Sarah Paine: evaluation

Transcript context

…Before we get to the period of Russian collapse, let’s go back to the end of the Soviet period. Gorbachev starts instituting these economic reforms along with glasnost and perestroika. But what I find mysterious is that those economic reforms not only fail to prevent the stagnation that the Soviet Union is experiencing, but they in fact make things worse. You would think that reform, even if it’s handled badly, would have some sort of positive impact. If you do it badly, then it’ll have a smaller positive impact. But here it just causes this huge hyperinflation, causes all these big problems. So why did reform have this backwards impact? There’s so much that needs reforming there. But part of it, I think, is because he wanted to do political reforms. That’s what he understands. As a human being, that would be the thing that he’s very familiar with. Think about it. He’s an A-list member of the Communist Party to be the guy when they do generational change, he’s the one. So he’s obviously very astute at that level, but the problem is economics. He’s giving away political power before he’s fixed the economic problems. China’s conclusion is there is no way you’re going to touch political power. They’re going to hang onto that and then deal with as much of the economics as they’re going to deal with. That’s part of it. But part of it is there’s no tradition for all of these things. Then you go, “Well, how did Russia get this way?” It’s a very difficult address. Prior to the Industrial Revolution, it’s flat, neighbors all invade, and so you needed a big army in order to defeat them. A big army is going to want a war economy. Historically, you’re going to want to support a big land force. I mean this is my take. Others who are actually experts on these various periods of Russian history can come up with something else. But I think you’re funneling, you’re channeling your economics into that. Whereas you’re looking at Europe, particularly Britain, and it’s merchants. They have a big aristocracy who are not going to dirty themselves with buying and selling stuff, but there are a tremendous number of very rich merchants in Britain that are going to influence government laws and things, which is not going to take place in Russia. Then what’s nice about the Navy for Britain is you send them away. They’re not going to run a coup in the capital because they’re off on the ship somewhere. And there aren’t that many of them compared to a standing army. So I suspect, I can’t prove this, that this leads to different outcomes or contributes to them. One theory I heard that is complementary to your theory is that Gorbachev is instituting reforms because he thinks there should be decentralization and democratization, but he doesn’t fundamentally believe in the market system. So he’s delegating power to these quasi-firms. At the same time, he thinks the price system is immoral, private property is immoral. So they can’t intermediate between themselves using real prices. So then how do these firms intermediate? Well, there’s corruption. If you can’t use actual prices and property to figure out who gets what allocation of scarce resources, you just backroom deal, which makes the problem worse.…

Stored transcript either side of the excerpt. The highlighted words are the published quote; the surrounding text is unedited source, never generated.