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. Last Updated: 07/27/2016

PARTY LINES: Alfa's Aven Unmasks 'Reformers'

In my final column for "Party Lines" last year, I responded to claims that economic liberalism had failed in Russia by arguing that liberalism has never been tried here.

Pyotr Aven, the head of Alfa Bank who earlier served as Yegor Gaidar's foreign trade minister, recently made the same case in Kommersant. Aven himself, of course, benefited from the nomenklatura capitalism that masqueraded as liberalism. But his deconstruction of Russia's reforms - an unsentimental insider's view - is invaluable.

Aven argues that the reforms were a fraud even by the "young reformers"own criteria. There was no "economic stabilization," he writes, since inflation was lowered through "nonpayment of wages, under-financing of state orders and insane borrowing." Meanwhile, state spending in Russia from 1993 to 1997 was 42 percent to 50 percent of gross domestic product, compared with 16 percent to 18 percent in "communist" China. Citing economist Andrei Illarionov, Aven writes that Russia's effective tax rate is 60 percent of GDP, perhaps the world's highest. Yet Sergei Kiriyenko (Aven calls him "that marvelous liberal") planned to increase the overall tax burden by 13 percent.

For Aven, the key "anti-liberal" feature of government policy has been its "exclusive support ... for individual enterprises." This was sometimes the handiwork of President Boris Yeltsin - like his decrees mandating tax and tariff exemptions for such worthies as the National Sports Fundand even an organization founded by reputed mobster Otari Kvantrishvili. And then there was Gazprom, Norilsk Nickel. ... Such handouts robbed billions from the budget but created what amounted to a presidential electoral slush fund from what were essentially kickbacks.

As for Anatoly Chubais' privatization, Aven asks how one should regard a process "in which the privatization of just one aluminum factory was accompanied by twenty murders" and "in which the country's largest enterprises were purchased with government money."Aven says the winners of all the major loans-for-shares auctions were picked in advance. Not news, simply a confirmation.

Aven vouches for the "personal incorruptibility and honesty" of Gaidar,Chubais and most of the other "young reformers." Given the infamous interest-free loan of 1996 and book deals of 1997, I would say the jury is still out. But Aven lists some of their less-than-endearing qualities: "Self-identification with God, naturally flowing from the belief in one's own exclusivity," "childish" optimism and a readiness to lie. Hence their consistent underestimation of price rises in 1992 and 1993, their constant predictions of imminent economic growth, their certainty the ruble would fall no lower than 9.5 to the dollar after the August crash.

Finally, Aven attacks the International Monetary Fund's "maniacal" focus on budgetary and monetary policy and its "absolutely superficial" approach to everything else. The IMF's loans created "the illusion ... of the success of the reforms."

Aven's article would make good reading for Michel Camdessus, U.S. Deputy Treasury Secretary Lawrence Summers and everyone else who pushed the Big Lie about Russia's "reforms." But don't expect any mea culpas. Gaidar, Chubais & Co. recently declared that their new "center-right" coalition will fight "nomenklatura capitalism." Clearly they, unlike Aven, have not taken a look in the mirror. Nor, I bet, will their Western enablers.