Conversation With A Shock Therapist
R. M. Schneiderman - the web producer of all things, for the Economix blog at the Times - posted a report on a Lancet study of the impact of sudden privatization, shock therapy, on the health of Eastern Europeans. Which effect seems to have been a lot like the impact of liberation on the health the people of Iraq.
Readers may be forgiven if they forget what shock therapy was. The Lancet defines it well as:
“a program that transferred the ownership of at least 25 percent of large state-owned enterprises to the private sector in two years by selling them with citizen vouchers and giveaways to firm insiders.”
Wonks Anonymous will add that the citizen vouchers were mostly snatched up by insiders, gangsters and various swindlers who went on to become the new business elites of Russia and Eastern Europe. Most often the time frame was shorter than two years and the transfer was closer to 100% of assets.
The Lancet concluded that the death rates in these nations increased dramatically during the period of shock therapy. It attributed this to a breakdown of social support that had been handled by firms and to the large drops in income that the subsequent economic chaos caused.
Jeffrey Sachs, the apostle of shock therapy, responded that the study was "completely wrong" and went on to blame rising death rates in Russia on the generally poor health of that nation.
Now, as some loyal readers may know, Wonks Anonymous completed a dissertation on the economy of Yugoslavia at about this time. He went on the job market with various shock therapists and recalls an interesting conversation he had with one of these.
Wonks Anonymous who had read extensively on Russia and Eastern Europe in the original languages and spent some time there, was under the general impression that these nations were in bad shape because central planning was simply an excuse for arbitrary allocation of resources. People with connections got important jobs, factories for their towns and guaranteed "success". Everyone else got to pick up after them.
Wonks Anonymous was under a general impression that the workers were not the problem here and if we lifted the burden of political meddling they might just make a go at running their own factories on competitive markets. He thought that the best solution might be a sort of market system with social ownership of the means of production.
The shock therapist was unencumbered by such prejudices. Which fact enabled her to complete her dissertation much more quickly and also allowed her to be guided by the long experience of the International Monetary Fund and financial theory. For her, the workers were the problem, they were overpaid and under worked.
According to this economist, Eastern Europe could only be revived if ownership were transferred to capitalists who would discipline the labor force and cut its pay. It mattered little who got control, so long as they did so quickly and so long as they were ruthless in their pursuit of gain.
She got the job offers.
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