Under Western Eyes

...Unfortunately, Aslund doesn't analyze convincingly why America didn't step forward...

...What's worse, this rotten state of gradualism robbed real reforms of credibility: All the public could see was that "reform" made life seem as bad as before...

...What's worse, partial reform—or "gradualism" as Aslund contemptuously terms it—created a breeding ground for corruption...

...The fallen rulers were, after all, fellow socialists...

...Melana Zyla Vickers worked on Ukraine's successful 1991 referendum for independence from the Soviet Union...

...But Russia faltered, and in its wake the smaller ex-Soviet republics rejected reforms as well...

...slund's prescription for future improvements is similarly spotty...

...According to Aslund, they didn't pass on the cheaper prices to consumers but kept the subsidies for themselves...

...I doubt I'm the only Eastern Europe-watcher who wouldn't mind seeing the region's laggards jolted hard—by a Philippine-style popular uprising, perhaps, or a national scandal profound enough to anger citizens and topple one of these entrenched proto-Communist regimes...

...Where other writers have described the problems of the 1990s, the Carnegie Endowment scholar Åslund does the hard work of digging into the Soviet period to explain the problems' origins...

...Non-connected, honest reformers could not similarly buy friends and supporters in high places and eventually fell into the "electoral trap of underreform...

...Back in 1988, the Soviets passed a banking law that allowed the establishment of republic-level central banks...

...He rather memorably trounces former World Bank chief economist Joseph Stiglitz for lauding Gorbachev-era gradualism and for seeking to protect "organizational capital"—the institutions and officials who ran the old regimes...

...Economic reforms that failed to include all these elements were sure to fizzle...

...These republican banks offered the USSR's new commercial bankers opportunities to borrow at low interest rates and to hold only minimal sums of money as reserves...

...The Balts were ultimately helped by their European neighbors...

...slund also criticizes the sort of "national-mysticism" defense that one hears so often in the Slavic world—the self-flagellating argument that a given country's citizens are genetically unable to mount a successful, democratic-capitalist system...

...The post-Communist countries that failed to reform their economies quickly sank into paralysis so deep it still mires them...

...In aggressive reforming countries, corrupt "rent seekers" were denied the time and opportunity to entrench themselves...

...economists who can't piece together this picture of "bureaucratic counterrevolution...

...Aslund also calls for the region's countries to be allowed into the World Trade Organization, in the hopes that free trade will improve their fate...

...But in slow-to-reform states, corrupt officials established monopolies...

...When enterprises failed to pay money they owed the government, they struck deals to "pay" it back through bartered services such as road construction...

...Motivated to keep their niches, these rent seekers paid off the politicians along their path to continued wealth...

...How is it that citizens in Polish Galicia are rip-roaring capitalists, while Ukraine's Gali-cians are poor, he asks...

...Abig bang, most memorably detonated in Poland under Leszek Bal-cerowicz, requires national leaders to cut budget deficits in order to halt hyperinflation, tighten money supply through an independent, inflation-wary central bank, deregulate prices and end price subsidies, break up monopolies, open up to foreign imports and exports and make the national currency convertible, allow the rise of new private businesses, and sell off state-owned businesses...

...At about the same time, officials in the commodities bureaucracies were arguing that Soviet production would collapse if Soviet oil, natural gas, metals, chemicals, and other goods had to compete against cheaper goods from the outside world...

...BY MELANA ZYLA VICKERS Two years ago in an interview, I asked Mikhail Khodor-kovsky, chairman of Yukos Oil and one of Russia's leading oligarchs, whether it was possible to have risen to his financial heights without having been a well-connected Communist before the fall of the Soviet Union...

...The Soviet Union under Gorbachev is a foremost example of gradualist reform...

...The officials got the subsidies, often in the form of credits with which to buy foreign commodities...

...He does note that a new Marshall Plan for Eastern Europe was never a real option: The original Marshall Plan had "cost the United States 2 per cent of GDP a year, which would have corresponded to $125 billion in 1992...

...Of course not," he answered...

...Similar corruption, though not as deeply entrenched, existed in Central Europe...

...Nobody was prepared to put up that kind of money...

...Similarly, agricultural-sector officials argued that without subsidies to buy foreign food imports, foreign prices would gouge local people and they would starve...

...An economic "big bang" is what separates the region's winners from its losers...

...But mounting such change is up to the locals...

...She is a columnist for TechCentralStation.com...

...While democrats aspired to disrupt the dictatorship, Stiglitz hoped for its continuity...

...The result was an instant class of commercial bankers—running 1,360 banks in Russia alone—who demanded that the state print for them vast sums of rubles that they in turn passed on to well-connected borrowers...

...Without them, no one on the outside can fix what ails Eastern Europe...

...Moreover, some conservatives saw little gain in helping the former Soviets to their feet, while Europeans on the political left "objected to the right-wing project of building capitalism...

...That organizational capital consisted of the Communist party, the secret police, and the Red Army, which are rarely praised in democratic society...

...But he doesn't explain how the benefits of trade are to flow beyond the rent-seekers crowded at the troughs of the region's semi-reformed economies...

...They'd value the public contracts at a high price, then carry out the work as cheaply as possible, shortchanging the project and eventually bankrupting the government...

...Other enterprise managers made arguments in defense of workers, telling their central governments that without subsidies, layoffs would ensue...

...When the Baltic countries and Russia made early efforts to reform, the United States did not back them substantially...

...slund doesn't blame all the region's woes on internal factors...

...Until Anders Aslund's Building Capitalism, that is...

...Pakistan and India, whose average citizens have toiled for decades in the twilight of semi-reform, suggests the unlikeliness of the idea...

...He proposes a somewhat wishful theory that the corruptly enriched officials eventually compete against each other for remaining rents, with their rentseeking economies thereby degenerating into liberal market economies...

...Since then, few insights into the former Soviet Union's current state of affairs— not the belabored chronicles of Russia's loans-for-shares debacle, not the rationalizations about Ukrainian ex-Communists being better leaders than current Communists, not the bromides that "civil society" will in time cure all the region's ills—have matched the creepy oligarch's refreshingly candid remark...

...These officials opposed unemployment benefits that went directly to the workers, instead sucking funds into the enterprises they managed and pocketing them...

...And so, while export regulations blocked whole firms from selling goods on the world market, corrupt officials were able to buy large quantities of domestic goods privately and sell them on world markets at much higher prices...

...One side benefited from the big bang, the other fiz-zled—simple as that...

...slund doesn't hide his disdain for left-leaning U.S...