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Turkish Weekly | 11Feb2012 | Anders Aslund

The Snow Revolution’s Orange Shadow by Anders Åslund

MOSCOW -- Vladimir Putin’s regime is warning Russians that their budding “Snow Revolution” will be as big a mistake as Ukraine’s Orange Revolution of 2004. But, while the similarities between these two popular movements are palpable, their differences are essential, so comparing them might help the Russian opposition to avoid some mistakes.

Like the Snow Revolution, the Orange Revolution was a broad middle-class reaction against corruption and the absence of the rule of law. In contrast to the Arab Spring, the Orange Revolution was entirely peaceful, as the Snow Revolution has been, and neither was triggered by economic or social crisis. In 2004, the Ukrainian economy grew faster than ever, by 12%, and Russia’s GDP increased last year by a respectable 4.3%.

But there are also significant differences. Ukraine has a big ethnic divide between Russian speakers and Ukrainian speakers. The Ukrainian opposition was well entrenched in the parliament and media, rendering it part of the old system.

The outstanding achievement of the Orange Revolution was political and civil freedom. But its ultimate flaw was a nearly complete political stalemate, which led to even worse corruption and authoritarianism. Having been in Ukraine during and after the Orange Revolution, and having just spent time in Moscow, some pitfalls facing the Snow Revolution seem evident to me.

[W.Z. Why was Anders Aslund in Ukraine during the Orange Revolution? What was he doing there?]

The Orange Revolution was peaceful because a sufficiently large number of people took to the streets. The Russian opposition has already absorbed that insight, minimizing the risk of violence.

But it might have been a mistake in 2004 to occupy the center of Kyiv and pursue persistent demonstrations that forced a quick resolution of the crisis, because it prompted a flawed compromise with the old regime. The sudden relief caused dangerous euphoria and hubris among the Orange revolutionaries.

For this reason, the Russian opposition is probably being sensible by holding large demonstrations from time to time, showing the regime its strength but not forcing an instant solution. Indeed, the sudden resolution of the Orange Revolution led to the adoption of a dysfunctional constitution with a confusing and unwieldy division of powers. It looked like a trap set by the old regime’s operators.

There is no reason for anybody to repeat such a mistake. A constitution requires serious consideration. The old regime’s adherents can more easily trick the newcomers into dangerous compromises if the process is exceedingly fast.

[W.Z. Drafting or amending a constitution does, indeed, require serious consideration. Since a constitution outlines the rules and procedures by which the populace consents to be governed, a constitution must never be drafted or amended by politicians or bureaucrats in the governmental apparatus. A Constitutional Assembly composed of completely apolitical delegates selected or elected from all regions of the country must first be established. Each "Delegate" would be responsible for setting up a Constitutional Committee (again completely apolitical) in his/her region to propose and discuss various constitutional proposals with the general population. The Delegate (or a member of his/her Constitutional Committee) would report to the Constituent Assembly periodically (perhaps monthly), which would compile and distribute a consensus of the constitutional proposals for further consideration by the Constitutional Committees. After about a year of discussion and consensus building the Constitutional Assembly would draft its final proposal to be voted on in a referendum by the general populace. This referendum would be binding upon the existing Verkhovna Rada, the President and the governmental bureaucracy.]

The other major shortcoming was that the leader of the Orange Revolution, Viktor Yushchenko, turned out to be a feckless and irresponsible president. Initially, he traveled the world for months to celebrate his victory, ignoring the chaos back home. Then he began vetoing virtually all decisions by the government, causing a political stalemate, and, toward the end of his presidency, tacitly joined with the old guard (now back in power) against then-Prime Minister Yuliya Tymoshenko (whose party, to its credit, had voted against the constitution).

But, while Yushchenko serves as a warning to Russians not to elect an accidental president with excessive powers, an underlying cause of the Orange government’s breakdown was that most of its ministers (Yushchenko appointees) were defectors from the old regime. Most had never opposed its corruption, and the prominent businessmen who funded the Orange Revolution expected to profit handsomely from their political investments. As a result, there was no cleansing of the old cadres, and corruption declined only temporarily.

By contrast, Georgia’s “Rose Revolution” of 2003 carried out a wholesale change of senior officials, bringing in young and well-educated leaders with Western educations. Russia needs to follow the example of Georgia (and Estonia) by promoting a new generation of young, skilled, and untainted professionals.

The Orange Revolution’s greatest policy mistake was its early focus on “re-privatization” -- the renationalization and resale of enterprises that had been privatized at exceedingly low prices. The Orange government spent its first half-year discussing which enterprises should be reprivatized and how. Meanwhile production slowed every month, as uncertainty about property rights scared businessmen. In the end, only one big metallurgical enterprise, Krivoryzhstal, was reprivatized; by then, the Orange coalition had already fallen apart.

[W.Z.  During the early 1990s, Anders Aslund was very closely associated with the "shock therapy" proponents from Harvard University, who criminally colluded with the "Chubais Clan" to impose "privatization" on the Russian economy. This "crime against humanity", which led to the impoverishment of the Russian population and to the rise of the oligarchs, organized crime and corruption, is now acknowledged to have been an ill-considered disaster. The backlash led to the "appointment" of KGB-colonel Vladimir Putin to the Presidency in early 2000 and the establishment of the "Mafia State". Twenty years later, Mr. Aslund is once again peddling his poisonous ideas.

Contrary to Mr. Aslund's view, the "re-privatization" of Krivoryzhstal and its public auction on 24Oct2005 to Mittal Steel for $4.8 billion was the highlight of Yulia Tymoshenko's career and was the proper, moral action to take. Her proposal to "re-privatize" some 3000 enterprises was supported by Ukraine's populace, but  was, of course, highly unpopular with Mr. Aslund's "scared business friends" both inside and outside Ukraine, as well as in the West. If Ms. Tymoshenko's "re-privatization" scheme had been allowed to proceed, these 3000 enterprises and their owners would have become "legitimized" and would be investing their profits in a growing legitimate corruption-free economy; whereas now they are legitimately considered to be criminals -- fleecing the Ukrainian people and laundering their ill-gotten gains in foreign tax-shelters.

On the other hand, it is now recognized that the "re-privatization" of Krivoryzhstal (as well as her continuous fight with Dmytro Firtash) was a political mistake for Yulia Tymoshenko. Not only did it create an undying enmity of the two Viktors (Yanukovych and Yushchenko, as outlined in Alexander Motyl's blog "Who's Afraid of Yulia Tymoshenko"), it created an undying enmity of Viktor Pinchuk and Renat Akhmetov from whom she wrested Krivoryzhstal and of the 3000 enterprise owners, who prefer to continue their criminal ways rather than become "legitimatized". As far as I can ascertain, she has absolutely no supporters amongst Mr. Aslund's "friends".]

For Russian politicians, re-privatization is a great political temptation. Indeed, all three opposition parties in the Duma (parliament) call for far-reaching renationalization, though it would be politically and economically devastating. Instead, a new democratic government could call for higher property taxation and prosecution of corrupt officials. In comparison with Ukraine, Russia has quite decent legislation, and its economic courts enjoy some respect.

The ultimate reason to expect a more successful democratic breakthrough in Russia today than in Ukraine in 2004 is that Russia is so much richer and more developed than Ukraine, with per capita GDP (at current exchange rates) four times higher. As modernization theorists like Seymour Martin Lipset and Samuel Huntington would have noted, Russia is simply too wealthy, well-educated, and open to be so authoritarian. According to the NGO Freedom House, only seven small oil-exporting states and Singapore are wealthier than Russia and still authoritarian.

Russia should draw four major lessons from the Orange Revolution as its own Snow Revolution proceeds. First, the new democrats must avoid being tricked into a dysfunctional compromise with the old regime. Second, leaders are critical to a sustainable democratic breakthrough, and this choice will be as vital as it is difficult. Third, Russia needs a cleansing of corrupt officials, and it should draw from its wealth of young and well-trained talent. Finally, re-privatization is a poison pill that must be avoided.

The Orange Revolution was no mistake, but a just cause is no guarantee of victory. Russia’s Snow revolutionaries must make sure that the good fight is also a smart fight.

Anders Åslund, a senior fellow of the Peterson Institute for International Economics, has previously advised Russian and Ukrainian governments.

Saturday, 11 February 2012

[W.Z. A Google Internet search for "larry summers USAID" refers to a book titled "The Shadow Elite" by Janine R. Wedel (Basic Books 2009) wherein Chapter 5: The Privatizers (pp176-233) the author details the criminality of the USAID-funded Chubais-Harvard Privatization Project in the early 1990s. On the American side promoting "shock therapy", the key players were Larry Summers, Jonathan Hay, Andrei Shleifer, Jeffrey D. Sachs, Nancy Zimmerman, Elizabeth Hebert and Anders Aslund. On the Russian side, the key players advising Boris Yeltsin and implementing the "shock therapy" were Yegor Gaidar and later supplanted by Anatoly Chubais (of the St. Petersburg Clan). Needless to say, the "privatization scheme" was an absolute disastrous "crime against humanity" for the Russian people leading to the rise of the Oligarchs, organized crime and corruption. In 1997 the U.S. Department of Justice launched criminal charges against the Harvard Clan, which led to a 2005  negotiated settlement requiring "the university to pay fines to the U.S. government of $26.5 million, Shleifer to pay $2 million, and Hay between $1 and $2 million".]


Date: Thu, 20 Aug 1998
From: Stefan Lemieszewski <stefanl@direct.ca>
Subject: Comment on "Why Call It Reform? (Stephen Cohen)

Stephen Cohen legitimately raises the question of "Why call it reform?"
(The Nation; 1Sep98; JRL #2316) but does not provide an answer as to why
it is called "reform." Seems to me "reform" is a very effective
propaganda term--both for the West and for Eastern Europe.

For the West, reform connotes change and when used with "free markets,"
"democracy" and "capitalism" implies that the change in Eastern Europe
is for the better, away from the evil enemy of Communism of the Cold War
to something more familiar, less threatening, and preferable as a common
goal. The change is anticipated to become something like us Westerners.

This deflects criticism and makes the approval for various foreign aid
program funding much easier. "Reform" labelled policies can be much more
easily portrayed in the media and government circles as irrefutable
common sense. There is a ring of congruence to common Western values.

To the Eastern Europeans, initially "reform" connoted a change to become
like the West--more opportunity, more prosperity, more freedom and thus
very desirable. This hope made their citizens patient and willing to go
along with the changes initially. However, after the disastrous results
of a serious decline in the standard of living during the past several
years, citizens of the former Soviet Union have lost much hope and are
beginning to blame "reforms" and their associated reformers for the
demise as their patience runs out. The latest devaluation and default in
Russia only adds fuel to their fires of dissatisfaction.

Cohen speaks of "demodernization" and observes that the Russian
economists are now trying to distance themselves from the "the
'neoliberal' monetarist orthodoxies of the State and Treasury
departments, the IMF, World Bank and legions of Western advisers, which
have done so much to abet Russia’s calamity."

The failure of these IMF/World Bank/State/Treasury programs should not
come as a surprise. Economists such as Michel Chossudovsky (University
of Ottawa) go further and suggest that they are by design. In his book,
"The Globalization of Poverty: Impacts of IMF and World Bank Reforms"
Chossudovsky writes:

"The IMF-Yeltsin reforms constitute an instrument of
"Thirdworldisation"; they are a carbon copy of the structural adjustment
programme imposed on debtor countries in Latin America and sub-Saharan
Africa. Harvard economist Jeffrey Sachs, advisor to the Russian
government, had applied in Russia the same 'macro-economic surgery' as
in Bolivia where he was economic advisor to the MNR government in 1985.
The IMF-World Bank programme adopted in the name of democracy
constitutes a coherent programme of impoverishment of large sectors of
the population. It was designed (in theory) to 'stabilize' the economy,
yet consumer prices in 1992 increased by more than one hundred times
(9,900 per cent) as a direct result of the "anti-inflationary
programme". As in Third World 'stabilisation programmes', the
inflationary process was largely engineered through the 'dollarisation'
of domestic prices and the collapse of the national currency. The 'price
liberalisation programme' did not, however, resolve (as proposed by the
IMF) the distorted structure of relative prices which existed under the
Soviet system."

Chossudovsky forewarns of these programmes and goes on to describe the
collapse of civil society in Russia.

Further information on the Shadow Elite and Janine Wedel may be obtained in the links below (book excerpts, youtube video on the "flexians", website, interviewsand articles):