In January 1989, I was contacted by the Polish Government, then a reform-minded communist government, with a request that I come to Poland to advise on the management of its external debt. I declined to come on the grounds that the Solidarity Movement, led by Lech Walesa, was still outlawed. I explained that I would be happy to come at a future date, when Solidarity was legalized, and when I could act perhaps as an advisor both to the Government and to the Solidarity movement. By quirk of fate, I was called back several weeks later, to be told that the Solidarity Movement would indeed be legalized in early April 1989. I therefore planned a trip to Warsaw accordingly and arrived on the day of the signing of the so-called
“Roundtable Agreement” that legalized Solidarity.

In Poland during 1989-91, I had worked closely with the team of Leszek Balcerowicz, 30 and found most of my suggestions were highly consistent with Balcerowicz’s strategy and were usually adopted in one form or another. In Russia during 1991-93 this close and successful advisory relationship was not the case. The reformers in Russia could make little political or economic headway. Politics was highly conflictive. As a result, even when I had the ear of a reform-minded official, few of my suggestions were ever adopted.

There were several reasons why Russia’s reform trajectory was so much harder than Poland’s. In Russia, the political scene was vastly more complicated than in Poland, the existing bureaucracy much more deeply entrenched and hostile to reform, the cabinet politics vastly more byzantine, and understanding of market economics among the political elites an order of magnitude lower. Poland had a national consensus based on the “Return to Europe.” Russia, by contrast, experienced a deep and continuing struggle for power, with
no ideological or practical consensus on almost any matter, even the basic idea of transformation to a market economy. The three main areas where my advice went unheeded were the following: (1) the need for large-scale financial assistance32 for Russia, which I deemed (and still deem) to have been essential to molding a political consensus around reforms, and to bolstering the financial situation enough to achieve a modicum of success in the fight against hyperinflation; (2) the need for strong monetary and fiscal policy to achieve a rapid end to inflation33; and (3) the urgency of establishing a social safety net34 , especially inhealth care and pensions, to ensure an adequate social and political base for societal transformation and democratization.

While I continued as an advisor to the Russian Government during 1992 and 1993, it is fair to say little of my advice was taken during that two-year period. This was nothing personal. After the first days of 1992, following the initial freeing of prices on January 2, the reform process was mostly paralyzed by a bitter struggle for power between the Duma and the President. Gaidar made little headway. Ruslan Khasbalatov, the unstable head of the Duma in early 1992, called for the Government to step down just a week after the start of reforms. To the extent that outsiders had any influence at all, that influence was wielded by the IMF. I would meet with Gaidar every several weeks, for an hour or two, but mostly this was to commiserate with Gaidar’s waning influence, or to reiterate the growing list of urgent but stalled reforms, or to review the state of negotiations over Western assistance, or to try to plan stratagems for overcoming resistance from the Duma and the Russian Central Bank. Almost all such attempts to break the deadlock failed. By April, Gaidar had lost control over the economic team (symbolized by Yeltsin’s abrupt firing of the Energy Minister, Vladimir Lopukhin), and by June he had lost control of the Russian Central Bank, with the return to power of the disastrous Viktor Geraschenko, whose inflationary policies killed the chances for early stabilization.. By December, Gaidar lost his job entirely, replaced as Prime Minister by Viktor Chernomyrdin.