Jeffrey Sachs Discusses The War in Ukraine, ‘Shock Therapy,’ and More

Perhaps the most stunning bit of information in the interview comes from Sachs’s disclosure of the reason for the failure of “Shock therapy” in Russia. “Shock therapy” is the name given to the abrupt transition from the Soviet-style command economy to a market-oriented economy. It was a success in Poland, but a failure in Russia where it led to a depression deeper and more costly than our own Great Depression. Why? Sachs was an advisor to Poland and then Russia for the “therapy.” So he had witnessed a “controlled experiment,” as he put it elsewhere. At a certain point it the process, financial help from the outside was needed to revive the economy on a new basis. It was provided to Poland; but when Sachs called for the same help in Russia, it was refused by the West, specifically by the White House. This happened despite Sachs’s direct pleas to the White House. The depression that followed was neither accidental nor a surprise. Far from it. This was the first time that the US attempted to “weaken” post-Cold War Russia, an attempt that was eventually reversed under Putin.

Related:

Russian aid controversy:

With the collapse of the Soviet Union, the United States Agency for International Development (USAID) funded a project by the HIID to help rebuild the Russian economy on the basis of western concepts of ethics, democracy and free markets. Jeffrey Sachs was said to have “packaged HIID as an AID consultant”. USAID were glad to accept help from Harvard, since they lacked expertise for such a project. The HIID oversaw and guided disbursement of $300 million of US aid to Russia with little oversight by USAID. HIID advisers worked closely with representatives from Russia, notably Anatoly Chubais and his associates. Once USAID accepted help from the HIID, HIID was in a position to recommend U.S. aid policies while being a recipient of that aid. It also put the HIID in a position of power overseeing some of their competitors. The project, which ran from 1992 to 1997, was headed by economist Andrei Shleifer and lawyer Jonathan Hay. HIID received $40.4 million in return for its activities in Russia, awarded without the normal competitive bidding approach.

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