BOOKENDS: Ec Prof’s Defense of Shock Therapy May Send Jolt to Kremlinologists

Ask the average Russian about Boris Yeltsin’s “shock therapy” approach to privatization in the early 1990s, and you’ll get anything from a sour frown to a brief sampling of the more colorful metaphors Russians use to describe the activities those they don’t like perform on their mothers.

Ask Jones Professor of Economics Andrei Shleifer ’82 about shock therapy, and he’ll tell you that Yeltsin’s privatization plan did just what it was designed to do—successfully destroy the vestiges of state control over the Russian economy.

In his new book, “A Normal Country: Russia After Communism,” Shleifer’s vociferous defense of the application of laissez-faire economics to post-Soviet Russia culminates in a daring claim—that, thanks to shock therapy, Russia is now a “normal country.” He does not hide the fact that he is taking on deeply entrenched popular wisdom in the United States; indeed, he revels in it:

“By the turn of the century, Russia had come to be viewed as a disastrous failure and the 1990s as a decade of catastrophe for its people,” Shleifer writes. “Journalists, politicians, and academic experts typically describe Russia not as a middle-income country struggling to overcome its communist past and find its place in the world, but as a collapsed and criminal state.”

In fact, Shleifer speculates that the magnitude of Russia’s post-Communist economic collapse has been greatly overstated because official Soviet statistics were quite inflated. Shleifer further argues that Russia’s woes closely resemble those of middle-income countries such as Argentina, Brazil, Malaysia, and Mexico, which all have per capita GDPs that hover around Russia’s of $8,000. Hardly exceptional, the economic problems that addle Russia—from capital flight to debt defaults—are standard fare for these middle income countries.

Most of Shleifer’s argument rests, predictably, on Russia’s economic indicators. He does not, however, ignore Russian politics. He explains away President Vladimir Putin’s efforts to undermine democratic institutions as perfectly ordinary activities for middle-income heads of state, comparing the level of election fraud, voter intimidation and vote-buying in the Russian Federation to those of Argentina and Brazil. So Russia is “normal,” at least according to the conveniently quantifiable indicators economists such as Shleifer use to gauge the economic and political life (or lack thereof) of a country.

Kremlinologists who have made their careers by finding evidence for Russian exceptionalism will, undoubtedly, poke holes in Shleifer’s data and analysis in years to come. But the real problem with Shleifer’s book is not that experts will find reasons to object to his often penetrating analysis, which should be treated for what it is—an extremely valuable addition to the literature on the Russian transition.

More frustrating for the reader is that the book is really a collection of papers Schliefer wrote between 1993 and 2005, with an introduction and a conclusion thrown on the ends. And it feels like a collection of papers, not a unified whole. A chapter on the unofficial economy in 1997 is followed by a chapter on legal reform in 1996, which is followed by a chapter comparing federalism in China and Russia in 2001. Each chapter does well on its own, but Shleifer does not convince the reader that one has to slog through all of them to fully appreciate his overarching conclusion.

Indeed, though the book is filled with fascinating research from key periods in the transition, all you really need to read to digest the most salient pieces of evidence is the last chapter, in which Shleifer introduces the systematic comparisons to other middle-income countries that tie together his “normal” thesis.

The book also suffers by association with Shleifer’s now infamous activities as an advisor to former President Boris Yeltsin for the Harvard Initiative for International Development (HIID). Shleifer allegedly invested indirectly in Russian companies affected by the policies he proposed, and Shleifer has since been sued by the U.S. government. He never makes more than oblique references to his work in Russia after the 1997 currency crisis, a point that will surely disappoint readers looking for the defendant’s perspective in the ongoing scandal.

“A Normal Country” is, first and foremost, a book for specialists. It offers a needed response to the retroactive criticism of the shock privatization by arguing that its result—a normal Russia—was well worth the social price paid during the turbulent 1990s. The book is also predictably economics-centric, and if you’re not comfortable pretending to understand regressions, you may want to steer clear. But even the casual Kremlin watcher will appreciate the surprisingly accessible final chapter, which should be required reading for any class on modern Russia. Americans have been used to thinking of Russia as “a riddle, wrapped in a mystery, inside an enigma” ever since Churchill coined the phrase; a dose of counterargument will be good for specialists and non-specialists alike.

­­—Staff writer Stepehn W. Stromberg can be reached at stromber@fas.harvard.edu.