West squandered billions on Russia to no avail

November 14, 2000

Free Market Foundation

When it came to office in 1993, the Clinton administration encouraged Western nations to throw a huge amount of aid at Russia and mount a “big bang” approach to encourage change. While the money may have helped prevent the Communists from returning to power, the country’s economy is worse off than before. That is the conclusion of a General Accounting Office report.

A cumulative $66 billion in aid flowed from the U.S., Europe and international lending agencies.

But the donor countries did not co-ordinate programmes sufficiently, lacked a comprehensive strategy and tended to distribute money hurriedly, the report concludes.

Russia has been plagued by corruption, a rebellious parliament, heavy turnover among government ministers and limited grass-roots support for capitalist changes.

Due to the failure to build robust capitalist institutions or produce sustained economic growth, Russia produces roughly one-third less now than it did a decade ago.

Bungled privatisation schemes put many of the nation’s most productive enterprises in the hands of a small elite. State assets were effectively stolen during that period, analysts point out.

The Clinton administration, which responded to the report in a letter, said the main conclusions were balanced, and a central problem was Russia’s own failure to embrace change.

Source: Joseph Kahn, Why West’s Billions Failed to Give Russia Robust Economy, New York Times, November 2, 2000.

For text http://www.nytimes.com/2000/11/02/world/02AID.html

For more on Russia http://www.ncpa.org/pi/internat/intdex9.html