Just What Yasin Prescribed

Evgeniy Yasin, Academic Supervisor of the HSE, in an interview with “Itogi” spoke about the years of transition in the Russian economy and his own role in the transformations that took place. Here are some excerpts from the interview:

The transition from the planned Soviet economy to a market economy is the most controversial period in modern Russian history. The debates about ‘shock therapy’, loans-for-shares auctions and who was responsible for the Default will continue unabated for a long time yet. During the last years of the Soviet Union Evgeniy Yasin was actively involved in the development of a market reforms programme together with Leonid Abalkin and Grigory Yavlinsky, and subsequently headed the Ministry of Economy in the new Russia.

— Mr. Yasin, probably it makes sense to divide your life, as well as the life of most of our contemporaries, into two parts: before 1991 and after…

— I think that the turning point in my life happened earlier – in 1989, when I was invited by Leonid Abalkin, then deputy chairman of the USSR government, to work in the Commission for economic reform. I worked on government resolutions in a team of economists and administrators. Since then and up to 1992, I was doing this very responsible job, which probably was the most important in my whole life. Then, by the way, I also met Grigory Yavlinsky.

— Did you quit the Commission for economic reform because your plan failed, or was rejected?

— Yes, I disagreed with the government policy and went to work in the Russian Union of Industrialists and Entrepreneurs.

In summer 1990 I went to a seminar in Hungary. Suddenly during a session I received a call from Yavlinsky who said: ‘Evgeny, everything is all right, come back – we are starting work on our new programme which will be prepared by a new team approved by both Gorbachev and Yeltsin, in order to stop the confrontation between the Russian Soviet Federative Republic and the Soviet Union central administration’.

The programme, which we finished by August 1990, was entitled ‘500 days’. The title included the milestone period during which the main market function reforms needed to be implemented, and after which the changes would become irreversible.

Our programme included cutting the inflation overhang before price liberalization. And privatization was supposed to be implemented not with vouchers, but on a case-by-case basis, as in England at the time of Margaret Thatcher. But we are not England, and we lacked people who could do this slow privatization and run an expert check on each and every enterprise. There were so many of them, dozens more than in Great Britain.

The ‘500 days’ programme should have been approved by the USSR and RSFSR Supreme Councils. At that time, Yeltsin’s authority was indisputable. In September 1990 he urged the RSFSR Supreme Council to vote, and the programme was approved. Then the discussions in the USSR Supreme Council started. Gorbachev, who seemed to support the programme at first, later started to back pedal. I had an impression that the people who later formed the GKChP (State Committee of the State of Emergency), hinted to Gorbachev that if he insisted on this “vile” programme, things would end badly. Gorbachev gave in. After that, Yeltsin made a resolute statement and said: we are breaking off with the Union central administration - we are going to implement our own policy. A tug of war began.

— Which lasted till the end of 1991…

— Lithuania, and then the other republics announced their withdrawal from the Soviet Union. The Special services started to use force to save the Union. But Yeltsin declared, “your freedom is our freedom”, which meant he sided with the seceding republics. In August the GKChP took decisive steps. We were expecting a crackdown, repressions. The GKChP leaders brought tanks onto the streets of Moscow, but couldn’t do anything because the army didn’t support them. I believe that August 21, 1991, is a real national holiday for our country: that was the day when the democratic forces won.

After that Russia experienced a period of ambiguity and confusion. And then Gaidar appeared. He sent Yeltsin a letter offering his services. They met and came to an agreement. Gaidar’s team started preparing papers on how to implement market reforms.

Finally, in October Yeltsin addressed the Supreme Council and offered to create a reform government with himself at the head and Gaidar as his deputy for economic reforms. The order was signed on November 6, and they got down to work. At that time I wasn’t involved in the new government’s work. Alexander Shokhin offered me to join in, but, as they had agreed to the break-up of the Soviet Union, I wasn’t in a mood to have to do with them. Besides I was staying loyal to my team, to Yavlinsky, with whom we wrote the ‘500 days’.

Later, when the ‘shock therapy’ started, I realized that, as regards to aims and methods, our programme was no different from Gaidar’s. Moreover, I could feel that in the minds of Yeltsin’s new team there was a desire to implement real reforms not just in words, but in deeds.

Then 1992 began. The USSR collapsed, and as soon as it happened, both Perestroika and the democratization process came to an end. The next stage was market reforms but they didn’t mix well with democratization. The government was going to implement the market reforms first, and then continue with democratization. 1992 for Russia saw a drop in the standard of living, a fall in production, and a sharp rise in unemployment. It felt like a total catastrophe…

— Was this an inevitable result of transition to market economy or the tactical mistakes of a young government?

— This was not the result of the government’s mistakes. Russia had been through a long period of existence in a socialist planned economy, with the administrative regulation of all spheres of life. I realise that it’s difficult for the younger generation to understand how things were. The nightmare of 1992 was related to two circumstances. First, planning methods were dead, and it was vital to launch market mechanisms, such as price and contract. Money had to be made to have a real value. Second, government spending was cut dramatically. So when I say ‘shock therapy’ I mean exactly that.

Another thing was – your domestic market is empty, where do you get food? Before the reforms, the USSR was buying more than 40 million tons of grain from abroad. Ships full of grain stood on the dockside and couldn’t be unloaded, since nobody was paying – there was no money. The people started to adjust to the market economy themselves. It was crucial that goods should appear on the market and the international trade channels could be established. This was done. The market was filling up with goods again by around mid-1993.

If you cannot produce goods which are in demand – you fail. The system began to work, and by ­­­1998 we had a different economic structure in place. I cannot say that it was a faultless operation. In the end, the lion’s share of the economy is still in producing and primary processing of oil; machine building has shrunk, but metallurgy, on the other hand, is beginning to develop.

— In your article ‘Defeat or Retreat’ you said that some objective circumstances are responsible for the 1998 default.

— We always like to look for someone to blame. But people who make responsible decisions are sometimes up against circumstances where they have no alternative. They will only be postponing the inevitable. We can blame Prime Ministers Viktor Chernomyrdin and Sergey Kirienko… But I believe that the default was not a result of someone’s bad will or incompetence, there was a whole set of circumstances, most of which were against us.