In a recent essay on the dramatic economic difficulties facing the former Soviet Union, Alexander Yakovlev, an intellectual architect of Gorbachev's Perestroika reform program, stated that "By placing Marxist-Leninist theory above reality, above life, we managed to cripple life itself. By embracing the views of Friedrich von Hayek and Milton Friedman without making any adjustments for Russian realities, we risk falling into the trap of imposing on Russian life programs that, although inherently sensible, may not be suited to Russian exigencies."[1]
This paragraph succinctly summarizes the debate now exploding across Russia as to the appropriate strategy and direction of economic reform. On the one side are the proponents of "shock therapy," often associated by its critics with a missionary, dogmatic view of the economic changes necessary to introduce market reforms. On the other side are the institutionalists, or pragmatists, who are often seen by their critics as apologists for the status quo unwilling to institute the inevitable policy choices, which will, in the short run, increase tremendously the economic burdens on the average Russian.
The analysis which follows will identify the most important individuals associated with each perspective as well as describe the major dimensions and assumptions of their respective economic strategies. The end result will hopefully be a more complete understanding of the political and economic conflict now swirling through Russia.
The economy in Russia today is awful. The monthly rate of inflation is estimated to be between 20 and 30 per cent, the budget deficit is subject to so many different accounts that no single figure can be given--but it is probably more than 15 percent of gross national product (GNP). The ruble, which stood at about 170 to the dollar at the beginning of 1992, has seen its value drop to about 500 to the dollar. There is no agreement between Russia and t...