More Than They Bargained For

Controversy Surrounding the Kennedy School of Government's Widely-Publicized 'Grand Bargain' Plan for Soviet Economic Reform Rages On In the Wake of the Dramatic Political Upheaval

For the past several months, debate about the Soviet Union's transition to a market economy has focused on a plan claiming to offer the United States a "Grand Bargain." The brainchild of former Kennedy School of Government Dean Graham T. Allison Jr. '62, the ambitious plan was jointly conceived by a team of Soviet economists and Kennedy School policy experts.

Although the scheme is officially titled the "Window of Opportunity," it has become known throughout the world simply as "The Harvard Plan."

But in the aftermath of last month's attempted Soviet coup, all bets are off. Although the Harvard plan once seemed like a leading model for economic reform, the options have since multiplied a hundred fold, and the future of the Soviet economy--if there is a Soviet economy--is far from certain. And although one of the plan's co-authors, Grigory Yavlinsky, is now deputy head of the State Council's economic management committee, it is highly unlikely that the plan will be implemented intact.

Before the coup, the Harvard plan served as the framework for an ongoing debate among academics and practitioners about the Soviet Union's economic path. Since the coup, that debate has only increased, and an economic plan for a nation 4500 miles away seems to have revealed deep rifts right here at Harvard.

The most fundamental debate centers on whether the plan, as originally conceived for the pre-coup Soviet Union, represents the best path to economic reform. The plan proposes using Western monetary aid, in the tens of billions of dollars, to make democratic reforms possible.

Under this carrot-and-stick arrangement, aid would be conditional upon the implementation and continuation of six principal reforms: stabilization of the macroeconomy, liberalization of prices, establishment of private property, opening of the economy to foreign trade and limitation of governmental intervention in the economy.

Supporters of the plan say it answers the concerns of President Bush, who opposes aid to the Soviets on the grounds that they do not yet have the market mechanisms to make efficient use of such funds. Although a good number of experts agree with the plan's central premise, some here at Harvard say the very concept of a Grand Bargain is flawed.

"The plan was premised on the notion that if we pumped all this money in we would automatically be able to bring about reforms," says Mark Kramer, a fellow at Harvard's Russian Research Center.

"If you think about the situation in reverse, you realize how ludicrous that idea is," he says. "Imagine that during the depression, [U.S. President Franklin Delano Roosevelt '04] had approached Stalin and said, 'Give us $20 billion to create a larger state intervention.' The idea is laughable, obviously."

But the plan's authors insist that Western aid would reduce the risk of economic and political chaos during the Soviets' reorganization of their economy and society. They conclude, "When measured in terms of the value of success in this endeavor, the costs will be low--much less than costs imposed by the likely alternatives, and if provided sooner, lower than later."

Both supporters and opponents of the plan agree that the breakup of the strongly centralized Soviet Union has created a host of new obstacles to pursuing any kind of widespread reform plan. "The report assumed that there would be a coherent central government," says Stanley Fischer, an MIT economics professor and member of the Allison-Yavlinsky team. "Those assumptions are obviously no longer valid."

Fischer noted that it has become more difficult for the West to give general monetary aid to the Soviet Union because it is not even clear whether the aid would go to President Mikhail S. Gorbachev's federal government or Boris Yeltsin's Russian Republic.

Do-It-Yourself Reform

Some observers argue that political and economic changes have been taking place so rapidly that the plan is no longer a relevant model to follow. "All the conditions that the plan was supposed to achieve, we've achieved without giving a cent," says Gabriel Schoenfeld, a senior fellow in Soviet Studies at the Washington-based Center for Strategic and International Studies.