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Iraq: Yegor Gaidar Brings His Bag of Tricks to Baghdad

by Matt TaibbiNew York Press
September 18th, 2003

I interrupt my campaign diaries to bring the people of New York a startling Holy-Shit-O-Gram from Moscow. Early last week it was announced that the U.S., in the person of L. Paul Bremer III, had invited one Yegor Gaidar to Baghdad to assist in the development of Iraqs postwar, "transition" economy.

Gaidar, former Prime Minister under Boris Yeltsin, is not the most despised man in Russia. That title belongs to the man who succeeded him as the chief architect of the Russian privatization effort, Anatoly Chubais. There is no way to talk about the meaning of this decision to invite Gaidar to Iraq without mentioning Chubais, because in inviting Gaidar, what the U.S. almost certainly was trying to say to the world was: At least we didnt invite Chubais.

This was, in fact, how most Russia-watchers interpreted the news. Harvards Marshall Goldman, one of the big heavies in the Russia-watching business, said as much to the Moscow Times in response to the Gaidar announcement: "If they had invited Chubais, that really would have set off a firestorm. That would have really been too much."

Chubais, a William Weld lookalike and towering genius of sleaze, was, with Gaidar, part of a group of beady-eyed intellectuals known in Russia as the "St. Petersburg Mafia." They were revolutionaries whose style of public address was purely Leninist: relentless, zealous, arrogant and heavily reliant on maximalist expressions like "absolutely and completely eliminate", "wipe out", "monster and vile scoundrel." They appealed to academics and intellectuals for the same reasons that Marxism/Leninism once did: Their political vision consisted of using obscure, nerdy theorems to ruthlessly dictate the fate of millions.

The only difference was that their revolution was an ironic variation of Bolshevism. They wanted to smash the state and create a neoliberal laissez-faire paradise. Lenin talked about workers and collectives: The St. Petersburg Mafia talked about markets, prices, goods.

Gaidar and Chubais are both affiliated with Harvard. Their ascension to power in the early 1990swith the enthusiastic backing of the U.S.willed into being an expression that now comprises the three most-feared words in the Russian language: Harvard-trained economist. Thats because the economy they created was not capitalism, but a cruel parody of it. Lenin preached communism but created a dictatorship: This crew preached laissez-faire economics but created a corporate oligarchy in which the state replaced the market. Their legacy was the wholesale theft of Russias riches from the population, and their delivery into mafia and foreign control.

The theft was a surprisingly quick and brutal process. If Iraq is in for the same treatment, here are some of the things Iraqis have to look forward to.

First, stealing money from peoples pockets. In 1992, Gaidar began implementing a program known as "Shock Therapy" (yet another cruel irony of this business: first Shock and Awe, now Shock Therapy?). Shock Therapy was the brainchild of another Harvard villain, Jeffrey Sachs. In the early phase, this took the form of Gaidars move to free the ruble before the end of state-controlled prices. This resultedas even a child could have predicted it wouldin hyperinflation. By the end of 1992, prices in Russia had increased by a factor of 26. Money from 1991 became worthless overnight. Families that had been stuffing mattresses since the siege of Stalingrad saw their life savings disappear in a few weeks.

The benficiaries? The banks that had been licensed by the state to handle currency exchange operations, which naturally became lucrative as Russians fled to foreign currencies. This small group of bankers, hand-picked by the Gaidar government, would become the first bidders on public properties in the next phase, privatization. After all, who else could bid? Nobody else had any money.

There is not enough space here to detail the many obscene nuances of the privatization effort, but roughly speaking it came down to one thing: The crown jewels of the Russian economy were handed over to a small group of thugs and gangsters at fractions of their actual cost. In some cases the Chubais/Gaidar clan actually lent state money to friends to help them buy properties.

Auctions were often openly rigged. In the notorious "loans-for-shares" tenders in 1995-96, the bidding banks were often put in charge of holding the auctions, allowing them to exclude other bids. In one famous instance, a bank excluded a rival on the grounds that its application to participate was 24 minutes late for the auction. In a cruel wink to observers of the process, another bank subsequently also excluded a rival for being 24 minutes late.

The privatization schemes enacted by Gaidar and Chubais were created in close consultation with American aid officials. Much of the legislation and legal infrastructure for the effort was designed by such pseudo-governmental organizations as the Russian Privatization Center (RPC) and the Harvard Institute for International Development (HIID), the latter organization owning the USAID contract for Russian economic reform. The chief figures here were Chubais and Gaidar on the Russian side and Harvard economists Sachs, Andrei Shleifer and Jonathan Hay on the American side. (Hay and Shleiffer were subsequently investigated by a grand jury for investing in privatized properties through their wives). There was no question that the grossly regressive effects of privatization were enacted at the express will of the U.S. government.

Why? What was the point? The point was to seize control of a countrys valuable propertyin Russia as in Iraq, primarily oil. Then you hand it over to the right six people, so that you can plunder the country and dictate its politics. The U.S. kept the Gaidar/Chubais clan in pocket by lavishing hundreds of millions of dollars in aid money on their private reform organizations; it kept the new Russian tycoons in pocket by making them dependent upon state tribute, administered by their puppets; and it kept Boris Yeltsin in pocket by making him politically reliant upon the financial support of the tycoons it created.

Gaidar last week noted the "similarities" between the post-Soviet economy and Iraq, and the World Bank has noted that the Baathist party "modeled its economy on Eastern European communism," hinting that similar reforms might be needed. Anyone whos lived in those places knows what this means: privatization, mass layoffs, the gutting of healthcare and education and the creation of a super-rich class of ruthless, America-friendly dickheads.

Gaidar today is a ranking member of a right-wing, neo-liberal political party called the SPS, which stands for the Union of Right Forces. SPS types have their own peculiar esthetic, and the ess-pe-es-ovet is a roundly loathed, popularly derided figure in modern Russia. If the early Bolsheviks were alive today, this is what they would look like: pale, skinny, dressed in yellow-tinted glasses and ribbed turtlenecks, humorlessly blowing stolen oil profits on apple martinis in shitty techno clubs.

If some version of this person appears soon in Iraqthink Sprocketts with a bushy mustachethen well know what went down. Well have figured out a way to steal everything in Iraq and leave a bunch of effete neoliberal desk clerks in charge. People today assume that the chief problem we face in Iraq is securing a peace so that we can build a happy, market-based democracy. But freedom and markets mean different things in different places. Just ask the Russian teacher who makes 40 bucks a month, and watches some Harvard-trained asshole techno-dance down Tverskoi Boulevard, on his way to his next revolutionary assignment.





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