Magazine article The Spectator

Russia, Land of Enterprise

Magazine article The Spectator

Russia, Land of Enterprise

Article excerpt

SIX YEARS ago in Washington it fell to me as chancellor of the exchequer to introduce Yegor Gaidar, then Russia's finance minister, to a packed meeting of the IMF. It was rather like introducing a new member of the House of Commons. We walked together up the aisle, but instead of being greeted by the Speaker the newly admitted member shook hands with Michel Camdessus, then, as now, the IMF's managing director.

It was a historic moment. It was the acknowledgment of Russia's wish to enter the global economy. I vainly attempted to interest the British media. None were interested. I was even taken to task by The Spectator's City columnist for spending too much time on Russia.

It had all started when Gorbachev invited himself to attend the G7 meeting at Lancaster House in 1991. Somewhat portentously he had announced that Russia was attending not as a supplicant, but as a partner. After that meeting, I, as chairman of the G7 group of finance ministers, went to Moscow. Boris Yeltsin, the coming man, made it clear to me that reform would happen in Russia, even if it didn't in Gorbachev's Soviet Union.

It was then that I first met young economic reformers like Yavlinskly, Fyodorov and Shokhin. They could have come straight from the pages of Turgenev's Fathers and Sons. They had all the passion of 19th-century Russian liberals for foreign ideas. I was impressed by their courage and understanding of market economics.

I particularly wanted to help improve the efficiency of Russia's primitive banking system. I arranged technical assistance from the Bank of England. With Yeltsin's approval I devised a scheme for British banks, with government assistance, to take young Russians for training. I wrote to hundreds of UK firms and, as a result, over 1,000 young Russians were trained in British financial institutions.

Two weeks ago I found myself again reflecting on these matters in St Petersburg at the time of Yeltsin's double whammy of default and devaluation. At that point there was little sense of crisis. Admittedly there were a few queues outside banks, and in shops new price tags were being placed on top of old.

But at the Grand Hotel, the mobsters' molls, dressed head to toe from Prada, continued to slip through the metal detector to the caviar hall, followed by squat men with crew cuts and open-necked check shirts. On the streets I noticed many fourwheel-drive vehicles with dark windows, and one Rolls Royce, though most cars were old. The shop windows seemed full of goods compared with the empty shelves in Moscow during my last visit.

However, away from the centre and up Moskovsky Prospekt you find a different city. The buildings are crumbling, the streets full of rubble and the shops much drabber. I wondered what life must be like in Gorky or Volgograd. Millions of Russians today survive outside the formal economy and have not seen money for years.

Commentators have eagerly written off Yeltsin's presidency as an abject failure. One wonders what they imagined success could possibly have looked like. The holding and winning of the first direct election for a Russian president was a historic achievement. On the economic front, it was Yeltsin's lifting of price controls that brought many more goods into the shops. Russia has the beginnings of a new service economy.

In recent days it has been suggested that attempts at full-scale reform of Russia's economy were naive and always doomed to failure. It is ironic to recall that the original IMF programmes for Russia were criticised by economists like Jeffrey Sachs for being insufficiently radical. …

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