature I have on Central Asian economies comes from a great many shorter articles and reports, especially those from the Central Asian and Russian press.

Best Wishes

Alan F. Fogelquist, Ph. D.
Unfunded and unpaid research scholar
Eurasia Research Center