May 29, 2002

Strobe Talbott, _The Russia Hand_

Strobe Talbott (2002), The Russia Hand: A Memoir of Presidential Diplomacy (New York: Random House: 0375507140).

Strobe Talbott, Deputy Secretary of State in the Clinton administration and longtime Friend of Bill, has written his memoirs. They are extremely well-written, fascinating, informative, and a marvelous addition to the historical record. They give us a ringside seat at U.S.-Russian relations in the 1990s.

There were two great problems in Russian economic reform. The first was that nobody knew what to do: nobody had ever undertaken a transition from socialism to capitalism before. The second was that the Russian political nation did not know what it wanted to do. Outside of the former Soviet Union it was very clear what economies of transition wanted to do: they wanted to become as much like western Europe as possible as fast as possible. Inside the former Soviet Union it was not so clear.

A democratic, non-Communist Russia--one that is not ruled by those who regard themselves as Marx's viceroys on earth--has no interests opposed to and many interests aligned with the United States. On the political side, they share a common interest in making sure that Germany is no longer the "exceptional" nation that it was in the first half of the twentieth century. They share a common interest in general peace in Europe. They share a common interest that the emerging twenty-first century Asian superpowers--China and India--do not turn nationalist, expansionist, and totalitarian: a China with national socialist characteristics or a fascist India with anti-Islamism replacing anti-Semitism could be very bad for both. Most important, they both share a common interest in the political success of Russia's reforms: that the 1990s and 2000s not be looked at in retrospect as the period of "Weimar Russia."

Russia and the United States also have a common economic interest in a wealthy and prosperous Russia. From the U.S. standpoint, a wealthy and prosperous Russia is a way of not finding out whether there truly is an elective affinity in late industrializers between large-scale economic distress and expansionist fascist nationalism. From the U.S. standpoint, a wealthy and prosperous Russia is a much better trading partner than a poor and depressed one. And from the Russian standpoint, achieving rapid economic growth must rank second in its list of national priorities, behind only national defense (Russia has, after all, been conquered or come within an inch of being conquered five times--by Mongols, Swedes, French, and Germans (twice) in the last millennium).

The coincidence of strategic interests has thus left me puzzled that American-Russian relations on security issues were not even better in the 1990s than they were. Missile defense, Chechnya, Bosnia, NATO, and other disputes were about tools to be used to achieve what ought to have been seen as common goals, not about the goals themselves. Strobe Talbott's memoir does not make this much clearer to me. Talbott writes (p. 142) about often-learned and often-forgotten lessons: "The bottom line was clear: once again, we had taken too much for granted and left too much to chance. We should have spent much more time making sure that the Russians knew exactly what the communique would say, what it would mean, and how we should handle our differences in public..." But the root causes of the strategic disputes remain elusive. I got a sense that a large component of it was political shadowboxing--both the American and the Russian governments more interested in playing parts in front of their own domestic political audiences, and willing to do so because the points of friction were not truly serious.

On the other side, the coincidence of economic interests has not left me puzzled that more was not achieved in the Russian economy in the 1990s. There were two great problems in Russian economic reform. The first was that nobody knew what to do: nobody had ever undertaken a transition from socialism to capitalism before. The second was that the Russian political nation did not know what it wanted to do. Outside of the former Soviet Union it was very clear what economies of transition wanted to do: they wanted to become as much like western Europe as possible as fast as possible. Inside the former Soviet Union it was not so clear. Supporters of aggressive market reform like Yegor Gaidar coexisted with those like Victor Chernomyrdin who wanted to preserve as much of the bureaucratic-industrial structure of the past as possible, and with other factions that sought a return to the Communist past or a step forward to some other form of disciplined and non-capitalist society. Thus believers in reform always had at most a tenuous and temporary hold on power, and were usually outweighed in the Duma and in the Kremlin by the other factions--apparatchiks, believers in patronage, believers in stability, believers in authority, and so forth.

In such a situation, the American government can do only two things. First, it can come up with enough money in the form of aid to make the dislocations and privations of transition smaller. Second, it can speak with one voice to assert that the currents pushing for reform are indeed headed in the right direction, and that short-run political difficulties arising from faster economic reforms are likely in short order to be outweighed by longer-run political advantages as successful economic policies begin to have their effect. From my perspective, the most interesting thing about Strobe Talbott's book is how weakly the U.S. government's attempts to undertake these two things were.

One thread running throughout the book is the disconnect between President Clinton's commands that those aiding Russia "think big" and the tiny drips of aid money that in fact appeared. Talbot writes (p. 61) of how Clinton and Gore commanded Congress to "'think big and act big' on Russia, and how Clinton smiled when Newt Gringrich 'gave a stem-winding speech on the overriding importance of helping Russia as "one of the great defining moments of our time,"' whispering "'Ol' Newt's trying to... out-Russia me. That's fine, as long as I can keep him with me.'" Talbot writes (p. 58) of how "only when we came back to the President on March 23 [1993] with a[n aid] package worth $1.6 billion was he satisfied." After the end of the Clinton administration, Talbott and Clinton would talk in Clinton's house about how Clinton "...wished we'd done things differently.... [H]e thought we should have done more--much more--in our effort to underwrite the transition to a market economy. He regretted that we hadn't been able to mobilize international support early in the administration for the kind of program that Larry Summers and David Lipton tried to develop... to alleviate the pain and dislocation that came with privatization." But the money from the U.S. wasn't there. And without large-scale U.S. money, the pockets of the Europeans and the IMF are shallow indeed. $1.6 billion is, after all, only $10 per Russian.

Why was the U.S. government thinking of $1.6 billion totals for aid to Russia, rather than $50 billion? If the U.S. was willing to spend $8 trillion over a generation to defend itself against Communist Russia, shouldn't it be willing to spend more than $1.6 billion to try to keep Russia non-Communist? One would think so. But the Reagan administration's deficits in the 1980s had eliminated the ability of the U.S. government to undertake large-scale initiatives. By 1993 the fear was that the exploding budget deficit was on the brink of causing large-scale Latin American-style economic chaos. (Recall that Argentina's total debt at the moment of its late-2001 economic collapse was no larger a share of GDP than and growing no faster than the U.S.'s total debt in 1993.)

Talbott does, I think, owe his readers an obligation to connect the dots. If there truly was a disastrous waste of opportunity (and I think it probable that there was) in the failure of the U.S. to aid Yeltsin in his first term with more than an eyedropper, it is important to understand that the eyedropper was used not because Clinton and his staff did not understand what was at stake but because Reagan had taken away the hose.

A second thread running through the book is the failure of the White House to consistently back what weak reform factions were present within Yeltsin's government. On one side of the internal debate within the Clinton administration were Larry Summers and his right-hand David Lipton, believing that "...Russia's ability to make proper use of the G-7 money depended" on the continuing power of "pro-Western economic reformers like Yegor Gaidar... and Boris Fyodorov" and the eclipse of "those who believed in maintaining employment through subsidies to inefficient enterprises and churning out rubles, propelling Russia back toward the brink of hyperinflation." Summers's reaction to Yeltsin's firing of Gaidar and Fyodorov was, as Talbott recounts it (p. 117), "high dudgeon. Yeltsin, [Summers] said, was inflicting a major blow on Russia's chances... Larry asked me to get word to Clinton that he should intercede with Yeltsin immediately to keep Gaidar and Fyodorov." But Clinton's reaction was not what Summers had hoped. As Talbott tells the story: "'I'll do it', said Clinton, 'but it's a tough one. Their political requirements are at cross-purposes with good economics.' He went off to talk to Yeltsin, while I went looking for Mamedov.... His advice was... 'Don't get excited; don't overdramatize.... You want us to be a democracy... so don't be surprised when a president and a prime minister have to sacrifice a minister of two who are tarred with the brush of what are seen as failed policies. This is real politics. At least we don't shoot people...'"

Or consider the U.S. government's reaction to the infamous 1996 loans-for-shares scheme. Summers and Lipton were horrified. Talbott writes (p. 208) of their "...deep qualms... sure to make instant billionaires... cast discredit on the very idea of market democracy... bad economics, bad civics, and bad politics." The Yeltsin administration responded that the favor that loans-for shares did "the oligarchs was nowhere near as bad as the communist victory it helpd them avert." In retrospect Talbott appears to regret the White House's failure to back Summers and Lipton: "The Russians... calculation... was debatable, and we, as the reformers' constant backers and occasional advisors, should have debated it more with them. We would have done so if we'd had more time, more foresight, and more influence..." Or consider Al Gore's belief that "...Larry's arguments were right on the merits... but... needed to be balanced against the imperatives of Russian democracy, since they, too, exerted 'a force as powerful as gravity or thermodynamics.' Our policy, said Gore, ought to be a 'synthesis between the iron laws of economics and the hard realities of Russian politics'."

What Clinton, Gore, and Yeltsin seem not to have gotten was that doing the "politically smart" thing this year puts you behind the 8-ball when the year after next rolls around. You see, economic policies have consequences. In any but the shortest of runs, there is no trade-off between good politics and good economics. It is only if your economic policies work that you have a chance of being politically smart. The task of a leader is to figure out what good economics is, and how to reframe the situation so that good economics becomes good politics--not to figure out how much economic rationality to sacrifice to short-term political advantage.

Posted by DeLong at May 29, 2002 02:21 PM | TrackBack

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