To some shock is hell, to others a kindly mother. Part Four

22:33 01.07.2010 • Armen Oganesyan , Editor-in-Chief, International Affairs

"Are you are looking for investments that could bring in 2,000% in three years? “ The "Wall Street Journal" in 1995 teased its readers. “Only one stock market promises such a result ... Russia.” Yet, as noted in her book "The Shock Doctrine" by Naomi Klein, Yeltsin "deviated" from the doctrine of the Chicago school, by not allowing foreigners to directly buy up "Russian wealth." Still, the profits were astronomical. First of all, enterprises fell into the hands of a new layer of society, the so-called oligarchs, and these opened the door for foreign companies. "This oversight was to continue to be taken into account at the time of privatization auctions in Bolivia and Argentina. And in Iraq, after the U.S. invasion, they went even further: they have tried to completely remove the local elite from unimaginable bargains. "

What, how and for how much did they buy in Russia? The Canadian journalist leads with dry numbers, which are of course, "well-known" to us (the common phrase of many domestic political scientists), but are well thought out (especially by our political scientists). 40% of an oil company, "comparable in size to the French" Total” company, was sold for $ 88 million. In 2006, "Total" sales were 193 billion dollars. "Norilsk Nickel" which produced a fifth of the world's nickel, was sold for $ 170 million, and its profits soon reached 1.5 billion dollars a year. The “Yukos” oil company, commands oil volumes larger than that of Kuwait, but was sold for 309 million dollars, and very quickly returned an annual profit of $ 3 billion. Finally, the "oil giant" SIDANCO” was valued at $ 130 million, and two years later, in the international market the valuation of the transaction was priced at $2.8 billion. A giant military factory was sold for $3 million (!) - the price of a country house in Aspen. "

One of the ministers in Boris Yeltsin’s government some time ago explained to me the features of the domestic reforms at that time. "Who is the head of "British Petroleum "or "Shell " oil companies? He is a hired, highly paid manager. But his fate depends on the opinions and assessments of the results of his work by a large number of shareholders, who are interested in monitoring his strategy, technological developments, and geological exploration. The managers themselves do not own any big blocks of stock and cannot single-handedly determine company policy. We have completely the opposite." Actually, this is the difference between “people's capitalism" and "oligarchic capitalism".

However, as suggested by Naomi Klein, the "scandal of these actions was not only that Russia's national wealth was sold at auction for a fraction of their real price, but also in the fact that they were purchased with public money." Public funds were transferred to the private banks by the oligarchs. Then, "the State concluded contracts with these same banks, and as a result they had to sell the oil fields and mines. The Banks arranged such auctions, but they themselves also took part in them - no wonder the banks were owned by happy oligarchs, as they became the new owners of the former state assets. The money with which they bought shares in these public companies was the same public money ..." The circle was thus complete.

However, the transfer of wealth into the hands of a limited number of individuals created severe social consequences, and not only in the form of the mass impoverishment of the population. In fact, the creation of huge pyramids of commodity companies broke the ground for a new generation of middle class in the country. Stolypin’s dream and the main purpose of all his reforms, was the creation of a middle class as a guarantor of power and political stability in Russia, and once again it failed, however, this time it was because of the "capitalist revolution" of the Chicago example. It is naive and unrealizable to believe that small and medium-sized businesses are able to create a historically desirable middle class for Russia. Because a middle class is not just something between wealth and poverty, as many believe.

After the collapse everybody blamed it on corruption, which, as rightly mentioned by Ms. Klein, one can in principle, blame for everything. Say, "Good-bye, dirty Russia!" It sounded quite hypocritical, given the corruption scandals in the environment of the overseas consultants, but pathetic. One of the advisers was more categorical in respect of reforming Russia: it turns out, "when the patient was cut open, it turned out all the other organs were infected." So they didn’t even bother to sew him back up.

We must pay tribute to the author, as we do not often see in the West, a journalist genuinely compassionate to Russia’s tragic position in the 1990s.At the same time, she leaves no chance for the "Chicago Boys" to justify themselves "When it was no longer possible to hide the failure of "shock therapy in Russia, there were conversations about a Russian "culture of corruption" and a belief that the Russians were "not ready" for true democracy because of the long history of authoritarian rule." However, "these quick dirty deals were actively supported by the West at each stage, hoping as soon as possible to start up an economic machine. The salvation of the nation was based on greed, and that stood behind the plans of the Russian "Chicago Boys" and their advisers, after the total destruction of Russian institutions. "

That could be the end of it, but you can not avoid some of the revelations of Jeffrey Sachs, Yeltsin's chief adviser at the most critical period of reform, which he shared with Ms. Klein in an exclusive interview. The fact is that when Sachs worked on the template for shock therapy in Poland, he easily arranged very substantial loans for Poland, to bring down a wave of discontent. In Russia, everything went differently: "Too much shock, too little therapy." Even Pinochet "softened the rigidity of shock therapy, with food programs for the poorest children, but Washington's lenders did not see any reason to help Yeltsin ... pushing the country into a nightmare like something from the writings of Hobbes."

Sachs was obsessed with the Marshall Plan, which had played a significant role in the reconstruction of Germany after the war. He was confident that the IMF and the U.S. Treasury would listen to "the most influential economist in the world", as "the New York Times” wrote about him at the time. After all, he managed to gather together in the White House, one billion dollars for Poland in a single day. "But,” as Sachs confided to his companion, “when I was asked to do the same thing for Russia, no one was interested. And the people from the IMF looked at me as if I was crazy. "

Naomi Klein believes that there is no reason to doubt the facts reported by Sachs. "To achieve significant assistance for Russia had been one of his main tasks, and it was on these conditions that Yeltsin agreed to apply the entire shock therapy plan." Sachs said: "My greatest personal mistake was that I said to President Boris Yeltsin," Do not worry, help is at hand." Only later did Sachs realize that behind it all, "many Washington wheeler-dealers in power, still continued to play the cold war." "I expected to hear," Great! Finally, this terrible regime will end. Let us help [the Russians] for real. We will give it all we can ... "Now, in hindsight, I realize that my offer to leading politicians seemed like sheer madness." So they didn’t give any money for the amortization of shock therapy, nor for a Marshall Plan.

However, Naomi Klein called Carolyn Eisenberg for help, the author of a book about the history of the Marshall Plan, who strongly suggested that such hopes of Sachs were utopian from the beginning. Economic aid to Germany was not an act of altruism on the part of the United States.

"The Soviet Union was like a loaded gun, Eisenberg wrote in her book. The economy was in crisis, Germany had a lot of left wingers, so they had to be as fast as possible to win the trust of the German people." In the battle of ideologies, there was a need to create a "showcase" for capitalism, and that is what the main engine of the Marshall Plan was based on, and "not on good will and reasonable argument, but on the fear of the indignation of the people." With the collapse of the Soviet Union there were no prerequisites for such plans for economic aid to Russia. It is difficult not to agree with the author's conclusion that "the real tragedy of the promises" given to Russia, was the fact that, after the course of shock therapy, "she would suddenly wake up like a" normal European country.”These "normal" European countries (with a strong system of social protection for workers, with strong trade unions and a public health system) resulted from a compromise between communism and capitalism. Now, there was no longer any need to compromise. And now all these "social capitalism mitigating measures are under threat in Western Europe, Canada and the United States. There was never any intention to implement these measures in Russia..."

"By 1998, more than 80% of Russian collective farms had gone bankrupt, and about 70 thousand state enterprises had closed down, creating mass unemployment." Ms. Klein provides some interesting figures, as if created specifically for modern Russian history textbooks. "In 1989, before the application of shock therapy, [but at the height of Gorbachev's reforms], 2 million people in Russia lived in poverty, earning less than four dollars a day. In the mid-1990’s, according to the World Bank, 74 million Russians lived below the poverty line ... never before In the absence of a serious famine, pestilence or war had so many disasters fallen upon such a proportion of the people in such a short time," concludes the author.

Naomi Klein writes:"The lists of those killed in the Chicago School crusade are being constantly replenished, since the Chile of the 1970s." However, "the most horrible massacre" fell upon Russia, it happened slower, but the number of its victims was much higher - the victims of the" side effects "of economic shock therapy ...

<!--[if gte mso 9]> 96 800x600 <!--[if gte mso 9]> Normal 0 false false false RU JA X-NONE <!--[if gte mso 9]> <!--[if gte mso 10]> /* Style Definitions */ table.MsoNormalTable {mso-style-name:"Обычная таблица"; mso-tstyle-rowband-size:0; mso-tstyle-colband-size:0; mso-style-noshow:yes; mso-style-priority:99; mso-style-parent:""; mso-padding-alt:0cm 5.4pt 0cm 5.4pt; mso-para-margin:0cm; mso-para-margin-bottom:.0001pt; mso-pagination:widow-orphan; font-size:10.0pt; font-family:Calibri;} <!--StartFragment--> More than 30 years ago, the famous German economist and sociologist Andre Gunder Frank, in a letter to Milton Friedman accused him of "economic genocide." Well, maybe some of his theories, in reality, are waiting for their own Nuremberg trial.<!--EndFragment-->


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