Date: December 10, 2006 6:15:50 AM PST
Subject: [4] BUSH & Co Behind the Plunder of Russia "During the Clinton Administration"
THE "OFFICIAL" VERSION
The Making of the Harvard-Chubais Partnership
In the late summer and fall of 1991, as the vast Soviet state was breaking
up, Harvard professor Jeffrey Sachs and other Western economists
participated in meetings at a dacha outside Moscow where young "reformers"
planned Russia's economic and political future. Boris Yeltsin, then
president of Russia within the Soviet Union and undermining Mikhail
Gorbachev, president of the Soviet Union (which would break up by year's
end), was building his team of advisers. The long-standing group of
associates around Anatoly Chubais were to figure prominently. The group's
prestigious Western contacts, which would prove crucial to its success,
distinguished it from other parties looking to have a hand in shaping
Russia's economic policy.
At the dacha, Sachs, his associate Anders Aslund (a former Swedish diplomat
affiliated with Washington think tanks), and several other Westerners
offered their services and access to Western money to the Russians. The key
Russians present were the economist Yegor Gaidar, who would become the
first "architect" of economic reform, and Chubais, who was part of Gaidar's
team and who later would take Gaidar's place as chief economic policymaker.
Individual Russians paired off with their Western partners to work on
economic policy. Chubais, with his savvy, self-starting style, found common
ground with Andrei Shleifer, a Russian-born U.S. émigré who, still in his
early thirties, had climbed to the pinnacle of academic success in America
as a tenured professor of economics at Harvard. Shleifer met Chubais
through Sachs.[25] Both Shleifer and Chubais were young, ambitious, and
eager to make economic policy history. They combined forces to plan the
privatization of Russia's state-owned enterprises.
Supporting the Sachs-Gaidar-Chubais agenda (although not present at the
dacha meetings) was yet another Harvard man, Lawrence Summers. In 1991,
Summers was named chief economist at the World Bank. In 1993, newly
inaugurated President Clinton appointed Summers Undersecretary of the
Treasury for international affairs. In this role, Summers was directly
responsible for designing the Treasury Department's country-assistance
strategies and for the formulation and implementation of international
economic policies.[26] He had deep-rooted ties to the principals of
Harvard's Russia project -- Shleifer credits Summers with inspiring him to
study economics;[27] the two received at least one foundation grant
together.[28] Summers's publicity quote for Privatizing Russia, a book
co-authored by Shleifer, declares that "[t]he authors did remarkable things
in Russia and now they have written a remarkable book."[29]
Summers had also long been close to Sachs, his colleague from Harvard.
Summers hired Sachs's protégé, David Lipton, a Harvard Ph.D. who had been
vice president of Sachs's consulting firm, to be deputy assistant Secretary
of the Treasury for Eastern Europe and the former Soviet Union.[30] After
Summers was promoted to deputy Treasury Secretary in 1995, Lipton moved
into Summers's old job, and assumed "broad responsibility" for all aspects
of international economic policy development. Lipton and Sachs published
numerous joint papers and served together on consulting missions in Poland
and Russia. "Jeff and David always came [to Russia] together," remarked
Andrei Vernikov, a Russian representative at the IMF; "They were like an
inseparable couple."[31]
Sachs helped Gaidar to promote a policy of "shock therapy," which aimed to
swiftly eliminate most of the price controls and subsidies that had
underpinned life for Soviet citizens for decades. Gaidar served as minister
of finance and the economy from November 1991 to April 1992, then as first
deputy prime minister, followed by acting prime minister to December 1992.
By November 1992, Gaidar was under severe attack for failed policies.
Chubais took over where Gaidar left off. To help him in his appointed task,
Chubais assembled a group of Westward-looking, energetic associates in
their thirties members of the Chubais Clan. From the start, the "young
reformers" together with their Harvard helpmates chose rapid, massive
privatization as their showcase reform. Harvard economist Shleifer became
director of the Harvard Institute's Russia project. Another Harvard player
was a former World Bank consultant named Jonathan Hay. In 1991, while still
at Harvard law school, Hay became a senior legal adviser to Russia's new
privatization agency, the State Property Committee (GKI).[32] The following
year, the youthful, hard-working Hay was made the Harvard Institute's
general director in Moscow.
Just what did the Harvard group and the Chubais Clan have to offer each
other? One characteristic of the transactorship mode of organizing
relations if there is a dominant side is that the main comparative
advantage and clout of the group representing the dominant side in the eyes
of the other side is the dominant groups access to and offering of
resources. In the early 1990s, many Russian elites looked to the West for
solutions. At that time, no one held more sway than Western experts,
especially those from Harvard. Yet, although prestige and "symbolic
capital" were part of Harvard's attraction, money was the magnet that
wedded the Harvard group to the Chubais Clan.
With aid money and Harvard's involvement, the Chubais Clan, which Deputy
Secretary Summers later called a "dream team," came to occupy important
positions in the Russian government.[33] Made significant by virtue of
hundreds of millions of Western dollars, Chubais was a useful figure for
Yeltsin: first as head of the GKI, beginning in November 1991, then
additionally as first deputy prime minister in 1994, and later as the
lightening rod for complaints about economic policies after the Communists
won the Russian parliament (Duma) election in December 1995. Chubais made a
comeback in 1996 as head of Yeltsin's successful reelection campaign and
was named chief of staff for the president. In March 1997, Western support
and political maneuvering catapulted Chubais to first deputy prime minister
and minister of finance. Although fired by Boris Yeltsin in March 1998,
Chubais was reappointed in June 1998 to be Yeltsin's special envoy in
charge of Russia's relations with international lending institutions.
Chubais came to be on intimate terms with many Western officials, including
the highest executives of the IMF, the World Bank, and the U.S. government,
including Deputy Treasury Secretary Summers. In a letter of April 1997
(obtained and published by Nezavisimaya Gazeta) from Summers to Chubais,
addressed "Dear Anatoly," Summers instructed Chubais on the conduct of
Russian foreign and domestic economic policy.[34]
As Russia roiled in economic ruin in July 1998, Summers entertained
Chubais, who had been appointed a month earlier to the new post, in his
home for brunch, where officials worked out the details of an emergency IMF
loan. The meeting was crucial in obtaining release of the funds, according
to a New York Times report.[35] After the crash a month later, Chubais, the
chief negotiator of the bailout, said he had "conned" from the IMF its last
$4.8 billion tranche.[36] Even this statement brought administration
officials to Mr. Chubais' defense.[37] As we now know, the IMF money
disappeared in short order.[38]
Nevertheless, Chubais remained a favored son of the Washington
establishment. In Washington in May 1999, Chubais, now chairman of the
electricity monopoly United Energy Systems, was received by Summers,
Treasury Secretary Robert Rubin, Secretary of State Madeleine Albright,
Undersecretary Strobe Talbott, and National Security Adviser Sandy Berger,
as well as top officials in the IMF and the World Bank.
Later, in August and September 1999, newspapers reported that billions of
dollars had been channeled through the Bank of New York in a major money
laundering operation,[39] and that the source of some of the money may have
been IMF loans.[40] Among those under investigation for alleged money
laundering were Anatoly Chubais and other current and former members of
Yeltsin's government.[41]
Working the American Side
On both sides in the U.S.-Russia case, the transactors, even if formally
serving their respective governments, supplanted the governments structures
and authority through the informal parallel executive structure that they
set up. On the U.S. side, this involved special treatment accorded the
Harvard Institute group through high government directives promoted by
Harvard-connected administration officials. Competitive bidding and other
standard government regulations and procedures were largely circumvented.
Without experience in Russia and under obligation to carry out
congressional spending mandates, an insecure foreign aid vehicle, the U.S.
Agency for International Development (USAID), was persuaded to largely
delegate responsibility for Americas role in reshaping the Russian economy
to the Harvard Institute group. The Harvard Institute's first award from
USAID for work in Russia came in 1992, during the Bush administration. Over
the next four years, between 1992 and 1997, with the endorsement of
influential proponents in the Clinton administration, the Institute
received $40.4 million from USAID in noncompetitive grants for work in
Russia. It was slated to receive another $17.4 million until USAID
suspended its funding in May 1997, citing allegations of misuse of
funds.[42] Approving such a large sum of money as a noncompetitive
"amendment" to a much smaller award (the Harvard Institute's original 1992
award was $2.1 million) was highly unusual, according to U.S.
officials.[43] Also highly unusual was the citing of "foreign policy"
considerations-that is, the national security of the United States-as the
reason for the waiver.
Nonetheless, the waiver was endorsed by five U.S. government agencies,
including the Department of the Treasury and the National Security Council
(NSC), two of the leading bodies making U.S. aid policy toward Russia (and
Ukraine). From Treasury, the Harvard-connected David Lipton and Lawrence
Summers supported the Harvard Institute projects. Carlos Pascual signed the
waiver on behalf of USAID in his capacity as USAID's deputy assistant
administrator of the Bureau for Europe and the New Independent States.
Pascual's support for Harvard Institute projects continued, and he was
later promoted to the NSC, with his current title of special assistant to
the president and senior director for Russian, Ukrainian, and Eurasian
Affairs.[44]
The Harvard Institute enjoyed a special standing in the U.S. aid
bureaucracy and secured terms that were different from, and more
advantageous than, those for many other aid contractors. Harvard-connected
key officials were responsible for handing the Institute not only the bulk
of USAID's economic reform portfolio in Russia, but also the legal
authority to manage other contractors. In addition to receiving millions in
direct funding, the Institute helped steer and coordinate USAID's $300
million reform portfolio in grants to the Big Six accounting firms and
other companies such as the public relations firm Burson Marsteller.[45]
These awards put the Harvard Institute in the unique position of
recommending U.S. aid policies in support of market reforms while being a
chief recipient of the aid, as well as overseeing other aid contractors,
some of whom were the Harvard Institute's competitors.
Because of its special standing with USAID and other government agencies,
the Chubais-Harvard transactors were able to urge contractors to use
certain institutions and people. Jonathan Hay, the Harvard Institute's
general director and its public face in Moscow, assumed large power over
contractors, policies, and program specifics. He had easy access to the
powerful Chubais Clan, but also served as its spokesman. The Institute
sometimes spoke on behalf of the Chubais Clan, sometimes on behalf of
itself as an aid contractor, and sometimes also as a contractor managing
the projects of competitor contractors. Thus, from an American perspective,
the Harvard Institute appeared to have a conflict of interest.
Beginning in 1992, Hay served as a key link between the Chubais Clan and
the aid community at large. Donor officials, contractors, and even General
Accounting Office (GAO) investigators wanting to talk to Russian officials
responsible for aid were directed instead to Hay. Hay said he viewed his
role as "getting policy focused right and turning that into a message for
donors," which included helping Chubais and others to prepare requests to
the leadership of USAID that communicated what the Russian government
wanted to do.[46] Many consultants not connected to Harvard indicated that
Hay had some control over their purse strings and that he spoke on behalf
of the Russian government (that is, the Chubais Clan) to USAID. Thus, it is
not surprising that at a meeting that I observed among Hay, representatives
of the Clan, and senior aid-paid Western consultants, the consultants
treated Hay with considerable deference.[47]
All this meant that, in practice, and under cover of economic aid, the
United States delegated to the Harvard Institute, a private entity, foreign
policy in a crucial area that involved complicated choices. This
arrangement eventually came under scrutiny. In 1996, Congress asked the GAO
to investigate the Harvard Institute's activities in Russia and Ukraine.
The GAO found that "HIID served in an oversight role for a substantial
portion of the Russian assistance program,"[48] that the Harvard Institute
had substantial control of the U.S. assistance program,[49] and that
USAID's management and oversight over Harvard had been "lax."[50]
In 1997, as the result of another investigation, this time by USAID itself,
USAID canceled nearly $14 million of its commitments to the Harvard
Institute amid allegations that Andrei Shleifer and Jonathan Hay, the
Russia project's two principals, had "abused the trust of the United States
Government by using personal relationships . . . for private gain."[51] In
May 1997, the Harvard Institute fired the two men, citing evidence that
they had used their positions and inside knowledge as advisers to profit
from investments in the Russian securities markets and other private
enterprises. Although acknowledging that they participated in and benefited
from many of the alleged activities, Hay and Shleifer denied that the
activities constituted a conflict of interest with their official
positions. As of this writing, the men remain under criminal and/or civil
investigation by the U.S. Justice Department, according to sources close to
the investigation.[52] Tellingly, USAID Deputy Administrator Donald
Pressley acknowledged: "We had even more than usual confidence in them
[Harvard advisers], and that's one reason we are so distressed that this
has occurred."[53]
Working the Russian Side
Given the "open historical situation" and the fact that the workings of the
new system were far from established, the Russian side was much more easily
maneuvered than the American one. In the Russian context, the very concept
of "the state" may be problematic. It is easy to see how clans could
significantly shape society, politics, and the economy in what appears to
have crystallized into a "clan-state."[54]
The notion of the clan-state builds on Graham's observation that Russia is
run by rival clans.[55] Under the clan-state, individual clans, each
controlling property and resources, are so closely identified with
particular ministries or institutional segments of government that their
agendas and activities sometimes seem identical. Whereas the Chubais Clan
was closely identified with segments of government concerned with
privatization and the economy, competing clans had equivalent ties with
other government organizations, such as the "power ministries" of defense
and internal affairs, and the security services.
In the clan-state there is little separation of the clan from the state.
The same people, with the same agenda, constitute both the clan and the
relevant state authorities. The clan is at once the judge, jury, and
legislature. The clan-state has limited outside accountability, visibility,
and means of representation for those under its control. Generally, a
clan's influence can be checked or constrained only by a rival clan, as
judicial processes are often politically motivated.
Loyalty to the clan above any institution for which clan members are
formally working or with which they are affiliated is an essential
ingredient of the Russian clan system. Members of a clan are "institutional
nomads," in that their loyalty is primarily to the group, rather than to
any particular institution with which they are associated.[56] The clan
places its people in various formal and informal positions where they can
access resources to serve clan agendas; it moves members around as it
serves the clan's goals.
The Chubais Clan positioned its members in many crucial activities and
institutions. Beginning in 1992, Chubais acquired a broad portfolio,
ranging from privatization and the restructuring of enterprises, to legal
reform and the development of capital markets and a regulatory framework
for business and securities transactions.[57] A number of commissions
dealing with bankruptcies, tax arrears, and debt were set up under Chubais,
who also headed the GKI and in 1994 became first deputy prime minister. The
creation of the Commission on Economic Reform in 1995 was further
confirmation, as the Russian newspaper Kommersant Daily stated, that "a new
center of economic power is being created around First Deputy Prime
Minister Anatoly Chubais." With "very great" powers, the commission was
described as "a quasi-Council of Ministers . . . in direct competition with
the bodies that have already been vested with such powers."[58] As
sociologist Kryshtanovskaya summed it up, "Gradually, his [Chubais's] men
started controlling not just privatisation, but also the anti-trust policy,
the bankruptcy mechanism, taxes, relations with regions (including the
organisation of the gubernatorial elections) and what was called the
propaganda work in Soviet times."[59]
Further increasing their influence, the Chubais-Harvard transactors
employed an important principle of transactorship: that transactors,
limited in what they can achieve through open lobbying and parliamentary
processes, often bypass them. The transactors operated through presidential
decrees, the preferred method for many market reforms. Harvard general
director Jonathan Hay and his associates drafted some of the decrees. The
transactors bragged that after the privatization program passed Russia's
parliament, "every subsequent major regulation of privatization was
introduced by presidential decree rather than parliamentary action."[60]
Moreover, a 1996 presidential directive dictated that only Chubais (at the
time chief of staff) had the authority to decide whether presidential
decrees were ready to be signed. The directive could be circumvented only
on receiving direct instructions from the president.[61]
Despite the fact that building democracy was a stated goal of the aid
community, many aid officials embraced this dictatorial modus operandi.
They promoted presidential decrees and the circumvention of parliamentary
authority, viewing such practices as efficient means of achieving market
reform. As USAID's Walter Coles, a key American official in the
privatization and economic restructuring program in Russia, pointed out,
"If we needed a decree, Chubais didn't have to go through the bureaucracy."
Acknowledging the lack of political support for many reform measures, Coles
said, "There was no way that reformers could go to the Duma [the parliament
set up in 1993] for large amounts of money to move along reform."[62]
However, as the U.S.-Russian aid case has shown, without public support or
understanding, decrees are a very weak basis for achieving the stated goal
of economic aid, that of helping to build a market economy. Some reforms,
such as lifting price controls, could be achieved by decree. But many other
reforms advocated by the aid community, including privatization and
economic restructuring, depended on changes in law, public administration,
or mindsets and required working with the full spectrum of legislative and
market participants, not just one clan. Without support from the parties to
the reform process, reforms were likely to be subverted in the process of
implementation.[63]
As stated earlier, transactors, although they may share the overall goals
of the sides they represent, may advertently or inadvertently, subvert
those goals in pursuing their own private agendas. The Chubais-Harvard
transactors were known to block reform efforts on occasion. In particular,
the transactors obstructed reform initiatives when they originated outside
their own group or when the initiatives were perceived as conflicting with
their agendas.[64] When a USAID-funded organization run by the
Chubais-Harvard transactors did not receive the additional USAID funds it
had expected, its leaders interfered with legal reform activities
concerning title registration and mortgages that were launched by agencies
of the Russian government.[65] The transactors' interference with the
record of property put them at cross-purposes with their own philosophical
goals of fostering markets.
Flex Organizations
The Chubais-Harvard transactors took advantage of the clan-state
organization and may have helped to further develop it. With their resource
base of funding from outside, the transactors set up and ran a network of
aid-funded private organizations to promote the transactors' agendas.
Although these organizations were formally private, they often carried out
functions that ought to have been the province of the state. The
organizations helped the transactors to bypass government, bureaucracy, and
parties they found necessary to circumvent. This informal parallel
executive structure enabled by foreign funding mimicked the dual system
under communism, in which many state organizations had counterpart
Communist Party organizations that wielded the prevailing influence.
For many in the donor community, channeling money through private
organizations was ideal, because that would circumvent inefficient and
cumbersome bureaucracy. In the U.S.-Russia aid case, such organizations
enabled the transactors to bypass legitimate bodies of government, such as
ministries and branch ministries relevant to the activities being
performed, and to circumvent the democratically elected Duma. Indeed, the
transactor-run organizations frequently carried out key functions of the
state (for example, negotiating loans with the international financial
institutions, making and executing economic policy, and implementing legal
reform). This network of "private" organizations that were parallel to
state organizations facilitated the Clan's operations in multiple arenas
and served to expand its influence. USAID's Walter Coles conceded that the
organizations were "set up as a way to get around the government
bureaucracy."[66]
The influence of transactor-run organizations is further enhanced by their
ambiguous, "flex" quality. Flex organizations play multiple and conflicting
roles and can switch their status and identity as convenient. They can
claim to be of one side or another (Russian or American). They are
constantly blending and/or traversing the spheres of state and private and
of bureaucracy and private enterprise. (Note that the uncritical
application to Russia of Western dichotomies of state and private is
analytically problematic.)[67] Flex organizations appear to be quite
compatible with the Russian context, in which control and influence, not
ownership, are pivotal.[68] The flexibility they afford lends
maneuverability to the transactors, which enhances their effectiveness and
resiliency.
Adding to the apparent impressiveness of the Chubais-Harvard transactor
organizations was the fact that they were run largely by Russians. What
donors often missed was that, needing a repository for funds, the model
organizational structures they laid down were created for their own
convenience. Although some of the organizations possessed the vestiges of
formal organizations, such as mission statements, boards of directors, and
bookkeeping practices that could be described in an annual report, there
was no assurance that any of this would work according to the donors'
conceptions, or that funds would be used in the way the donors had
envisioned. Finally, although the USAID-created, transactor-run
organizations had separate names and stated functions, the organizations
all were spawned, operated, and run by the Chubais-Harvard transactors and
their associates. The donors' reports discussed the organizations without
indicating their links to one another, but they were all part of the same
family.
The donors' flagship organization was the "private," Moscow-based Russian
Privatization Center (RPC). The RPC was held up by many in the aid
community as a model for other aid-supported organizations. With the
Harvard Institute's help, the RPC received some $45 million from USAID,[69]
millions of dollars more in grants from the EU, the governments of
Japan[70] and Germany, the British Know How Fund, and "many other
governmental and non-governmental organizations," according to the RPCs
annual report.[71] The RPC also received loans both from the World Bank
($59 million) and the European Bank for Reconstruction and Development ($43
million) to be repaid by the Russian people/state.[72]
The RPC epitomized the operations of the aid-supported Chubais-Harvard
transactors. The RPC was closely tied to Harvard in multiple ways, only one
of which was characterized by a USAID-supplied explanation: that the
Harvard Institute provided management support to the RPC.[73] RPC documents
state that the Harvard Institute was both a "founder" and "Full Member of
the [Russian Privatization] Center," which is the "highest governing body
of the RPC."[74] Harvard's Andrei Shleifer served on the board of
directors, along with Anders Aslund, long connected to Sachs and Shleifer.
Aslund helped to deliver Swedish government monies to the RPC and served as
a broker between the Chubais-Harvard transactors and the governments of
Sweden and the United States. Members of the Clan appointed one another to
serve in the founding, governing, and management structure of the RPC,
including Chubais (chairman of the board), Boycko (managing director until
1 July 1996), Eduard Boure (managing director after 1 July 1996), and
Dmitry Vasiliev (deputy chairman of the board), who also served as a vice
chair of the GKI.[75] Chubais, who recruited the RPC's board members,
continued to serve on it even after Yeltsin dismissed him from government.[76]
Formally and legally the RPC was a nonprofit, nongovernmental organization.
But the "private" RPC was established by Russian presidential decree and
received foreign aid funds because it was run by the Chubais "reformers,"
who played key roles in the Russian government. Lending credibility to its
appearance as a "government" organization, the RPC's tasks included helping
to make policy on inflation and other major macroeconomic issues, as well
as negotiating loans with international financial institutions. Even more
convincing was the fact that the RPC had more control than the GKI over
some secret privatization documents and directives, according to the
Chamber of Accounts, Russia's rough equivalent of the GAO. Two RPC
officials were authorized to sign privatization decisions (Boycko and the
American Jonathan Hay).[77] So a Russian and an American-both representing
a private entity-were approving major privatization decisions on behalf of
the Russian state.
The largesse that flowed through the RPC appears to have been much greater
than the sum-total of all these figures would indicate. The RPC's chief
executive officer, Chubais Clan principal Maxim Boycko, has written that he
managed some $4 billion from the West while head of the RPC, according to
Chamber of Accounts auditor Veniamin Sokolov. The Chamber of Accounts has
attempted to investigate how some of this money was spent. A report issued
by the Chamber in May 1998 shows that the "money was not spent as
designated. Donors paid hundreds of thousands of dollars for nothing . . .
for something you can't determine."[78]
A confidential 1996 report commissioned by the State Department's
coordinator of U.S. assistance to the NIS called the Russian Privatization
Center "substantially over funded and largely 'an instrument in search of a
mission.'"[79] The report also said that the center suffers from "imperial
overstretch."[80] And there were many reports by aid-paid consultants that
the center and its network of Local Privatization Centers were used for
political purposes.[81]
Thus the transactor-created, aid-funded organizations had a chameleon like
quality: They could switch their status and identity situationally. They
were situated somewhere between state and private, between the Russian
government and Western donors, and between Western and Russian allegiance
and orientation. They were sometimes private, sometimes state, sometimes
pro-Western, sometimes pro-Russian. Whatever their predilection at a given
moment, the organizations were run by the Chubais-Harvard transactors (with
financial support from USAID through Harvard and U.S. contractors)[82] and
served as the transactors' domain and political and financial resource to
allocate in the communist tradition, through patronage networks such as
those that had virtually run the Soviet Union.
Transidentities
Not only can transactor-run organizations switch status and identity
according to the situation, but so can some of their individual members.
Under transactorship, one source of flexibility and influence lies in
"transidentity capabilities": the ability of a transactor to shift his
identity at will, regardless of which side originally designated him as a
representative.[83]
Key Chubais-Harvard transactors had transidentity capabilities in that they
could switch their national identity back and forth as convenient:
sometimes as Russian representatives, sometimes as American ones,
regardless of which side they came from. The same individual could
represent the United States in one context and Russia in another, as called
for by circumstance.
A significant example is that of the Harvard Institute's Russia project
general director Jonathan Hay. Hay's transidentity was institutionalized by
policies and procedures on both sides. Formally a representative of the
United States, Hay interchangeably acted as an American and a Russian. As
an American, Hay not only acted as Harvard's chief representative in
Russia, but also exercised formal management authority over other U.S.
contractors, which the U.S. government had granted to the Harvard Institute
under a cooperative agreement. In addition to being among the most
influential foreign consultants in Russia, Hay was also appointed by
members of the Chubais Clan to be a Russian. As a Russian, Hay was
empowered to sign off on pivotal, high-level privatization decisions of the
Russian government.[84] According to a U.S. official investigating
Harvard's activities, Hay "played more Russian than American."
Another example of transidentities is that of Julia Zagachin, an associate
of Hay. Zagachin was an American citizen married to a Russian who was
chosen by Chubais Clan principal Dmitry Vasiliev, head of the Russian
Federal Securities Commission, to assume a position designated for a
Russian citizen. Zagachin was to run the First Russian Specialized
Depository, which holds the records of mutual fund investors' holdings and
was funded by a 1996 World Bank loan. As journalist Anne Williamson has
reported, the World Bank had established that the head of the depository
was to be a Russian citizen. But Vasiliev and other members of the Clan had
determined that if their associate Zagachin headed the depository, they
would retain greater control over its assets and functions, so as to evade
accountability if necessary.[85]
It was also difficult to pin down prominent consultants on the
international circuit in terms of whom they represented, whom they were
working for, who paid them, and where their ambitions lay. Harvard
economist Jeffrey Sachs is a case in point. According to journalist John
Helmer, Sachs and his associates (including David Lipton, who later went to
Treasury with Lawrence Summers) played both the Russian and the IMF sides.
During negotiations in 1992 between the IMF and the Russian government,
Sachs and associates appeared as advisers to the Russian side. However, as
Helmer writes, "they played both sides, writing secret memoranda advising
the IMF negotiators as well."[86]
Adding to the ambiguity was the question of whether Sachs was an official
adviser to the Russian government. Although he maintains that he
was[87]-and he certainly was often portrayed as such in the West-key
Russian economists as well as international officials say his primary role
was promotional[88] rather than policymaking.[89] Jean Foglizzio, the IMF's
first Moscow resident representative, was taken aback by Sachs's practice
of introducing himself as an adviser to the Russian government. As
Foglizzio put it, "[When] the prime minister [Viktor Chernomyrdin], who is
the head of government, says 'I never requested Mr. Sachs to advise me'-it
triggers an unpleasant feeling, meaning, who is he?"[90]
Sachs also offered his services as an intermediary. According to Andrei
Vernikov, a Russian representative to the IMF, and other sources, Sachs
presented himself as a power broker who could deliver Western aid. In 1992,
when Yegor Gaidar (with whom Sachs had been working) was under attack and
his future looked precarious, Sachs offered his services to Gaidar's
parliamentary opposition. In November 1992, Sachs wrote a memorandum to the
chairman of the Supreme Soviet, Ruslan Khasbulatov (whose reputation in the
West was that of a retrograde communist), offering advice, Western aid, and
contacts with the U.S. Congress. (Khasbulatov declined Sachs' help after
circulating the memo.)[91] Sachs was also adept at lobbying American
policymakers, as indicated, for example, in U.S. State Department
memoranda.[92]
An associate of Sachs's and another ubiquitous transactor was Anders
Aslund. Aslund was a former Swedish envoy to Russia who later worked with
Sachs and Yegor Gaidar. Aslund appeared to represent and to speak on behalf
of American, Russian, and Swedish governments and authorities. For example,
he was seen by some Russian officials in Washington as Chubais's personal
envoy in Washington. Although a private citizen (of Sweden), he
participated in high-level, closed meetings shaping U.S. and IMF policies
toward Russia in the Departments of Treasury and State.[93] And he was
known to have played a role in Swedish aid and policy toward Russia, as
stated earlier.[94]
Aslund was also involved in brokering business activities in Russia[95] and
Ukraine.[96] He had "significant" business investments in Russia, according
to Vyacheslav Razinkin, head of the Interior Ministry's Department of
Organized Crime.[97]
In addition to (or perhaps as part of) his work for governments and the
Chubais Clan and business, Aslund was paid to do public relations. His
assignment in Ukraine, where he also was active and funded by George
Soros's Open Societies Institute, explicitly included public relations on
behalf of Ukraine, according to Soros-funded advisers who worked with
Aslund in Russia and Ukraine.[98] His effectiveness in this role no doubt
was enhanced by his affiliation with Washington think tanks, his frequent
contributions to publications such as the Washington Post and the London
Financial Times, and the fact that he was invariably presented as an
objective analyst despite the promotional roles he additionally played.
Thus, a crucial feature of the transactorship mode of organizing relations
is that it institutionalizes flexibility and affords maximum leeway for
transactors to play on their transidentities. The most effective
transactors are the ones most skilled at exploiting this flexible
structure; they have multiple roles and identities at their disposal and
are adept at working them.
Maximizing Opportunities
The latitude that the transactorship setup permits-through flex
organizations, transidentities, and the interchangeability of one side's
transactors with those of the other-appears to encourage transactors to
extend their activities into other areas. Transactors can use the access
provided by the transactorship relationship to maximize their opportunities
in many arenas. Transactors, who have been officially designated as the
vehicles through which relations between the two sides are organized, are
not supposed to be working on behalf of their own individual interests or
those of the transactor group. But having identified a unified agenda and
significant common interests that can be best achieved by working within
the transactor group, that is precisely what the transactors do-all the
while supposedly merely acting on behalf of their respective sides.
The Chubais-Harvard transactors extended themselves into many important
spheres and institutions, not only Russian economic reform and foreign aid.
The entree, legitimacy, and resources that they had by virtue of aid
facilitated their influence in other areas, both in Russia and
internationally, and allegedly also facilitated their acquisition of
personal wealth.
The "open opportunities situation" appears to have encouraged the
transactors to take on multiple roles and identities and use them to the
advantage of individual transactors, their associates, and the group as a
whole. This stoked allegations of corruption on all sides. Members of the
Chubais Clan-the very group that Treasury Secretary Summers had called a
"dream team"-were consistently under investigation in Russia. There were
many substantiated reports of the Chubais groups using public monies for
personal enrichment.[104] The Harvard group also allegedly misused aid
funds, as stated earlier.
According to sources close to the U.S. government's investigation of the
Harvard Institute's activities, Jonathan Hay used his influence, as well as
USAID-financed resources, to help his friend Elizabeth Hebert set up
Pallada Asset Management, a mutual fund in Russia. A third transactor,
Sergei Shishkin, appeared as needed, once as head of the U.S.-funded,
Chubais-Harvard group-run Institute for Law Based Economy, sometimes as the
director of five Russian companies, among them Pallada. After U.S.
investigators noticed this, new Pallada documents materialized without
Shishkin's name.
Pallada became the first mutual fund to be licensed by Russia's Federal
Securities Commission, run by Chubais Clan principal Dmitry Vasiliev.
Vasiliev approved Pallada ahead of both Credit Suisse First Boston and
Pioneer First Voucher, much larger and more established financial
institutions.[105] Moreover, as reported in Russia, Vasiliev's commission
entrusted Pallada-without a competitive tender and with funding from the
World Banks Investment Protection Fund-with management of a government fund
to compensate victims of equities fraud. Russia's Chamber of Accounts
reported that an investigation had revealed that not a single kopeck had
been paid to a defrauded investor in the first year and a half of the funds
existence, although the fund's Western consultants had been receiving their
salaries.[106]
Another piece of the Harvard commercial puzzle involved the First Russian
Specialized Depository, discussed earlier. Hay associate Julia Zagachin was
selected to run the depository even though she lacked the required capital.
Ostensibly, there was to be total separation between the depository and any
mutual fund using its services. But the selection of Zagachin defied this
tenet of open markets: Both the depository and Pallada were run by people
with close ties through the Harvard group.[107] And so the very people who
were supposed to be the trustees of the system not only undercut the aid
program's stated goal of building lasting, nonaligned institutions, but
operated in a way that echoed the Soviet practice of skimming assets for
the benefit of the nomenklatura.
Another example of the Chubais-Harvard transactors in action, a story
detailed by journalist Anne Williamson, is that of Harvard's endowment
fund. Harvard's endowment managers and billionaire financier George Soros,
who were connected to the Chubais-Harvard group, were curiously the only
two foreign entities to get in on some of the most lucrative gems of
Russian industry-from which foreigners were excluded by regulation.[108] In
testimony before the House Banking Committee in September 1998, Soros was
asked how he was able to participate in the deals. He explained: "I think
that there were no foreign investors in that because we were a part of a
Russian group that bid. I would say I was part of the crony stuff that was
going on, and it was that [sic] still the old deal where the various groups
divided this place among themselves."[109]
The Chubais-Harvard transactors arranged for their associates to be well
represented on the high-level Gore-Chernomyrdin Commission, which helped to
facilitate cooperation on U.S.-Russian oil deals and the Mir Space Station.
Shleifer was named special coordinator of the Capital Markets Forum's
working groups and was the only representative to all four working groups.
In addition, Jonathan Hay's girlfriend, Elizabeth Hebert, served with CEOs
from Salomon Brothers, Merrill Lynch, and other powerful American-based
investment houses. In fall 1997, Congress asked the GAO to look into
Harvard's role in the Gore-Chernomyrdin Commission.
Operating as part of a strategic alliance enables members of the transactor
group to take advantage of openings in a free-floating environment that is
rife with lucrative opportunities as well as risk and uncertainty. With the
transactor group as the unit of decision making, this is a different unit
of economic analysis and decision making than is usually considered.
Individual players must take the interests of their fellow transactors into
account when making choices. Although individuals are often thought of as
the primary units to take advantage of economic opportunities, in the
environments in which the transactors operate, the unit of analysis of
responses to economic incentives is not necessarily the individual; it is
often the transactor group.
Because the transactors' success is grounded in mutual loyalty and trust,
and because of their shared record of activities, some of which may open
them up to allegations of corruption and to legal actions, there are
considerable incentives for the transactors to stick together. Polish
sociologist Adam Podgorecki has aptly called this phenomenon "dirty
togetherness."[110] Because an individual's well-being is dependent on the
transactor group, with which he shares a dubious record, any desertions
must be well considered.
Although Western donors were inclined to view the loyalty exhibited by the
Chubais Clan as part of its effectiveness, many Russians regarded the Clan
as a communist-style group that was adept at commandeering resources for
itself. Long-established loyalty might mean "They're effective" in the
West, but in Russia it tended to mean "They're sharing money."
Institutionalized Deniability -- Implications
Despite evidence of corruption, a dictatorial modus operandi, and lack of
Russian popular support, U.S. officials embraced the Chubais Clan as the
group that could deliver economic reform to Russia. As Shleifer and Chubais
Clan principal Boycko acknowledged in a 1995 book funded by Harvard and
published in the West, "Aid can change the political equilibrium by
explicitly helping free-market reformers to defeat their opponents. . . .
Aid helps reform not because it directly helps the economy-it is simply too
small for that-but because it helps the reformers in their political
battles." U.S. privatization aid, the "reformers" added, "has shown how to
. . . effectively . . . alter the balance of power between reformers and
their opponents."[113] In a 1997 interview, U.S. aid coordinator to the
former Soviet Union, Ambassador Richard L. Morningstar, stood by this
approach: "If we hadn't been there to provide funding to Chubais, could we
have won the battle to carry out privatization? Probably not. When you're
talking about a few hundred million dollars, you're not going to change the
country, but you can provide targeted assistance to help Chubais."[114]
Indeed, in the short run, an efficient structure for affecting policy and
delivering aid may have been created. Yet one of the main problems with all
this is that it is a political payoff thinly disguised as economic aid.
Much of it feels familiar to Russians raised in the communist practice of
political control over economic decisions-the quintessence of the
(discredited) communist system. Thus this aid strategy followed in
communism's footsteps and may have helped to reinforce communism's legacies.
This point has not been lost on many Russians: That the chosen Chubais
"reformers" were visibly involved in politics and creating opportunities
for themselves opened Western aid to suspicion and skepticism about
capitalism, reform, privatization, and the West. Anger has accumulated over
economic "reforms"-many of them urged, designed, and funded by the United
States-reforms that have left many Russians worse off than before the
breakup of the Soviet Union. Many people blame Western aid and advice,
according to a survey conducted by the U.S. Information Agency.[115]
Further, some Russians now believe that the United States deliberately
set out to destroy their economy. Whatever the intentions of the policymakers, the
consequences of the policies and the transactorship mode of delivering them
appear to be far afield from stated goals.
The U.S.-Russian case of transactorship is probably not unique;[116]
transactionship is likely to become more frequent as a way of organizing
relations between nations. Some theorists argue that the nation-state is on
its way out.[117] Under an ideology of globalization, in which nationality
is irrelevant, and with ever closer connections to one another and less
loyalty to the nation-state, global elites often do not see themselves as
American or Brazilian as much as they see themselves as people who want to
make money, or play racquetball, or exercise power wherever they may be.
Williamson describes this as a world of "coziness among elites who consider
themselves international personages."[118]
At present, global elites and the supplanted relations of transactorship
operate in a world with laws and assumptions about the nature of
representation and of nation-states. For example, assumptions about
representation, grounded in national and international law, are based on
the idea that an individual can formally represent either one nation-state
or another, but not both, and that the representatives act on behalf of the
nation they represent.
In addition, foreign aid may call into question the notion of
representation. In the U.S. Russia case, aid, which by definition comes
from outside, undermined democratic processes and contravened a crucial
principle of Western governance: parliamentarianism. Even on donor side,
the structure of transactorship encouraged the thwarting of regulations and
oversight that might have prevented some of the alleged abuses.
The transactorship model raises a number of public policy questions: What
are the implications of a state of affairs in which the "choice" of who
represents one side is shaped to a significant degree by self-selected
representatives of the other? What are the consequences of the same actor
representing multiple sides? Where is the accountability?
------------------------
THE "BEHIND-THE-SCENES" VERSION
While it's true that the systematic plundering of the Russian economy occurred when the Democrats were in power, during the Clinton Administration, there's still some substance to the argument that Clinton and his national security advisors failed to understand the motives and modus operandi of certain members of his cabinet entrusted with implementing foreign policy goals through economic strategies -- "economics" being an arcane science (more "art" than science), nebulous to laymen no matter how well educated.
The cabinet member with most accountability for the Russian debacle was Clinton's Treasury Secretary Lawrence Summers, an Ivy Leaguer whose greatest claim to fame was that he was a protege of Martin Feldstein, Harvard professor of economics for over a generation. Outwardly a "liberal" and a Democrat, Summers has been described by those who actually knew him as ultraconservative in belief and attitude, and ignoring the academic's aptitude for protective camouflage (assuming any guise to curry favor from the powerful), as a Neoconservative, just like his mentor Feldstein, Reagan's and Bush's "court economist."
In his 2004 debate with Al Gore, on the issue of privatizing Social Security, George W Bush chose to cite the arguments of only one economist ---Lawrence Summers-- in support of his proposed legislation.
Quoting a memo from "liberal" economist Lawrence Summers, ensconced in his ivory tower at the World Bank: "Shouldn’t the World Bank be encouraging MORE migration of 'dirty' industries to [Less Developed Countries]? ... I think the economic logic behind dumping a load of toxic waste in the lowest wage country is impeccable, and we should face up to the fact that countries in Africa are vastly UNDER-polluted."
http://www.whirledbank.org/ourwords/summers.html (After the memo became public in February 1992, Brazil's Secretary of the Environment replied, "Your reasoning is perfectly logical but
totally insane.")
That Lawrence Summers, with Bush economic adviser Feldstein watching over his shoulder, gets credit for hand-picking all the worst culprits in the "Harvard Institute" that assembled around Jeffrey Sachs -- particularly major baddy Jonathan Hay, who had worked under Summers at the World Bank and whose .
involvement in the scheme to plunder Russia began early, BEFORE Bill Clinton took office -- under the presidency of George HW Bush, no doubt with Bush pal Feldstein's seal of approval, a wink and a nod.
Emigre Andrei Schleifer, "our man in Russia" for the Harvard Institute, had been a protege of Lawrence Summers at Harvard in the '80s and obtained tenured professorship thanks to Summers's intervention. In 1991, the same year Summers became chief economist at the World Bank, Schleifer was dispatched by the US Agency for International Development (USAID) to help Russia rewrite securities laws and convert to a market economy. The two events, occurring during the Bush Administration, are certainly connected.
"In October 1992, just a few weeks before losing the presidency to Bill Clinton, president George H.W. Bush signed the Freedom for Russia and the Emerging Eurasian Democracies and Open-Market Support Act. It authorized up to $350 million in aid to Russia, to be provided and managed by USAID, which already had an advance team working informally in Russia at the government's invitation."
The individual in charge of administering President Bush's "reconstruction" project in Russia through USAID was LAWRENCE EAGLEBURGER, Bush's Secretary of State in partnership with James A. Baker (whose law firm he now serves, as well as being a director of Halliburton) --formerly Kissinger's right hand man under Nixon (and now president of Kissinger Associates, as well as a notable in the Council on Foreign Relations) and afterwards Reagan's undersecretary of State, a principal in the Iran-Contra affair.
Now, ask yourself, why should anyone in this tight-knit closed-system of international
oil men and specialists in CIA-managed coups of foreign rulers have any "off the books"
interest in all the black-market oil-wealth being siphoned off by gangsters in Russia?
"A Washington company, whose partners include former U.S. Senator Howard Baker and former Secretary of State Lawrence Eagleburger, is raising millions to invest in Russia -- even as the looming presidential elections there darken the investment climate.
"I think the media has distorted the risk -- making Russia seem like a much riskier place than it actually is," said Richard Jacobs, managing partner of the Newstar Group.
Communist Party candidate Gennady Zyuganov has plenty of support to survive a runoff ballot June 16 and could win the final election in July -- a prospect that sends shivers down the spines of many Western investors.
But Jacobs, who learned his way around Russia as assistant to Occidental Petroleum Chairman Armand Hammer, calls it inconceivable that Russian president Boris Yeltsin would concede power.
Schleifer's predatory activities in the "anything goes" economy of the "new Russia" would have drawn high praise from his mentor Lawrence Summers, judging by the latter's attitudes expressed in the memo quoted above -- although, to be fair, Summers is quoted as having frequently warned him to steer clear of the temptation of "corruption," if for no other reason than to spare their alma mater the attendant disgrace.
"The Department of Justice had chosen to file civil charges for defrauding the U.S. government ... It wasn’t until 2005 that the civil case [against the Harvard Institute] was resolved. Harvard, Shleifer, and his colleague Jonathan R. Hay, who assisted him in Russia, agreed to settle for $30 million. Harvard would pay $26.5 million, while Shleifer would cough up $2 million, and Hay would pay between $1 million and $2 million, depending on future earnings. Neither Harvard nor Shleifer was forced to admit liability. No criminal case was ever filed. Shleifer is back in the classroom at Harvard, and, according to the University of Connecticut's IDEAS Project, Shleifer still ranks as the most cited economist in the world."
http://www.thecrimson.com/article.aspx?ref=514518
Jeffrey Sachs's partner-in-crime Anders Aslund, an itinerant "Russian expert" working for the Council on Foreign Relations (as Lawrence Summers is now -- see below) and similar "globalist" think tanks, didn't mind raking in big bucks from illegal insider trading in the "free market" he devised for corrupt Russian-Jewish gangsters, but nowadays he is the very picture of virtue, solemnly condemning the "anarchy" of the Russian economy (which, remember, he helped to create) and, in a "objective, scholarly" way, even calling for the forcible overthrow of the Putin "regime" -- which earns him a celebrity status in the Neocon theatre of mirrors-reflecting-mirrors where he stands cheek-to-jowl with Richard Perle, agreeing with Neocons that Russia's G-8 membership must be revoked. And note that, joining ranks with Neocons from the Project for the New American Century, Aslund is one of the signatories of the American Enterprise Institute's 2004 "Open Letter to the Heads of State and Government of the European Union and NATO" chastising Putin.
Overlooking his passionate opposition to allowing organized labor to have any voice in Russia or Eastern Europe, Jeffrey Sachs himself appears to be a genuine Lefty --he's currently travelling the globe alongside Bono, promoting the UN's New-Agey "Millennium Project," AND running for President [!]-- but, like many New Agers, he seems incapable of acknowledging any possible discrepancy between fantasy-ideal and reality, particularly when his own actions result in conditions opposite to those he intended or expected.
"[Sachs] refuses to accept any blame for the disaster, offering the defense that the Russians didn't take his advice and the West didn't come through with the big aid package he insisted was necessary. Apparently this is a well-practiced strategy. A 1992 Euromoney profile notes: 'Sachs is reluctant to acknowledge mistakes, defining them in terms of regret when governments do not take his advice.' In that case, he blamed Poland for not privatizing fast enough. Contrasting with Sachs's regrets over advice not taken, several governments he's consulted with have since characterized the material produced by him and his associates as irrelevant, or, as a Slovenian official put it at the time, "simplistic -- kindergarten stuff." ... His style was always abrasive and domineering -- he rebuked the Slovenian parliament for passing a bill without his approval and dismissed his critics as "idiots" and "imbeciles." Waiting to meet with senior Soviet officials in 1991, Sachs put his feet up on a table. An aide asked him not to do that. Sachs took his feet down for a moment, and when the aide turned away, put them back up. From several public events and an hour-long interview, I can say he comes across as a very unpleasant fellow -- cocky, vain, and free of doubt.
"In the words of former World Bank economist David Ellerman, who frequently collided with Sachs's work in Slovenia and has followed him intently ever since, 'Wherever the parade was going, [Sachs] had to be in front ... Only the mixture of American triumphalism and academic arrogance could produce such a lethal dose of gall.' ...
"Sachs admits to no responsibility for the Russian catastrophe. When I interviewed him, I asked him to comment on the (incontrovertible) fact that he's viewed by scores of millions of Russians, as one journalist has put it, as either an emissary of Satan or of the CIA. He answered that he found this question "disgusting," "perverse," and like nothing he's ever been asked before. (The global elite leads a very insulated life.) ... I asked him how he justified tearing apart the USSR and forcing the country headlong into capitalism when there was little popular support for such a strategy. He responded, illogically, that he "wanted to support the democratization of the Soviet Union." He sang the praises of "transparency and honesty in government" (even though the Yeltsin regime he was advising was opaque and corrupt.) Asked to comment on published reports that he supported creating inflation so as to wipe out the life savings of Russians --part of the shock therapists' strategy to jump-start post-Soviet Russia with 'a clean slate'-- he bristled further, denouncing the question as "indecent" and the interview itself as not being in "good faith."
'Nuff said -- we all know the type in "New Age" politics. Then as now, Jeffrey Sachs is the "rock star" of "save the world" economics, whose detached compassion for human suffering "entitles" him to be in the spotlight -- in which he's blinded by the "greatest love of all," in the immortal words of Whitney Houston. Sachs would have been an ideal candidate for the position of "useful idiot," others minding the store.
Justin Raimundo
The neocon's favorite Ivy Leaguer, Harvard President Lawrence Summers, has
declared that anti-Semitism is on the rise, not only throughout Europe and the Middle East, but also in the U.S. ... The idea that an alliance of Christian fundamentalists and their Jewish equivalent has taken hold of the Republican party and what used to be the conservative movement is not all that surprising. But
the War Party has made far more gains of late, even establishing a beachhead at Harvard.
The President of that august institution, already having won the hearts and minds of everyone from Hilton Kramer to Norman Podhoretz (a narrow spectrum, that, but a significant one), has now stepped forward to denounce the divestment movement that has bedeviled Israel's amen corner on college campuses across the nation.
Summers whines that Israel is not universally beloved:
"At the same rallies where protesters, many of them university students, condemn the IMF and global capitalism and raise questions about globalization, it is becoming increasingly common to also lash out at Israel. Indeed, at the anti-IMF rallies last spring, chants were heard equating Hitler and Sharon."
Like all neocons, Summers is a potential police agent, a one-man Cheka whose nose for political correctness always translates into a hunt for treason:
"Events to raise funds for organizations of questionable political provenance that in some cases were later found to support terrorism have been held by student organizations on this and other campuses with at least modest success and very little criticism."
------------------
http://www.economicprincipals.com/issues/05.01.30.html
To understand the itch behind the Republican Party's attempt to replace the Social Security Administration with an investment-based system, it is necessary to recognize that the single most powerful voice advocating the creation of "personal" accounts has not been George W. Bush channeling Barry Goldwater, or the PR battalions of the securities industry (though these are, of course, considerable forces in their own right), but rather a mild-mannered professor of economics at Harvard University named Martin Feldstein.
The current enthusiasm for an overhaul of the system of social insurance that the United States adopted during the Great Depression has been building slowly in some precincts of the economic profession for more than thirty years - at least since Feldstein published in the Journal of Political Economy in 1974 his first study of the effects of the Social Security system on savings behavior.
Twice in the space of the past ten years, Feldstein has used a turn in the profession's most bully pulpits to advocate that the current insurance system -- in which retirement costs are handled in much the same way that the armed forces are financed, on a pay-as-you-go basis -- be traded for a fully funded system, in which individual "contributions" would be invested through great funds in stocks and bonds.
First in 1996, in a lecture to the annual meeting of the American Economic Association, Feldstein described Social Security reform as "the missing piece" in policy analysis. In that year Steve Forbes was the only presidential candidate calling for privatization. Four years later George W. Bush actively campaigned on the proposal.
Then, earlier this month [January 2005], in a presidential address to the same association, Feldstein recommended a combination of forced individual accounts and government insurance for ALL the major forms of social insurance -- not just personal retirement accounts, but medical savings accounts and unemployment insurance as well. If ever there was an intellectual blueprint for the "ownership society," this was it.
It is difficult to exaggerate the political centrality of Feldstein to his professional generation -- the generation of the 1960s. In many respects, he is Milton Friedman's heir. Feldstein has built his reputation ... by carefully building behind-the-scenes relationships with politicians.
Feldstein began his public policy career as a leading proponent of the rhetorically powerful capital gains tax cuts of 1978, which produced an avalanche of high-tech investment. It came as no surprise, then, when he was the man to whom the Reagan Administration turned for legitimacy in 1982 when tax cuts got it in trouble. He took with him to the Council of Economic advisers a handful of post-docs who since have become household names, at least among families that follow political economy: New York Times columnist Paul Krugman, Harvard University President Lawrence Summers, best-selling textbook author (and former Council chairman himself) N. Gregory Mankiw. In the process, Feldstein became a regular adviser to then-Vice President George H.W. Bush.
Returning to Harvard in 1984, he took over teaching economics to a generation of college freshmen. He resumed the presidency of the non-partisan National Bureau of Economic Research ... but Feldstein's specialty, as before he went to Washington, was training the next generation of public finance economists. Among the better known are Summers, who rose to [greater] prominence during the Clinton administration; Harvard's David Cutler, designer of an elaborate system of national health accounts; Columbia's Glenn Hubbard, chairman of the Council of Economic Advisers under George W. Bush; and MIT's James Poterba, the lone economist to be appointed by Bush to his new Tax Reform Commission. And now Feldstein himself is among the leading candidates to replace Alan Greenspan.
Probably the only economist of comparable influence among of the previous generation, the World War II generation, is Robert Solow, of the Massachusetts Institute of Technology. He, too, has operated mainly behind the scenes, but with astonishing affect: setting much of the nation's previous economic policy agenda, impressing a style of work on the profession, and training a generation of students who further shaped the public's concerns. But where Solow's tradition exemplified nearly everything we meant by "liberal" in those years, Feldstein today represents the essence of what today we think of as being "neoconservative." In influence, the men are similar; in core beliefs, they are each other's opposites.
The concept of social security wealth is at the heart of today's debates. Friedman's philosophical arguments have become in Feldstein's hands arguments about economic efficiency, couched in terms of "deadweight loss" and potential welfare gains. The study of the various undesirable effects on incentives that inevitably arise has been extended to the other big social insurance programs against various kinds of risk -unemployment, healthcare and disability.
The kinds of deep changes that Feldstein advocates ordinarily require decades to win popular acceptance. But the Bushies are rushing because they know that, far from being the wave of the future, this is their last hurrah. The senior members of today's administration got their first taste of real power in 1974, when they became part of the Ford administration, after the resignation of Richard Nixon. Out of office for four years while Jimmy Carter held the White House, they returned to positions of authority for twelve years, until Bill Clinton sent them packing again -- until George W. Bush raised them to their current heights. Thirty five years at or near the pinnacle of power is a long time.
But by 2008, the old lions will have left the stage: both Bushes, Vice President Dick Cheney, Secretary of Defense Donald Rumsfeld, Federal Reserve chairman Greenspan. Marty Feldstein is not Paul Wolfowitz, the reckless architect of the war against Saddam Hussein, but George W. Bush is still the president. The haste with which Bush is trying to stampede his party to a vote with a phony Social Security "crisis" is strongly reminiscent of his ill-considered campaign in Iraq. The administration's tactics, if they are implemented, are as likely to backfire just as badly in the domestic arena as in its ill-conceived occupation of Iraq.
------------------------
Senior Statesmen Henry Kissinger and Lawrence Summers
Chair New Council Task Force on U.S. Policy Toward Europe
April 14, 2003
Council on Foreign Relations
http://www.cfr.org/publication/5849/senior_statesmen_henry_kissinger_and_lawrence_summers_chair_new_council_task_force_on_us_policy_toward_europe.html?breadcrumb=%2Fmedia%2Fnews_releases%3Fpage%3D7
April 14, 2003 - With the United States facing the greatest transatlantic rift in 50 years, former Secretary of State Henry A. Kissinger and former Secretary of the Treasury Lawrence H. Summers will co-chair a Council-sponsored independent task force on a new U.S. policy toward Europe. The bi-partisan task force will bring together leaders from business, former senior government officials, and policy experts to issue a report that will address the rift. The group will also include a number of European experts.
"I can’t imagine two more able people than Henry Kissinger and Larry Summers to take on this challenge,” said Council President Leslie H. Gelb. Kissinger is currently Chairman of Kissinger Associates; Summers is President of Harvard University.
The Task Force addresses four core questions:
- How serious is the current transatlantic rift and how did it come about?
- How important are good working relationships with Europe, including institutional ties, to America's interests?
- Is it possible to put the transatlantic community on a sounder basis, and if so, what are America’s strategic options? Do we need to substantially reorient relations?
- What policy paths and actions should the United States be prepared to take to carry out the preferred strategy?
Council Senior Fellow and former National Security Council official Charles Kupchan is the Task Force project director.
The Council-sponsored Task Force on Transatlantic Relations is made possible by generous grants from ENI SpA and Merrill Lynch.
Established in 1921, the Council on Foreign Relations is a nonpartisan membership organization, publisher, and think tank, dedicated to increasing America’s understanding of the world and contributing ideas to U.S. foreign policy. The Council accomplishes this mainly by promoting constructive debates and discussions, clarifying world issues, and publishing Foreign Affairs, the leading journal on global issues.
TASK FORCE MEMBERS
<"includes">
REGINALD BARTHOLOMEW is Vice Chairman of Merrill Lynch Europe. His U.S. Government career included assignments in State, Defense, and the White House and as Ambassador to Lebanon 1983-86, Spain 1986-89, NATO 1992-93, Italy 1993-97, and Undersecretary of State for International Security Affairs, 1989-92.
HAROLD BROWN is a Partner at Warburg, Pincus & Co. and Counselor at the Center for Strategic and International Studies. He has served as Chairman of the Foreign Policy Institute of the John Hopkins University’s Paul H. Nitze School of Advanced International Studies, Secretary of Defense during the Carter
MARTIN S. FELDSTEIN is President and Chief Executive Officer of the National Bureau of Economic Research and previously chaired the Council of Economic Advisers. He has been Professor of Economics at Harvard University since 1967. Mr. Feldstein is a member of advisory boards of the Congressional Budget Office and the Federal Reserve Banks of New York and Boston.
JOHN LEWIS GADDIS is Robert A. Lovett Professor of History and Political Science at Yale University. Professor Gaddis is on the advisory board of the Cold War International History Project and served as a consultant on the CNN television documentary “Cold War.” He is the author of numerous books on grand strategy and the history of the Cold War.
ROBERT W. KAGAN is a Senior Associate at the Carnegie Endowment for International Peace, specializing in U.S. leadership and foreign policy. He is cofounder, with William Kristol, of the Project for a New American Century. Prior to joining the Carnegie Endowment, he worked in the Department of State as a Deputy for Policy in the Bureau of Inter-American Affairs and was a member of the policy planning staff as Principal Speechwriter to the secretary of state.
HENRY A. KISSINGER is co-chair of the task force and Chairman of Kissinger Associates, Inc., an international consulting firm. He was the 56th Secretary of State from 1973 to 1977, serving under Presidents Nixon and Ford. He also served as Assistant to the President for National Security Affairs from 1969 to 1975. He has since served on a number of U.S. government boards and commissions including the President’s Foreign Intelligence Advisory Board and the Defense Policy Board.
CHARLES A. KUPCHAN is director of the task force and Senior Fellow and Director of Europe Studies at the Council on Foreign Relations. He is also an Associate Professor of international relations at Georgetown University. Dr. Kupchan was Director for European Affairs on the National Security Council during the first Clinton administration. Before joining the NSC, he worked in the U.S. Department of State on the Policy Planning Staff.
FELIX G. ROHATYN was U.S. Ambassador to France from 1997-2000. Prior to this role, Rohatyn was Managing Director of the investment bank Lazard Frères and Company in New York, which he joined in 1948. He has also served as Chairman of the Municipal Assistance Corporation (MAC) of the City of New York and as a member of the Board of Governors of the New York Stock Exchange.
BRENT SCOWCROFT is President and founder of The Scowcroft Group. He served as National Security Advisor to Presidents Ford and Bush. From 1982 to 1989, he was Vice Chairman of Kissinger Associates, Inc. He served in the military for 29 years, reaching the rank of Lieutenant General.
LAWRENCE H. SUMMERS is co-chair of the task force and President of Harvard University. He served as Under-Secretary of the Treasury, Deputy Secretary, and eventually Secretary of the Treasury in the Clinton administration. Prior to his service in the Clinton administration, he was Vice President and Chief Economist for the World Bank, and a Professor of Economics at MIT and Harvard.
STEPHEN M. WALT is Academic Dean at the John F. Kennedy School of Government at Harvard University, where he holds the Robert and Renee Belfer Professorship in International Affairs. He has been a Resident Associate of the Carnegie Endowment for Peace, a Guest Scholar at the Brookings Institution, a consultant for the Institute of Defense Analyses, the Center for Naval Analyses, and the National Defense University.
TASK FORCE OBSERVERS
LEE FEINSTEIN is Deputy Director of Studies and Senior Fellow at the Council on Foreign Relations. He was the Principle Deputy Director of the Policy Planning Staff at the U.S. State Department during the second Clinton administration. He co-directed the task force on Enhancing U.S. Leadership at the United Nations (2002) sponsored by CFR and Freedom House.
BENN STEIL is the Andre Meyer Senior Fellow and Director of International Economics at the Council on Foreign Relations. He is also the Editor of International Finance (Blackwell Publishers), a member of the European Shadow Financial Regulatory Committee and the Advisory Board of the European Capital Markets Institute. Until November 1998, he was Director of the International Economics Programme at the Royal Institute of International Affairs in London.
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November 04, 2003
http://www.jbholston.com/mtype/week_2003_11_02.html |
Khodorkovsky Both Business Week and the NY Times commented in recent days on L'Affaire Khodor. Business Week's main article is sympathetic to Putin, although their editorial (interestingly) is not. BW: Khodorkovsky is being punished because he broke the pact that Putin struck with the oligarchs in 2000 soon after he came to power: If the oligarchs steered clear of politics, Putin would allow them to keep the lucrative assets they amassed during the chaotic rule of Boris Yeltsin. ...But before the prosecution of Yukos even started, the government had trouble getting its laws through parliament -- particularly laws that would have raised taxes for oil companies. "It was Khodorkovsky blocking tax proposals in the Duma relating to the oil business that was the final straw," says Christopher Granville, chief strategist at United Financial Group, a Russian investment bank. That, in turn, reflects a more fundamental problem: the excessive wealth and influence of the oligarchs. "This isn't some paranoid KGB fantasy," he says. The Times piece points out the tight connections Khodorkovsky developed among the power elite in Washington, particular Republicans in power and in business (but not only Republicans): Mr. Khodorkovsky's steady efforts to win access to other influential Americans have paid off. Last July, he met with Energy Secretary Spencer Abraham to discuss America's oil policy. Former President George H. W. Bush traveled to Russia in September and spoke at a dinner attended by Mr. Khodorkovsky. ...The Carlyle Group, an investment bank that retained the elder Mr. Bush as an adviser until a few weeks ago, has a close business relationship with Mr. Khodorkovsky. Although Mr. Bush was in Russia as a Carlyle representative, the bank said, his visit had nothing to do with oil deals and he did not meet privately with Mr. Khodorkovsky. Last summer, too, Mr. Khodorkovsky traveled to a meeting of business leaders in Sun Valley, Idaho, as a guest of a former senator, Bill Bradley, a New Jersey Democrat. Mr. Bradley also advises the Open Russia Foundation, a Russian philanthropy based in Britain that is bankrolled by Mr. Khodorkovsky. Henry Kissinger, secretary of state in the Nixon administration, is on the foundation's board, a position he said he accepted at the invitation of Lord Rothschild, another board member. Mr. Kissinger said he had only met Mr. Khodorkovsky twice, briefly and in a group. Combined, the two stories reaffirm that this is a late-stage move in a game orchestrated years ago. Putin agreed to a Faustian bargain with the oligarchs, whereby they could keep the billions they stole during the broken privatization process as long as they steered clear of politics. That bargain was, I believe, designed not so much to protect Putin as to protect Russia. Putin knew that once the Oligarchs could also buy the government, Russia would devolve into an entirely undemocratic and despotic third world country. | |
