by DAN JOSEFSSON
(research by Stefan Lindgren)
(The following article, originally written in Swedish language, first appeared in English translation in 1999. It’s a must for those interested in learning how Russia was thrown on the path of market economy, under the guidance of Harvard professor Jeffry Sachs and Swedish economist Anders Aslund, and how a certain class of people with no experience in entrepreneurship benefited without uplifting the economy. Ed.)
The experiment began in 1991. Today, seven years later, statistics show that it turned into far more of a shock than of therapy. The fact is that the therapy has nearly killed the patient.
Let’s take a look at some figures.
Between 1991 and 1997, Russian GNP – i.e. the value of all goods and services that Russia produces – went down 83%. Agrarian production decreased 63%. Investment decreased 92%. 70,000 factories were closed down. This led to Russia producing 88% fewer tractors, 76% fewer washing machines, 77% less cotton fabric, 78% fewer TV-sets – the list is endless.
In a country without unemployment, 13 million people lost their jobs. Those who still have work have had their wages cut in half. The average life span for men has been shortened by six years. Six years!
Such a change normally occurs only when a country is hit by a massive war, an epidemic or famine. None of this has happened in Russia. Still, the average life span decreased, in just a few years, to the same level as in India, Egypt and Bolivia.
The experiment that the lady with the placard wants put an end to is literally killing her countrymen.
No wonder she is demonstrating.
…
In the Western world we’re used to a small class of owners controlling the main part of our countries’ resources. In Sweden, for instance, the Wallenberg family controls half of the Swedish trade and industry. This fact is either accepted or totally ignored by the Swedes. But what would happen if somebody suggested that we should privatize the national railways and the national phone company, by simply turning them over to the Wallenberg family? Something like that could hardly happen without debate, the injustice being far too obvious.
But what the shock therapists planned to do in Russia was precisely to create a few new Wallenberg families by selling off national resources dirt cheap. An astonished reporter from Dagens Nyheter asked Anders Åslund whether Russia really intended to more or less give national companies away. “Yes”, Åslund replied, “in order to rapidly create a class of owners”. (Dagens Nyheter 16-02-1992)
An owner class was to be created. But just as the Swedes would not be inclined to make a gift of their national resources to Mr Wallenberg and his sons, neither would the Russians want to see their country handed over for a token sum to some arbitrarily chosen robber baron.
In his Swedish book “Därför behöver Östeuropa chockterapi” (SNS 1993) (i.e “Why Eastern Europe needs Shock Therapy”), Anders Åslund presented a solution to this problem. Privatization should be made “politically acceptable” by distributing small blocks of shares to a lot of Russians. Thus, nobody would perceive the privatization process as some Russian version of the Wallenbergs grabbing the people’s property.
And so this was done. All Russians were given a voucher, worth about a month’s wages in roubles. This coupon was meant to be used to acquire company shares.
…
This, however, did not lead to any distribution of ownership. On the contrary. Boris recounts that each voucher was worth about a month’s wages when privatization started. But a few months later, when people were about to exchange their vouchers, runaway inflation had consumed nearly all their value. A voucher was worth no more than a bottle of vodka.
It so happened that at this very time, a bunch of businessmen suddenly turned up, willing to exchange people’s apparently worthless vouchers for – yes, vodka bottles. What people didn’t know was that a voucher lost nothing of its value if used to acquire company shares. The value of the companies had not been adjusted by inflation.
“Most people swapped their vouchers for vodka”, says Boris Kagarlitsky.
Thus, people with contacts could collect a couple of thousand vouchers, enough to buy a whole company for 2,000 bottles of vodka. The buyers were the same elite who had been at the top during the Soviet era, and who had helped Yeltsin implement the shock therapy.
Dan Josefsson for more