Tainted Transactions: An Exchange

National Interest, The, Summer, 2000 by Jeffrey D. Sachs, Anders Aslund, Marek Dabrowski, Peter Reddaway, Igor Aristov, Wayne Merry, Michael Hudson, David Ellerman, Steven Rosefielde

Jeffrey D. Sachs, director of the Center for International Development, Harvard University:

JANINE Wedel, for the umpteenth time, repeats her phony diatribes against me ("Tainted Transactions: Harvard, the Chubais Clan and Russia's Ruin", Spring 2000). Please permit me to correct the record.

Despite Dr. Wedel's weird insinuations that I had no advisory role with the Russian government, I was an official adviser to that government, but only for two years and two months, from December 1991 to January 1994. I worked closely with Anders [dot{A}]slund during this period. President Yeltsin officially designated us as advisers during a meeting with us on December 13, 1991, and we received offices in the Council of Ministers during 1992 and in the Ministry of Finance during 1993. During the period until the end of 1992, [dot{A}]slund and I mainly advised acting Prime Minister Yegor Gaidar, and in 1993 we led a unit within the Russian Finance Ministry advising Deputy Prime Minister Boris Fedorov. (The most bizarre and entertaining fiction is Dr. Wedel's additional suggestion that I somehow secretly worked with the IMF during 1992.)

During this entire period, there were notoriously heated divisions within the Russian government, and between the Russian government on one side and the Duma and Central Bank on the other. The reformers, led by Gaidar and Fedorov, did what they could to pursue needed reforms, but very often they were blocked. Unlike my experience in many other countries, such as Poland, little of what I recommended was actually enacted. It wasn't pleasant being blamed for high inflation and other ills that resulted from the very opposite of the advice that [dot{A}]slund and I were giving (such as when the Central Bank ran a disastrous hyperinflationary monetary policy in 1992 and 1993), but it was still worth the effort of supporting the brave reformers fighting an uphill battle. [dot{A}]slund and I publicly resigned in January 1994, days after Gaidar and Fedorov left the government. We were concerned about the takeover of the government by the "industrial lobby", with a foreshadowing of the mega-corruption that was to follo w, especially in the disgraceful state giveaways of the lucrative natural resource enterprises, mainly during 1994-96. I was also particularly distressed by the lack of appropriate Western advice and assistance, a point that I made repeatedly in writings and speeches at that time and afterward.

Somehow in this maelstrom some people came to assume (or at least claimed to assume) that whatever happened was what I had recommended, even though I was publicly and privately critical of the lawlessness and lack of reform progress. For a few people this has continued despite the fact that I have not advised the Russian government for six years or even been to Russia for five years. Wedel writes in just this nonsensical vein. For many years I have publicly and repeatedly denounced the scandals of privatization such as the "shares for loans" deals, and published articles and books describing and criticizing the lawlessness and corruption in Russia (including The Rule of Law and Economic Reform in Russia, 1997).

Dr. Wedel deliberately and systematically mixes personal references to me, the Harvard Institute for International Development (HIID) and other Western advisers, so that she can rope me into her phony conspiracy theories. The HIID projects she refers to were directed by Professor Andrei Shleifer at Harvard, and I had no role in those projects. She seemingly can't understand that I had a completely separate project, and that I resigned from advising the Russian government as of January 1994. One and one half years later, I became director of HIID in July 1995, and Professor Shleifer's project was one of sixty or so ongoing HIID projects around the world. During the period in which I directed HIID (1995-99), I stayed completely away from any personal involvement in any Russian advisory work, consistent with my public resignation in 1994. Moreover, when dubious practices in Professor Shleifer's project came to the attention of the U.S. Agency for International Development (USAID) and myself in the spring of 199 7, USAID and I worked together to close the project immediately.

Dr. Wedel writes darkly that "it is unclear who paid Sachs and his team." As I have explained repeatedly to her, and to anyone else that had the slightest interest, I received my academic salary for my work in Russia, with my leave time from Harvard University covered mainly by the United Nations University in Helsinki in early 1992, and thereafter by the advisory project supported by the Ford Foundation and the Swedish government during 1992-93. USAID supported a small amount of my summer academic salary, probably a total of a month or two. Of course, I never invested a penny in Russia, or in any other country in which I have served as an economic adviser. Nor did I engage in any consulting services for private businesses or investors involved with the Russian economy.