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. Last Updated: 07/27/2016

Red Bosses, Not Yasin, Saboteurs

Yevgeny Yasin did not deserve to be called a saboteur, and he certainly does not deserve to be fired as economics minister as has recently been rumored. But fairness has little value when the president needs to pay his political bills.


President Boris Yeltsin has publicly denounced Yasin and his ministry for ignoring a decree that, sidestepping the rules for government financing, promised budgetary funds to the Krasnoyarsk Combine Factory, whose director, Lev Loginov, has developed a close relationship with Yeltsin.


Yasin replied that the ministry had no reason to believe the factory would pay the money back. In reformist terms, this would be the best recommendation for Yasin since he went after Prime Minister Viktor Chernomyrdin's beloved Gazprom for additional tax revenues last year. His only mistake was that he later backed down.


Politically, Yeltsin chose his reason shrewdly: He distanced himself from the harsh monetary measures that apparently fueled a Communist victory in parliament. But by placing the interests of a Soviet-style director above those of his own reform program, Yeltsin has provided the public a rare glimpse of how he and other top officials have helped undermine market reforms since they began in 1992.


One of the key tenets of reform has been that the government must cut off subsidies to enterprises, thus forcing them to restructure or perish. This policy is aimed at Soviet-style "red" directors like Loginov, who are better at squeezing money out of the government than at making money by producing anything that anyone would want to buy.


As Russia has moved toward the market, these directors have retained much influence. Their power can be measured in government credits and funds lost to the budget through tax breaks and protectionist import tariffs.


For example, Gazprom, headed by Chernomyrdin's prot?g?, Rem Vyakhirev, could cover a large portion of the 1996 budget deficit if it paid its share of taxes. And AvtoVAZ, which foists upon the Russian consumer shoddy cars that differ little from 1960s Fiats, enjoys tax breaks and tariff protection against imported competition even though its director has failed to come out with a new model since he first promised to do so under Mikhail Gorbachev.


Yeltsin proved in his criticism of the Economics Ministry that he bears responsibility for this subversion of economic common sense. Yasin, in rejecting Yeltsin's desire to do a favor for Loginov, was trying to stop a bad habit that has benefited a select few at great expense to the vast majority. But it was already too late: The majority has made itself heard. Now the Communists are in, reform is out, and red directors like Loginov can make, if not more combines, a lot more money.