Moscow: What the Blood Wrought Jude Wanniski October 5, 1993

In all the hours of television I watched Sunday as the crisis in Moscow unfolded, not once did a reporter or political commentator refer to the IMF/World Bank "shock therapy" that lay at the heart of the political turmoil. Nor was there a single mention that Yeltsin's political opponents in parliament -- supposedly hardline anti-democratic communists -- were only asking for simultaneous elections of the executive and legislative branches. The performance of the video press corps was truly pathetic, pretty boys and pretty girls interviewing each other about the "good guys" and the "bad guys" on either side of the gun barrels. The amount of pontification was suffocating, reaching a nadir with Jeane Kirkpatrick blathering for ten minutes on the Brinkley show about a subject she obviously knew nothing about -- except that Yeltsin was a good guy. By mid-afternoon, the CNN reporters were routinely referring to the democratically elected Congress of People's Deputies, which Yeltsin had dissolved because it was resisting his shock therapies, as "rebels."

The only politician from either side of the planet who made sense was Senate Minority Leader Bob Dole, who appeared on CNN's "Late Edition" show in the early evening along with Majority Leader George Mitchell. Dole, while supporting Yeltsin, questioned IMF/World Bank shock therapy as perhaps pushing not only Russia, but also Yugoslavia and Poland, too far, too fast. Dole was also the only person who did not see anything wrong with electing a president and a legislature "on the same day," which is how it is always done. Dole's performance, in fact, may be the only good thing that came out of the weekend bloodbath in Moscow. He had read my op-ed essay in Friday's New York Times, "Go-Go Gradualism," which compared the success of China's gradualism to the failure of Russia's cold plunge, and even mentioned me by name on the show. He repeated his observations on the Senate floor Monday, which may be read by the Clinton Administration as a welcome excuse to rethink its foreign economic policy. In the 25 years I've been watching the IMF/World Bank destroy nations with poisonous conditions attached to their loans and grants, no political leader of Dole's standing has ever questioned their method or results -- until now.

Dole's position is already being rejected by Strobe Talbott, the college chum of President Clinton who he put in charge of Russian affairs at the State Department. This bit of daylight that Dole has opened between himself and the President will be critical in the months ahead as Yeltsin moves to consolidate his power. If Yeltsin intends to proceed with the next stages of shock therapy, the only way he could hope to maintain power is by stamping out opposition in a similar manner to his decimation of parliament. He is going ahead with plans for new parliamentary elections on December 12, and, if they are free, I have no doubt the new legislature would be as ardent in opposition to the Yeltsin "reforms" as the one he dissolved in flames. Austerity schemes are always unpopular with ordinary people, because they are so destructive. In the United States, political strategists get around this problem by having their candidates run on rosy scenarios, then break their promises, and hope the voters will forgive and forget in time for the next election. Yeltsin can proceed now by decree with the destructive schemes the IMF/World Bank and Clinton Treasury Department have designed for him, but since he has promised to stand for re-election next June, there will be precious little time for the voters to forgive and forget. Yeltsin will have to use brute force to survive.

  The Wall Street Journal editorial page continues its lovefest with Boris Yeltsin this morning, applauding the "Burning Parliament." In a dispatch from Moscow, though, reporters Adi Ignatius and Claudia Rosett note: 

...there is no reason to believe that Mr. Yeltsin will become the democrat that his supporters in the West would like. While acting in the name of democracy, Mr. Yeltsin has displayed a strain of authoritarianism that makes even some of his allies uncomfortable.

Mr. Yeltsin's gamble Sept. 21 to dissolve Parliament and call for new elections lacked a constitutional basis, though the president justified the move as the only way to break Russia's political deadlock and create new democratic institutions.

But subsequent steps were even more disturbing. He removed the governor of Bryansk for opposing him. He censored media coverage to squelch unflattering articles and broadcasts. On Monday, he shut down several newspapers partial to Parliament and banned some political organizations that have opposed him. And he continued a pattern of harassing prominent political opponents by cutting their phone lines, taking away their cars, removing their security details.

"The demons of despotism and dictatorship still loom large in Russia," warns Stephen Cohen, a Russia scholar at Princeton University. "The last time a parliament was burned in a fledgling democracy was the Reichstag in Weimar Germany, an omen we should not forget."

Former U.S. Ambassador to Russia, Bob Strauss, interviewed today on "Good Morning, America," insisted that his friend Boris was committed to democracy, because he told him so. Yeltsin may well be every inch a democrat, but the Svengali behind his rise to power, Gennadi Burbulis, has no more regard for the wisdom of the masses than does, say, President Clinton's political svengali, James Carville. I met Burbulis last May in Moscow and came away impressed with his brilliance, but with a clear sense that he regards the Russian people as sheep to be led. He even boasted of their capacity to endure suffering. Bob Strauss continues to blink away what he knows have been the tragic errors of U.S. foreign economic policy that have caused this suffering in the former Soviet Union.

If, by decree, the Yeltsin government proceeds as planned with increased crude oil prices and the addition of yet another value-added tax, I'd wonder if he could even make it to the December elections. Treasury Undersecretary Larry Summers still wants Yeltsin to lift domestic crude to the world oil price. This would mean raising the price of oil from R38,000 per metric ton to about R160,000. Remember, three years ago it was only R120. At the same time, the shock therapists want to cut off the central bank's subsidized credits to the state agricultural sector. As long as parliament controlled the central bank, credits went to the farm communes in order to finance purchases of fertilizer, even as crude oil prices were soaring. Under the fiendish plans of the shock therapists, the economy would soon shut down, except for the hard currency mafia. The Wall Street Journal last week published an amazing dispatch from Moscow, "Democracy by Decree," which quoted Swedish Economist Anders Aslund, one of Yeltsin's shock therapists. Aslund gleefully noted how much "fun" it was to issue decrees that did not have to be approved by parliament.

The one unknown in all this is the position of the military. When the fun began September 21, we noted that the military would now have to choose sides, between Yeltsin and parliament. Our surmise was that it would refuse to let the country go through another round of shock therapy, and for awhile last week it appeared from wire service dispatches that Yeltsin would not have the support of the provinces or the most important military districts. It still is not clear how the military chose the support of Yeltsin or what promises Yeltsin made to secure that support. The military primarily wants order, for without it there will be division in its own ranks. In the wake of Sunday's grisly events, the calm throughout the country suggested that some accommodation has been made that will avoid another planned economic shock. At the very least, in the aftermath of Bloody Sunday, with its scary nuclear implications, the nature of Yeltsin's economic reforms will be getting some attention.