O
ne of my favorite economists is Yegor T. Gaidar, a former Communist who struggled hard in the 1980s and 1990s to turn Russia into a capitalist country. Gaidar, 53, died Dec. 16 of a blood clot.
So many people on this blog are free market advocates. At times, they get into the nit-picky about what they sometimes see as a creeping turn to socialism and big government.
Think of Gaidar and see the approach turned on its head. Consider that you are a member of the Communist Party of what was then a super power. You even edit an academic tome titled “Kommunist.” Yet during the excitement of Mikhail S. Gorbachev’s “perestroika,” you get free market religion and, in increments, you turn into a capitalist that Milton Friedman would envy.
At the same time, you are thrust into a decision making position of a country undergoing a huge, lightning-fast transition from police and military industrial state to what Russians call “dicki capitalism,”” or “wild” capitalism. You have to keep things in check, fight off mossbacks in the government, avoid civil war (with nuclear weapons no less) and somehow build an enduring structure of a free market economy.
The man who assumed the Herculean task was Gaidar. He sure didn’t seem the part. He looked literally, like an egghead. His round, oval face topped a small body that was equally round and soft. He was usually soft spoken and kind when we used to meet in the cluttered office at his institute in the late 1980s. The issue then was than Gorbachev’s efforts towards breaking from the command economy past weren’t going fast enough.
Gaidar had an interesting background. His great grandfather and grandfather were Russian culture icons since they wrote children’s fairy tales that are still in circulation today. Not many people know this but in 1962, young Yegor was a child in Cuba during the Missile Crisis. He was there because his father was an official with the Soviet team supporting Castro.
When the Soviet government fell apart in December 1991, Gaidar was one of the leaders who tried to plot a new course. Just a month before, he had become minister of finance and the economy. He lasted in that post only two months, but that was enough to launch”shock therapy” which is kind of like using a defibrillator to electrify the country into capitalism.
“Shock therapy” had been used with some success in basket case economies such as Bolivia’s. It had had some success in Poland. Gaidar’s plan was to overhaul state industries and end the gigantic government subsidies, ruble funny money, that for decades had kept the country from teetering to a crash.
The result were awful in the short term. Inflation jumped to something like 2,000 percent per annum. People saw their life savings vanish overnight and comparisons with Wiemar Germany were inevitable. Later, Gaidar helped with mass privatization in which ordinary citizens got vouchers for shares in formerly state-owned industries. It was a privatization of a scale never seen before. Even Margaret Thatcher, the Queen of Privatization during the Reagan era, only really privatized maybe a couple dozen British firms.
Gaidar had plenty of critics. He was blamed for crashing the economy. Rank and file Russians had no idea to do with their vouchers, so smart entrepreneurs picked them up for mere kopecks, giving rise to the oligarchs, which still rule today.
Gaidar’s political career remained spotty. He served briefly as Boris Yeltsin prime minister before being sacked. But as Anders Aslund, a Swedish economist and Russia expert notes, Gaidar helped create the capitalist foundations of the new Russia that people like Vladimir Putin get credit for.
My most vivid member of Gaidar was in the coup d-etat against Gorbachev on Oct. 3 and 4, 1993. I was Moscow bureau chief for BusinessWeek and the streets erupted into gunfire. We were conveniently located about a quarter of a mile from the White House, the locus of most of the fighting.
I was leading a team of three. We were crashing a cover story, intermittently running out on the streets, dodging for cover from the machine guns and then running back to the office to file a steady narrative to New York. We needed analysis as well.
That’s where Gaidar came in. The streets were extremely hazardous. The two-day combat resulted in more than 1,000 casualties, including 150 dead. Of them, seven were journalists.
Gaidar knew we needed an interview. He also knew that we would be placing ourselves in great danger if we tried to get to the Kremlin where he was holed up with Yeltsin’s staff.
You know what he did? He grabbed a tape recorder, interviewed himself and sent us the tape.
This post is in memory of the man.
Peter Galuszka