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Will Shock Therapy Work?
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19983 |
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Section : |
CURRENT ISSUES
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| Issue
Date : |
8 / 1992 |
1,914 Words |
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James R. Millar
James R. Millar is director of the Institute for European,
Russian, and Eurasian Studies at George Washington
University. |
Aleksandr Solzhenitzyn has commented that Russia has forfeited the twentieth century. This interesting idea contains more than a grain of truth. If the communist regime imposed 70 years of abstract, obsolete nineteenth-century economic ideas on the Soviet peoples, now a new set of twentieth-century abstract economic ideas is being imposed in the form of a special school of Western economic theory. Russia is starting all over, and again with a rather radical strategy.
Shock therapy is a highly conservative Western economic doctrine emphasizing monetary policy; it is primarily a formula for macroeconomic stabilization. Originally developed to stabilize and invigorate an economy with substantial capitalist aspects, it is here being modified to convert a planned or command economy to capitalism. As far as the economy goes, Solzhenitzyn is correct in two senses. Russia missed developing a modern market economy and the taming of market forces. Both are the notable accomplishments of the twentieth century. It will be difficult for Russia to develop a market and learn to regulate it simultaneously.
The Soviet economy was not at the point of collapse in 1985. Poorly conceived and clumsily implemented reforms precipitated the collapse. The process of reform destroyed the economy by seeking to open a hothouse economy to the world market, a market it was designed to circumvent. The Soviet economy was built in periods (e.g. the 1930s, World War II, and the Cold War) when autarky actually served a useful economic or military purpose. Meanwhile, the dynamics of the world economy left the command-type economy behind. What they are talking about now in Russia and eastern Europe is not economic reform, but complete replacement of the economy.
The 1990 Shatalin Plan to transform the economy to market principles in 500 days was unacceptable to Gorbachev because it meant abandonment of both the Union and socialist principles. He was also skeptical about the feasibility of a rapid transition. Since Gorbachev's demise, however, all subsequent plans have been similar to the Shatalin Plan. They all are teleologically driven, that is, they have been based on the market economy as a goal, rather than being tailored to modify specific characteristics of the existing economic system. All, also, have called for a rapid transformation.
The first shock
The first step of shock treatment being applied in Russia and several of the other successor states under the
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