When the Soviet Union cracked up, a major New York publisher signed Anne Williamson to a contract for a book on Russia in 1993:
But when she finally delivered a manuscript in 1997 predicting that the Russian bond market would crash in 1998 (which it did), nobody in the publishing world would touch it. Williamson believes that her criticism of the Clinton Administration and, especially, of George Soros made it radioactive. According to a 2001 essay in the New York Review of Books, Williamson’s unpublished book was “widely read in manuscript.”
By the way, all this interest in Russia recently reminds me of an old mystery from before the recent economic unpleasantness: the Harvard endowment grew in the 1990s at a rate that would seem to call into question the hallowed Efficient Markets Theorem. When asked to share tips for how you too could achieve such a high ROI, Harvard’s gnomes usually made vague noises about investing in timber.
It finally occurred to me that during this period, Harvard was, coincidentally enough, being paid by American taxpayers to advise the government of Russia how to privatize its vast holdings. Indeed, this process went so swimmingly for Harvard that in 2001 Harvard made the Clinton Administration’s central manager of Russian policy, Larry Summers, its president.
Anne Williamson’s 1999 testimony before the Committee on Banking and Financial Services of the United States House of Representatives points out two mistakes:
In the matter before us — the question of the many billions in capital that fled Russia to Western shores via the Bank of New York and other Western banks — we have had a window thrown open on what the financial affairs of a country without property rights, without banks, without the certainty of contract, without an accountable government or a leadership decent enough to be concerned with the national interest or its own citizens’ well-being looks like. It’s not a pretty picture, is it? But let there be no mistake, in Russia the West has truly been the author of its own misery. And there is no mistake as to who the victims are, i.e. Western, principally U.S., taxpayers and Russian citizens’ whose national legacy was stolen only to be squandered and/or invested in Western real estate and equities markets.
The failure to understand where Communism ended and Russia began insured that the Clinton Administration’s policy towards Russia would be riddled with error and ultimately ineffective. Two mistakes are key to understanding what went wrong and why.
The first mistake was the West’s perception of the elected Russian president, Boris Yeltsin; where American triumphalists saw a great democrat determined to destroy the Communist system for freedom’s sake, Soviet history will record a usurper. A usurper’s first task is to transform a thin layer of the self-interested rabble into a constituency. Western assistance, IMF lending and the targeted division of national assets are what provided Boris Yeltsin the initial wherewithal to purchase his constituency of ex-Komsomol [Communist Youth League] bank chiefs, who were given the freedom and the mechanisms to plunder their own country in tandem with a resurgent and more economically competent criminal class. The new elite learned everything about the confiscation of wealth, but nothing about its creation. Worse yet, this new elite thrives in the conditions of chaos and eschews the very stability for which the United States so fervently hopes knowing full well, as they do, that stability will severely hamper their ability to obtain outrageous profits. Consequently, Yeltsin’s “reform” government was and is doomed to sustain this parasitic political base composed of the banking oligarchy.
The second mistake lay in a profound misunderstanding of Russian culture and in the Harvard Institute of International Development advisers’ disregard for the very basis for their own country’s success; property rights. It was a very grave error. Private property is not only the most effective instrument of economic organization, it is also the organizational mechanism of an independent civil society. The protection of property, both of individuals’ and that of a nation, has justified the existence of and a population’s acceptance of the modern state and its public levies.