David Warsh: Blame Harvard
The Taubman Building at Harvard’s Kennedy School.
SOMERVILLE, Mass.
A “Freudian slip,” according to Wikipedia, is “an error in speech, memory, or physical action that occurs due to the interference of an unconscious subdued wish or internal train of thought.” Slips of the tongue are classic examples, but other manifestations include “misreadings, mishearings, mis-typings, temporary forgetting, and the mislaying and losing of objects.” The insight is a vivid reminder of what was learned from the 20th Century discipline known as psychoanalysis: some, definitely, but perhaps not as much as they thought.
I committed an act of misstatement that requires more explanation than mere correction when I recently wrote that “[Boris] Yeltsin…presided over a decade of ‘shock therapy,’ a massive helter-skelter privatization of government-owned Russian assets based largely on ideas propounded in College Park, Md., and Cambridge, Mass.”
College Park had nothing to do with what happened next.
Its IRIS Center, an economic strategy and development advisory service based at the Beltway campus of the University of Maryland, was founded in 1990. Even the source of its acronym, if there was one, is now lost to history. IRIS was the loser to Harvard University in a brief, bitter contest for State Department patronage at the end of the Cold War and the collapse of the Soviet Union.
Among IRIS founders were Mancur Olson, who might have been recognized with a Nobel Prize had he lived long enough, and Thomas Schelling, who lived long enough to collect one. The director was Charles Cadwell, a lawyer with plenty of experience with deregulation. Mostly involved in articulating proposals for Russia was theorist Peter Murrell, who advocated a considerably more cautious approach to industrial privatization and nation-building than the so-called “shock therapy” approach that carried the day.
Murrell’s 1990 book, The Nature of Socialist Economies: Lessons from Eastern European Foreign Trade (Princeton), had the advantage of being closely related to ideas espoused by Hungarian economist Janos Kornai, another member of the Nobel nomination league who died without recognition. Murrell is more than ever worth reading today.
What might have happened if independent businessman H. Ross Perot had stayed out of the 1992 presidential race? Perot won 19 percent of the popular vote, enough to tip victory to the Democratic candidate, Bill Clinton. Had George H. W. Bush been re-elected, former Secretaries of State George Shultz and James Baker and National Security adviser Brent Scowcroft and their team would have directed U.S. policy towards Russia for the next four years. Talk about NATO expansion “not one inch east” might have become carefully qualified. Russia’s proposed “big bang” transition might have taken a different path. But Clinton won the presidency. He and his advisers had ideas of their own.
I followed Murrell for a time but became swept up in the excitement surrounding the incoming Clinton administration, among other matters. Would-be Harvard advisers to Russia seemed to be everywhere in those days. They included Kennedy School Dean Graham Allison and economists Marin Feldstein, Jeffrey Sachs and Andrei Shleifer. But it turned out that a 1989 conference in Moscow of the Soviet Academy of Sciences and the tripartite National Bureau of Economic Research from the U.S. had formed relationships that led to the deal. In 1992, Harvard’s Institute for International Development obtained a State Department contact to advise Yeltsin’s government.
Five years later the U.S. Department of Justice sued HIID, after Shleifer, a Russian expatriate, and his wife, hedge-fund manager Nancy Zimmerman, were caught trying to enter the Russian mutual-fund industry on their own. The government got its money back, and HIID was extinguished, just as was IRIS. A few years later I began Because They Could: The Harvard-Russia Scandal (and NATO Expansion) after Twenty-Five Years (2018, Create Space).
Next week, back to the grim present day.
David Warsh, a veteran columnist and an economic historian, is proprietor of Somerville-based economicprincipals.com, where this essay first ran.