Bankrupt advice

American and British academics should take the blame for Russia's crisis, says Michael Haynes

After the fall come the recriminations. With the Russian economy in crisis they are beginning to appear thick and fast in the United States academic community, and not just against the corrupt oligarchy of Russians who have presided over the transition from communism to capitalism.

They are being laid against the western advisers who allowed this oligarchy to flourish. Instead of assisting in the destruction of the social elite that ruled the old order, western advisers facilitated its migration into powerful positions in the "private" economy. While some Russians invested heavily in the privatisation deals that have been described as "the rip-off of the century", so too did the Harvard Management Group, which controls Harvard University's endowment fund. In 1995 the group became a shareholder in the privatised steel mill Novo Lipetsk and in Sidanko Oil, both sold off cheaply after the collapse of communism.

Links between US academics and Russian officials have long been speculated about in Russia, but only now are accusations being made in the west. Research by Janine Wedel, an anthropologist at George Washington University, is damning. Her book, Collision and Collusion: The Strange Case of Western Aid to Eastern Europe 1989-1998, is prefigured by articles across cyberspace as she outlines how "the Harvard boys" cleaned up in Russia.

Wedel also investigates the links between the Harvard Institute for International Development and Russian reformers grouped around Anatoly Chubias - the politician who built a fortune for himself by driving privatisation forward. With advocates in the US government, International Monetary Fund and the World Bank, the Harvard Institute, led by Jeffrey Sachs, built close ties with Russian governments. It received several million dollars for "advice" as well as having control of the disbursement of millions more in aid programmes. Much of this money went to nominally independent organisations that the institute was indirectly engaged in helping to bring into existence. With many of these academics also running private consultancies, the lines become even more blurred.

Research and policy advice contracts flowed around these groups - in some instances with no competitive bidding. Crony capitalism in Russia was paralleled by a crony research and advice system stretching from Washington to Moscow.

What has been going on in Britain? Many a top-rated economics department boasts a group devoted to studying Russia's transition and has grown fatter on research contracts. British academics cannot avoid having the finger pointed for their role in the country's wider catastrophe.

The Russian economy lies in ruins. No one expected that, in the words of the United Nations Economic Commission for Europe, the transition crisis would be "so deep". The gross domestic product in Russia fell 13 per cent in 1991, 14.5 per cent in 1992, 8.7 per cent in 1993, 12.6 per cent in 1994, 4 per cent in 1995 and 6 per cent in 1996. The August crash appears to have sent it plunging again. What would happen if the Russians asked for a refund on all the money paid to British universities for their lamentable advice?

Perhaps the Russians could appeal to the Higher Education Funding Council to add a new element to the research assessment exercise when policy advice is involved. Consider the discussions - a 5* for those compelling discussions in top journals of why the transition has to take this form. But what would we give if we were assessing the success of this policy advice? Pride of place would undoubtedly go to Richard Layard of the London School of Economics for his disastrous misjudgement in The Coming Russian Boom. To quote the dust jacket, "the book ... shows how the greatest political-economic challenge of the post-cold war world has become a resounding triumph". And what would a HEFC evaluation committee do with Brigette Granville and researchers at the Royal Institute of International Affairs and their glowing account, The Success of Russian Economic Reforms?

University academics will sleep easy because the Russian recipients of their bad advice have no ability to make them suffer for giving it. The money that was the subject of all this misplaced advice was not Russia's in the first place. It was supplied by the West - by the IMF, the World Bank, the European Union, Know How funds and private bodies such as the George Soros Foundation. What the Harvard boys did was perhaps take a little too much in ways that became too obvious.

Now the attempt is to shift the blame to the Russians themselves. The British arm of the advice industry cannot be allowed to get away more lightly than its US counterpart. British academics share US complicity in Russia's crisis. They too sought short cuts to transition, they too refused to look realistically at what they were helping to do. If directors of bankrupt companies can be disqualified from running new businesses then should not advisers who have helped to bankrupt an entire economy be disqualified from giving advice ever again?

Michael Haynes is senior lecturer in European studies at the University of Wolverhampton.