Wednesday, December 16, 2009

Yegor Gaidar 1956 - 2009

The news of former Prime Minister Gaidar’s untimely death this morning made many of us feel that it was the end of an era. In reality, that era, of hope for Russia’s economic and political development ended some time ago but Yegor Gaidar’s involvement was so crucial that his physical passing reminds us all of it.

Yegor Timurovich Gaidar was born into a privileged Soviet family, a fact that one keeps coming across in the biographies of the first generation of reformers. The reason is simple: who else would have had the access, first, to western economic and political literature and, second, to any position of power in the late Gorbachev and early Yeltsin years.

Gaidar’s grandfather, Arkady Gaidar, was one of the best known children’s writers in the Soviet Union, author of two of the best read books: Школа (School), a fictionalized account of his participation as a youngster in the Civil War, and Тимур и его команда (Timur and his team), a story of a red pioneer group, who off their own bat decide to help families of servicemen who are fighting in a war. Which war? Well, it took me a little time in my youth to work out that it was not the Great Patriotic War but the rather less well known one against Finland in 1940.

Gaidar’s books were popular with children as well as adults because, though ideologically absolutely pure, there was a hint of rebelliousness about them. Timur and his pals did not seem to be obeying any young pioneer leaders and were distinctly uninterested in adult guidance.

Arkady Gaidar, though a journalist as well as a writer, was unaffected by the peculiar death of his patron, Mikhail Frunze, and survived the purges. Possibly that was because he wrote for children and teenagers, possibly, as Robert Conquest put it, because somebody had to. But he did not survive World War II a.k.a. the Great Patriotic War; having become a war correspondent, he was killed in the autumn of 1941.

Timur Gaidar, named after Tamerlane and allegedly the character on whom the fictional Timur was based (not something I can readily believe) grew up to be a successful naval officer, a Rear-Admiral, no less and a friend of Raúl Castro’s before he became Pravda’s military correspondent. He married the daughter of another writer, as did Yegor himself, the daughter of one of the famous Strugatsky brothers. A highly privileged family, were the Gaidars.

The point is that it is precisely this kind of families that produced people who became oppositionists and, sometimes, dissidents, such as Pavel Litvinov, grandson of Maxim, and his sisters.

Gaidar did not go that far. In fact, he remained outwardly a Communist. The difference between him and his colleagues was that he had read numerous Western economists and had been thinking about their ideas. This is what the French liberal economist Henri Lepage wrote about him in the CRCE collection of articles about Lord Harris of High Cross [scroll down] and about his appearance at a conference organized for the young East European and Russian reformers by the Centre for Research into Communist [now Post-Communist] Economies (CRCE) in Ljubljana in 1990:
At that time Gaidar was a close adviser to Gorbachev and a member of a team of economists sent... to inform the outside world about the aims and developments of Perestroika, and to demonstrate a more open-minded attitude towards the West. Gaidar had a peculiarity: he had studied Samuelson's basic textbook and took it on himself to initiate his fellow Soviet economists in a clandestine way, to the basis of modern western neo-classical economics. This was the reason he was selected by Gorbachev. He was one of these rare Soviet economists able to discuss economics in modern micro and macro economic terms with his Western professional counterparts.

Several months later, as Gorbachev's perestroika was unfolding, surprisingly Ljubo and Ralph came to me asking whether the Institute I was then managing in France -- Institut Euro 92, founded and chaired by French politician Alain Madelain -- would agree to join the CRCE in funding a common Russian venture. This was to be a partnership with the economic department of the Soviet Sciences Academy. Institut Euro 92 was able to bring some money and assist the crce in creating ICRET -- International Centre for Research into Economic Transition. The new institute was located in Moscow and co-chaired by Gaidar and Ralph Harris. It benefited from new legislation allowing the formation of Soviet-Western academic research joint ventures

In fact, this particular joint-venture responded to a very specific motive. Being close to Gorbachev, Yegor Gaidar was getting worried about a possible reactionary move from the old Soviet communist guard. The communist coup against Gorbachev's policy was then looming as possible event, with a move back to more traditional dictatorship. Backed by the endowment in dollars, ICRET was a sort of survival kit that would help our new Russian economist friends to maintain western connections should a communist dictatorship be re-established.
In 1991 Gaidar left the Communist Party and joined Yeltsin’s government, becoming First Vice-Premier of the Russian Government and Minister of Economics from 1991 until 1992, and Minister of Finance from February 1992 until April 1992. He advocated liberal reforms through a shock therapy, abolished price control, reduced the budget deficit and cut industrial subsidies.

Gaidar became Acting Prime Minister for a few months in 1992 but the position was not confirmed by the Congress of People’s Deputies. Subsequently he continued in an active role, advising and even participating in the government. Gradual frustration with the way the economic reforms were not working out and electoral dissatisfaction forced him out of the government in 1994.

Since then Yegor Gaidar has dedicated himself to economic research and ideas in Russia and the West. He was forced to watch his reforms undermined, his legacy distorted and abused and Russia’s economic development stymied. The great hopes of the early nineties have gone and will not come back in a hurry. Indeed, those great hopes are regarded with loathing by many Russians.

This section in the Wikipedia biography sums up quite well the contradictory and strong feelings this quiet spoken, mostly courteous and well-meaning man has excited.

A carefully argued and thoughtful article (why does that expression always make me think of Peter Simple of blessed memory?) on the BBC website (yes, folks, they have the odd good article) sums up the situation Gaidar faced and his attempts to solve the heinous problems.
Appointed acting head of the government in the new non-communist Russia in 1992 by Boris Yeltsin, Mr Gaidar inherited a country that was quickly falling apart.

A mountain of foreign debt was choking Russia. Immediate default and massive state bankruptcy seemed unavoidable.

The system of food provision had collapsed, leaving the shelves of the country's shops literally empty.

Even the customary long queues were gone - there was nothing left to queue for. The prospect of massive starvation, riots and possibly an all-out civil war loomed large over a huge country.

Mr Gaidar's young and inexperienced government may have made many mistakes - but the fact remains that in 1992 it managed to save the country, lifting it as if by magic from the quagmire where it seemed doomed to sink.

There were only two solutions - either introducing martial law and severe rationing, or radically liberalising the economy.
Gaidar chose the second one and it prevented civil war, riots and any possibility of returning to Stalinism. It also plunged Russia into an economic turmoil.
The devaluation of Russia's currency had occurred before he took charge. The last communist government of Valentin Pavlov orchestrated it by stealth in early April 1991, when prices were drastically raised and hyperinflation unleashed without the population at large noticing - there were no goods in the shops anyway and new price tags were not even printed.

The lifting of price controls created an incentive for producers to produce and the shops to trade - and that filled the shelves with goods.

That was the moment when the people of Russia noticed that everything had suddenly become very expensive.

Savings - meagre as they were by world standards - lost any value.

The population - used to the stability and stagnation associated with flat prices that had not changed over decades - was deeply shocked.

At the same time, Mr Gaidar persuaded Western creditors that he was deadly serious about profoundly reforming - in fact, reinventing - the dying Russian economy, and the Soviet debt was restructured.

The country was saved both from bankruptcy and from starvation.

The following years were excruciatingly painful for Russians, as their country went through an unprecedented transformation from a totalitarian economy to a market one.
As we watch the Russian government reverse many of the reforms (though, by and large, price control has not been reintroduced) and retain greater popularity despite being shakier than before, we need to ask why those reforms failed.

Some reasons are obvious: the shock was too great, the chaos was compounded by the fact that oil and gas prices were low throughout the decade, the people did not have the fiscal reserves to survive.

There were other issues as well. The economic situation may have been bad but people were sort of used to that, even if they grumbled. The reforms did not necessarily make life worse for most people but they did not make it better, which is what they promised to do. The loss of savings, devaluation of pensions, sudden rise in prices and unemployment (unheard of in the Soviet Union) brought a curious fact home to the people of Russia: the much vaunted system towards which attitude was ambivalent was a greater disaster than they had realized. This touched a patriotic nerve. How could Russia be such a mess? Whose fault was it? Quite sane, intelligent people told me in all seriousness in the nineties that the Americans had deliberately destroyed Russia, something they had been wanting to do for decades, using the various oligarchs, corrupt associates of Yeltsin and the reformers for their own nefarious purposes.

Then there was the problem of legal structure or, rather, lack of one. The Russian experience has proved beyond any doubt, if proof were needed, that free-market economics does not work without a stringent legal and judicial structure, property rights, and an independent judiciary. What was supposed to produce a property owning democracy produced what Russians call бандитская страна, a gangster country. Mind you, they still call it that for some things did not change under Putin. There are now other oligarchs and they are all connected with the state and the security services. But the higher oil and gas prices pay people’s wages and allow them to buy most things in shops. They still grow a goodly proportion of food in their own dacha gardens and ensure that there is anything in the winter by drying, salting and pickling.

It did not help that a number of reformers though not, apparently, Gaidar himself, seemed to have a very nice life: pleasant housing, admirable and regularly paid salaries, trips abroad whence they returned with more goodies, schooling for their children in Britain and college education in the United States. People who felt that they were struggling for survival made no distinction between those who did have that life and those who did not; nor was there the slightest desire to understand the ideas that were supposed to give Russians a better life but could not do so.

Gaidar was unfairly castigated: there is no question that the alternatives to his policies would have been even more disastrous but those who lived through the nineties do not see it that way and seem to be prepared to surrender all political and much economic freedom for a steady income and a better life than they had known for decades. And who can blame them? Not I, living as I do in the wealthy West.

For all of that, I do not think Yegor Timurovich worked in vain. Eventually, it will become obvious that Russia is still trailing behind the West to everyone, not just the many thousands who praise Putin while carefully send their money and their offspring to other countries, often following themselves. And then, who knows? Maybe the reformist ideas, somewhat modified by reality, will come into their own.


  1. Mr Gaidar wrote an excellent essay on the collapse of the USSR called 'Grain and Oil'.

    I recommend it, if you can spare the time.

    I've not read it, but his book 'Collapse of an Empire' appears to be a more detailed exploration.

  2. Thanks for those links, Dave.

  3. A new book (AUTOBIOGRAPHY) see: