Dr. Ye. T. Gaidar, Director of the Institute of the Economy in Transition
Yegor Timurovich, how did the idea to create IET originate, what was happening at the initial stage?
Abel Gezovich Aganbegyan was the first to bring up the idea to establish the Institute; it happened in October of 1990. Abel Gezovich said that he had taken the decision to reform the research sections of the Academy of National Economy and to establish the Institute for Economic Mechanism. He offered me to take charge of this Institute. I accepted; at the same time I and S. Shatalin, at that time the Academician-Secretary for Economics of the Academy of Sciences, agreed that the Institute should be under both the Academy of the National Economy, and Academy of Sciences, and changed its name to the Institute for Economic Policy.
The fact that it was possible to start the Institute “from the scratch” provided for an ample opportunity to create a new institution, to invite productively working, young experts and thus to create a critical mass of skillful researchers – this prospect was very attractive.
Indeed, the Institute attracted talented, young, productive scholars, who had previously worked in other Moscow institutes engaged in economic studies, mainly from the Institute for the Economy and Forecasting of Advances in Science and Technology, from the Central Economics and Mathematics Institute, the Economy Institute of the Academy of Sciences, the Research Economy Institute of the State Planning Committee (Gosplan).
At that time we formulated the Institute’s credo: “We do not write economic programs (at that period about 10 governmental programs were composed and none implemented), we analyze the real processes underway in the Soviet economy, we try to forecast the development of these processes and, if necessary, give recommendations on economic policy issues.”
By that time the culture of short-time analysis and forecasting of the economic situation in the Soviet Union had been practically extinct. The country had economists studying the so-called “political economy,” i.e. general speculations about the economic process abundantly decorated with citations from Marx and Engels. The productively working teams of scholars were engaged in long term forecasting (15 to 20 years), while practically nobody was interested in current processes, or in what would happen in 3 or 6 months. However, in the situation of a mounting systemic crisis of the Soviet economy exactly the problems of current analysis of the economic situation and recommendations related to these problems were of special importance. We apprehended what the lead the world economic theory built up over the Soviet economic science constrained by rigid ideological censorship. Therefore, we set yet another long-term task the Institute should fulfill: to start gradually bridge this gap, to create prerequisites allowing our economists to work up to the world standards. It was obviously not a light task, we had to learn much; however we understood how interesting and important was to achieve this goal. By the way, when I invited researchers to work at the Institute, the requirement to learn hard in addition to performing routine functions was the decisive one. There were people who came to work at the Institute exactly because of this, and there were people who refused because of this requirement, because outside the Institute there was a stable life; reputation; theses, although provincial and slightly ridiculous, but still acceptable, while inside the Institute it was necessary to radically change the way of life, sleep less, learn languages, read books in foreign languages, etc.
What, in your opinion, are the turning points in the development of IET?
The key moment in the development of the Institute was the autumn of 1991, when the Institute became the main center, which was engaged in designing economic and political measures to be undertaken by the first Russian post-revolutionary government, and to a large extent formed this very government. My deputy Andrei Nechayev became the Minister of Economy, his colleague Vladimir Mashits – the Minister of Economic Cooperation in CIS, another deputy, Nikolai Golovnin headed the Secretariat of the Prime Minister, while Sergei Vasilyev, the head of our St. Petersburg office, became the first head of the working Center for Economic Reform. In 1991 the Institute, which functioned as a research organization from end-1990, became directly engaged in the actual process of elaborating and implementing the economic policy at the most acute crisis moment of the development of the Soviet, and later Russian, economy.
There were also difficult moments in the IET history, were not there?
The revival of the Institute in 1993 was a difficult moment in its development. In 1992 many key researchers and experts were recruited in the government. The life had also changed radically by that time. While before early 1990s science had been the natural sphere to attract talented people, who in another society could show their worth in any other kind of activity (business, politics, etc.), these other opportunities presented themselves after 1992. In this connection after 1992 the task to consolidate the critical mass of economists, the people interested exactly in the long-term research work, became considerably more difficult than in 1990. In the end of 1992 the Institute was renamed as the Institute for the Economy in Transition. We proceeded from the point that the post-socialist economic transformation is the most interesting phenomenon of economic practices and that the study of this phenomenon would be a serious guideline of research both in this country and in the world for years, and may be decades to come.
What problems is the Institute working on now? What are the most important results the Institute achieved over last years?
Our strategic aim is to improve the standards of economic culture, to integrate Russia in the world economic science; this task is very difficult and yet unfulfilled. The revival of the Institute as a team of researchers adapted to the market environment and able to carry out studies in the areas of macroeconomics, inflation analysis, budgetary processes, tax revenue forecasts, agrarian transformations, changes in ownership structure, social reforms at a proper level was the most important result of the developments taking place at the Institute in 1993 through 1995 and in 1996. The collective monograph “Economy of Transitional Period” analyzing the basic specific features of the Russian reform and its place in the world economic process was an important benchmark drawing a line under the initial stage of the Institute’s work.
In 1998 through 2000 we focused on preparing recommendations on the “second generation” of post-socialist reforms, i.e. the transformation of the tax system, the system of inter-budgetary relations, the financing of social programs, etc. as the political opportunity window for this opened as a result of the elections taking place in 1999 and 2000.
Now we have ahead of us an immense field for new important studies. These are both applied economic and political studies which may result in normative acts and recommendations to be implemented in practice, and theoretical studies primarily aimed at understanding of internal logic of processes underway in transitional economies, including the Russian economy.
Yegor Timurovich, how do you feel about the 10th anniversary of IET? And the second question in the same vein: the Institute in 10 years?
First of all, it is the joy that the collective created 10 years ago proved to be stable and did not disintegrate under the burden of work required to be done in the situation of the sweeping transformation over the last decade, on the contrary, it acquired more cohesion, and now it is an efficient organization yielding practical results.
I hope the next decade will be less dramatic for Russia, and the difference between the IET as it was in 1990 and the IET at the end of the next decade will be that the core of IET researchers will consist of those who are under thirty now.
Exactly because of the fact that we are rapidly catching up with the world economic tradition this is the opportune time for the young, and I hope that in 10 years it will be the Institute of the young.
|TEN YEARS OF THE IET|
A Brief Review of IET Work
The Institute presently known as the “Gaidar’s Institute” both in Russia and abroad was established by a resolution of the Council of Ministers of the USSR of October 3, 1990, as proposed by the Academy of National Economy at the Council of Ministers of the USSR (ANE # 477 of 11.11.90).
Originally it was the Institute of Economic Policy. On September 17, 1992, the Institute was registered as the Institute for Economic Problems of the Transitional Period (IEPTP) by the Moscow City Council of People’s Deputies of the RSFSR.
Presently it is the Foundation “Institute for the Economy in Transition” (IET) (the Institute was re-registered as a non-profit organization on December 22, 1999).
IET has been accredited by the government as a scientific organization and received a respective Certificate.
The founders of the Institute are the Academy of the National Economy under the Government of the Russian Federation, Observatoire Francais Des Conjonctures Economiques (OFCE) (France) and the Foundation “Center for Social and-Economic Studies” (CASE) (Poland).
According to its Charter the Institute is a non-profit research and educational center.
The research activities of IET are directly related to its main goal: the elaboration of the theoretical basis and practical implementation of liberal economic policies.
The IET basic mission is: to facilitate the development of economic and social sciences in Russia, to study and implement Russian and foreign experience of elaborating and implementing economic reforms and to prepare recommendations on the adjustment of current economic policies.
Over ten years the Institute conducted research of the most important problems of the Russian economy.
The research embraced four basic areas:
- Political problems of the economic reform;
- Macroeconomic studies (monetary and budgetary spheres; balance of payments; tax policies; household finances and consumer market);
- Study of the real sector (general trends in the development of the real sector; state of individual industries and agri-industrial complex (AIC); investment processes; foreign trade; problems of development of the social sphere);
- Institutional and microeconomic problems (privatization and changes in ownership relations; adaptive behavior of enterprises; formation of market infrastructure; surveys of business situation at industrial and construction enterprises).
IET cooperates with foreign and international economic and financial organizations in studying and generalizing international experiences concerning the theoretical and practical problems of economic reforms in the framework of joint programs.
The basic results of the IET work are presented in semi-annual and monthly issues of Russian Economy: Trends and Perspectives published by IET (including on Internet, in the series IET Working Papers). IET publishes three series of the monthly Bulletin of Business Situation Survey basing on the results of surveys of business situation at industrial enterprises, construction businesses and agrarian producers: for the industry, the construction business, and the agriculture. The results of business situation surveys are quarterly published in the OECD Short Term Economic Indicators.
In 1999 through 2000 the IET publications were referred to about 80000 times a month on the average, including over 6000 servers.
IET submits its findings to the Presidential Administration, the RF Government, the State Duma and the Federation Council, to ministries and governmental agencies, the Russian Academy of Sciences, mass media, regional administrations, international organizations.
The IET theoretical studies include the analysis of fundamental relationships between economic, social, and political processes underway in Russia. In the framework of applied studies IET carries out the research of macroeconomic trends and factors behind the developments in the Russian economy in the transition period. The research work is focused on the state of the RF public finances, monetary policy, monitoring of Russian financial markets, analysis of the tax legislation problems and tax reform. IET also studies macroeconomic and institutional problems of the financial crisis in Russia, the procedures of elaboration, approval, execution, and control of the RF national budget, problems of interregional transfers and municipal finances. The economic and mathematical modeling methods are widely applied for the analysis.
The business situation at and behavior of Russian enterprises are closely surveyed. The privatization process has been under survey for over eight years. IET analyzes the forming ownership structure and its transformation over the post-privatization period; the role and effectiveness of non-standard privatization methods applied in the post-voucher period of the reform of the ownership relations in Russia. The study of corporate governance models in economies in transition, the problems of protecting investors’ (stockholders’) rights and respective mechanisms used under different models of corporate governance is underway. IET analyzes and systematizes the data on the structure of capital at largest Russian companies in the key branches of the real sector and the information pertaining to issues of improving the management of state property.
While analyzing macroeconomic trends in the real sector, IET experts focus on changes in the production patterns and GDP formation, the effectiveness of labor resources and investment across sectors of the economy. The interrelation of economic policies, investment climate, and foreign investments is analyzed.
The analysis of developments in the Russian foreign trade, including the tariff policy, customs regimes, foreign trade controls (in the light of Russia’s prospects to join the WTO) is conducted on the monthly basis.
The problems of the development of the Russian agri-industrial complex are under scrutiny. IET experts analyze the agrarian and food policies of Russia and continue to study the formation of the infrastructure of the agrarian market, institutional transformations of the agriculture, the problems of financing the agri-food sector, the state support of producers and consumers of agricultural produce, tax privileges, the regulation of foreign trade with foodstuffs.
IET experts monitor the evolution of the social and cultural sphere. They elaborate measures necessary to compensate for the imbalances between state guarantees of free medical care for the populace and its financing; the uncompleted reform of the public health system, including the implementation of the system of financing the public health sphere on the insurance basis. The experts calculate the imbalances between the cost of the governmental program of free medical care for the populace and the amount of financing assigned by the state budget and the compulsory medical insurance funds for public health system. The IET experts study the guidelines of the reform of education and analyze their impact on the education level of consumers of respective services.
IET is engaged in the study of constitutional problems of economic reforms, the problems of fiscal federalism, political economy of populism, and the nature of the political and business cycle in Russia in the framework of a separate line of research.
Since 1997 IET has been engaged in studying the defense economy. IET focuses on the problems of forming and executing the military budget, the recruitment principles of the RF military system, social aspects of the military reform.
IET experts participate in the elaboration of laws by State Duma committees, drafting of resolutions of the RF government, recommendations issued by ministries and governmental agencies. Annually IET submits its proposals concerning the draft law on the national budget. A majority of approved laws pertaining to the tax system, foreign investment, the reform of the social sphere were drafted with direct participation of IET experts. In 2000 alone, IET scholars presented about 600 expert statements concerning drafts of laws elaborated by various State Duma committees.
The Institute renders research services to regional administrations, businesses and largest Russian enterprises. IET elaborates programs of social and economic development for a number of Russia’s regions (the Yaroslavl, Bryansk, Tver, Kaliningrad, Murmansk Regions, the Republics of Kabardino-Balkaria, Dagestan, Sakha-Yakutia), studies budgetary policies of Republics of Tyva and Altai, Vologda and Perm Regions. Among IET customers are federal agencies (RF Ministry of Economy, Goskomstat, Federal Commission on Securities, RF Ministry of Culture, RF Ministry of Agriculture and Food, RF State Tax Service, RF Migration Service, Federal Road Service, Federal Employment Service, etc.), financial institutions (Moscow Interbank Stock Exchange, Vneshtorgbank, Tecknobank, SBS-Agro), and major Russian enterprises (JSC “Uralmash”, RAO Norilsk Nickel, PO “Polyot” (Omsk), Verkhnesaldinsky Metallurgical Production Association ((Verkhnyay Salda), JSC “Machinostroitelny Zavod” (Electrostal), JSC “Russky Sakhar, , JSC “Exportles”, “AGROprodintorg”, JSC BAT-JAVA, JSC “Baltiyski leasing” and many others).
IET conducts a number of studies in cooperation with foreign partners. The Institute works on a project financed by the US Agency for International Development. In the framework or this project the reform of the tax system, interbudgetary relations, municipal finances, the reform of the social and cultural sphere, corporate stock market, problems of the present state of political economy, macroeconomic and institutional problems of the Russian financial crisis, principles of agrarian protectionism in the transitional economy are studied. A sociological study of the level of household expense for medical care was conducted in cooperation with American scholars.
IET/PROMETEE (l’Universite˜ Pierre
Mend`es France de Grenoble) joint project is still underway. IET experts also work in the framework of TACIS/ACE program concerning the progress of the economic reform and financial standing of Russian regions. The Institute participates in TACIS programs The Reform of the Russian Social Safety Net and Strategies of Russian Towns’ Economic Development (in cooperation with the European Expert Service). There are underway joint projects with the University of Kiel (Germany) and OECD Directorate for Food, Agriculture and Fisheries.
IET works on Know-How Fund Regional Financial Project in two Russian regions – the Republic of Altai and the Perm Region.
Some studies in the framework of OECD projects are also underway.
The Institute has close contacts with universities and research centers in USA, France, UK, Germany, Finland, Japan, Taiwan, South Korea and other countries, and with international organizations, including the Center for Development Research (Bonn University), Budapest University of Economic Sciences, Norinchukin Research Institute (Japan), World Bank, IMF, EBRD, the Halle Institute of Economies in Transition (Germany), the Agricultural Research Service of the US Department of Agriculture, Center for Institutional Reform and Informal Sector (IRIS) (University of Maryland), etc.
Annually IET experts undergo training at foreign educational and scientific centers of France, UK, USA, Netherlands. IET experts often participate in working meetings with prominent economists, political and state leaders, representatives of business centers of USA, France, Germany and other countries.
IET scholars regularly make presentations at international seminars and conferences (more than 500 presentations were made over last ten years).
IET researchers published about 100 books and booklets, over 1000 articles both in Russia and abroad.
In the past few years the experts of the Institute have published a number of monographs, including “Days of Defeat and Triumph” (two volumes) by Ye. Gaidar (include State and Evolution, Days of Defeat and Triumph, Economic Reforms and Hierarchic Structures, Anomalies of Economic Growth); monographs: S. Sinelnikov-Murylev Budget Crisis in Russia: 1985 – 1995; V. Mau: Economic Reform: Through the Prism of Constitution and Politics; A.V. Uliukaev: In Anticipation of the Crisis. The Course and Contradictions of Economic Reforms in Russia; Economics of the Transition Period. Outline of economic Policy in Post-Communist Russia 1991-1997, etc.
IET scholars presented over 30 publications for the IET Working Papers Series: Legacy of Socialist Economy. Macro- and Microeconomic Consequences of Soft Budgetary Constraints; Five Years of Reform; Problems of the Russian Tax System: Theory, Experience, Reform (two volumes); The 1998 Banking Crisis in Russia and its Consequences; Improving Interbudgetary Relations in Russia; The Financial Crisis: Origins and Consequences; Some Urgent Problems of the Agrarian Policy in Russia; Reforming Some Sectors of the Social Sphere in Russia; Political Problems of Economic Reforms: a Comparative Analysis; Economy and Law. (Constitutional Problems of Economic Reforms in Russia), etc.
Leading IET experts are members of editorial boards of a number of foreign and Russian scientific journals (for instance, Voprosy Ekonomiki (“Problems of Economics”), Mir Rossii (“Universe of Russia), Otkrytaya Politika (“Open Policy”), Agrokhleb, etc.).
In 1998 the Institute established two annual awards named after Adam Smith and Alexander II for the personal achievements in implementing the economic reform and defending the economic liberties in Russia. The IET Board of Directors awarded the Adam Smith prize to M. Dmitriev (Deputy Minister of Labor and Social Development), M. Leontyev (TV analyst), academician R. Entov, M. Sokolov (Izvestia columnist). The Alexander II prize was awarded to Yu. Latynina (journalist), M. Prusak (Governor of the Greater Novgorod Region), A. Chernetsky (mayor of the City of Yekaterinburg), I. Ilovaiskaya (editor of Russkaya Mysl newspaper).
In 1998 IET was licensed as an educational institution and established its post-graduate courses (including correspondence courses) “Economics (08.00.01)” and “Economy and National Economy Management (08.00.05)”. At the moment 18 students study at the IET post-graduate department.
ROUND TABLE DISCUSSION
“The Tenth Anniversary of IET”
The Discussion Participants:
|Dr. V. A. Mau, IET Deputy Director||Dr. A. I. Alekseyev, IET Academic Secretary|
|Dr. A. V. Uliukaev IET Deputy Director||Dr. S. V. Prikhodko, IET Director for international projects|
|Dr. S. G. Sinelnikov-Murylev, IET Deputy Director||The discussion is moderated by V. A. Natarov, IET Press Secretary|
When and how did the idea to establish the Institute originated?
Sinelnikov: Ye. Gaidar advanced the idea to create an institute for economics in 1987, when he was on the Communist magazine editorial board. At that moment there was no team of scholars in the country which could work, on one hand, at a good theoretical level, and on the other hand, to be knowledgeable about economic practices and be able to advise politicians. This problem became especially urgent in the situation of the economic collapse in the country.
What about the team headed by S. Shatalin, which worked on “500 Days” program?
S.: Certainly, we may refer to “500 Days” program, there appeared other programs as well. However, no program contained concrete economic measures. Gaidar strove to establish a new think tank capable of solving difficult economic problems exactly because of this.
Uliukaev: “500 Days” program was a set of really effective and necessary measures. However, it did not answer the question of who should implement these transformations, what the respective legal and executive mechanisms should be, were there adequate financial resources, would the transformation be seriously opposed and what should be done in this case – the program did not even state these questions.
What was the first milestone in IET history?
Alekseyev: The first milestone was October 3, 1990. On that day the USSR Council of Ministers issued its resolution followed by the order establishing the Research Institute for Economic Mechanism at the Academy of National Economy to be headed by Dr. Ye. Gaidar.
M. Gorbachev, President of the USSR, supported this initiative.
How many people worked at the Institute at that time?
A.: About 40 people.
What impact the events of August of 1991 had on the Institute?
S.: It was a difficult time for the whole country; however, for those working at the Institute these events were especially painful. We clearly realized that we faced the historic choice between the attempt to reverse the course of history and the progress, not merely the choice between the “putschists” and B. Yeltsin. All of us working at the Institute had immediately and unconditionally made our choice: both Communists and non-Party people supported the progress.
A.: On August 20 the Institute meeting of Communist party members practically unanimously (with one abstention) voted to withdraw from the party and to support B. Yeltsin.
Recollecting the articles published by the Communist magazine at the time Yegor Timurovich Gaidar worked there, this was a rather natural choice. It is clear, what sentiment predominated at the Institute, since it was a rallying point for the people professing liberal values. Was the choice predetermined than?
S.: Opponents of the system used different methods to fight it. Gaidar’s articles in the Communist seriously influenced the public opinion, which even the Communist party already could not ignore. These articles influenced not only the public opinion at large, but Party leaders, including Gorbachev himself.
Mau: The Communist of Frolov-Latsis-Gaidar became the most reformist and liberal magazine in the country.
May it be said that at that period the core of the present Institute team already formed itself? What percentage of this original core has remained at IET?
A.: About a half of the present staff have been working from the first days, and we closely contact about a third of those who has left, in many matters we rely on those people.
Many distinguished people had worked at the Institute, and later took important posts at the government agencies, are now successful scholars and businessmen: A. Nechayev, V. Mashits, B. Fedorov, A. Uliukaev.
So, it’s August of 1991. The Institute is being closed. What happened after the party meeting?
S.: The Institute continued to work. After that meeting all those at the Institute went to defend the White House. I remind, it was on August 20, when the prospects of democracy in Russia were still very vague.
At that dramatic moment our country experienced, where the Institute’s scholars worked, at what offices?
S.: If we speak of the time before November of 1991, they all worked at the Institute. In the period between August and November the Institute published its first semi-annual report. It may be found in archives. This report was structured similarly to our current reports. Certainly, it was a different economy, other experts, quite different level of statistics.
Did you already execute government orders?
S.: Yes, we already worked to the orders of the Russian government. At that time the budget war raged between Russia and other Republics, on one hand, and the Union government on the other hand. Russia wanted sovereignty and did not financed expenses. I, as an expert on public finances, look at the collapse of the Soviet Union and the emerging sovereign Russia in terms of the budget. The former economic structure was crumbling, Union government agencies already ceased functioning, while new Russian authorities had no experience of settling problems pertaining to a sovereign state emerging from a former Soviet Republic. Our Institute was responsible for quite a number of estimates the budgetary and other decisions of the time based on.
So, in December Gaidar was appointed as the acting Prime Minister?
S.: No, he was appointed as the Vice-Chairman of the Government for the economy. He became the acting Prime Minister before in June he and B. Yeltsin went to Washington to take part in the ceremony of Russia becoming a member of the International Monetary Fund.
In the period from September till October it was not yet clear about nominations and appointments; however, we understood the logic of the current developments and started to elaborate measures concerning the economic reform.
U.: The program of economic reforms designed under Gaidar’s direction and with participation of a number of would-be members of the government was very technological and answered not only “what” and “why” of the reform, but “how” and “how much.” This program we provisionally entitled “Program-91” was a set of separate documents, the most important of them being the conceptual “Russia’s Strategy for the Transition Period.” Among the Program documents were even draft laws, instructions and memorandums – so detailed was the Program in contradistinction to many other programs, and that determined its value.
M.: Ye. Gaidar becoming a member of the government was the peak of our revolution, of the revolution in the broad sense, of the revolution, which began in late 1980s and is being completed just now. There was a clear distinction between economic and political components. For a long time Gaidar was considered to be an expert on the economy, not a politician. It was in accordance with Gaidar’s intentions: he starts economic reforms, Yeltsin, as the head of the government, provides the political cover.
Gaidar succeeded in including his team in the government. It was a unique case at those times. It shall be noted that in formal terms he was the third most important person in the government after Yeltsin and Burbulis. Now Putin is blamed to form his retinue from friends and fellow townsmen. When I hear that I say: For goodness sake! We have formed a government from the staff of one institute!
We had clear ideas about what had to be done at that moment; it was the rare occasion when we knew what to do and had courage to do that.
The main success we achieved during our work at the government in 1992 in terms of economy was apparent: shops were filled with goods. However, from my point of view the main criterion was that if in early November of 1991 it was impossible to find anybody wishing to become the Chairman or a Vice-Chairman of the government, in November of 1992, figuratively speaking, there was a line of those wishing to take the post of the Prime Minister. Speaking of the political success of Gaidar’s reforms, I would mention first this important objective indicator.
S.: A number of people working at the Institute became governmental officials. I and V. Mau became Ye. Gaidar’s advisers, A. Uliukaev headed the group of advisers, P. Aven became the Minister of External Economic Relations, A. Nechayev – the Minister of Economy. B. Federov also worked at the Institute at that time, later he went to work with the European Bank for Reconstruction and Development. He became a governmental official after Ye. Gaidar had already left the government. A number of Institute’s employees combined the work at the government and at the Institute. For instance, Ye. Gaidar remained the Director of the Institute while taking various posts in the government.
M.: It is very important to have this ability: to alternate scientific study with the work at the government. In this way there originates a stratum of people who can work for the government, but are independent of their superiors. These people have an alternative job that sharply reducing the danger of corruption.
After so many people left, what became of the Institute?
S.: It continued to function mainly working for the government. The first time Dr. Gaidar became a member of the government he left his post as the IET director. He remained a member of the Supervisory Board, and Vadim Ivanov, now deceased, became the director. Immediately before the Gaidar government resigned in December of 1992, the Institute for Economic Policy had been transformed in the Institute for Economic Problems of Transitional Period.
Why was that?
A.: The Institute obtained the status of independent legal person. However, the Academy of National Economy became our co-founder and we maintain close relations with it.
M.: We are grateful for A. G. Aganbegyan’s unceasing support, he keeps advising and actually helping us.
The Institute has been at this address (Gazetny pereulok) since late 1992, hasn’t it?
S.: Since January of 1993.
It was rumored that the Institute was transformed and this building provided all but by a direct instruction from Yeltsin himself. Is it true?
S.: When working at the government Yegor Timurovich had no time to settle problems the Institute faced. He turned to the Institute when needing to analyze some problem or other, to obtain an expert estimate, or to elaborate a document. V. Mau and I had to find time to take care about the problem of the Institute obtaining the status of legal person, acquiring premises. Igor Kolosnitsin was actively engaged in these matters. At that time he was the executive director of the Institute, and it was his responsibility to form the Board of Directors, etc. If we failed to accomplish all that at that time, there were probably no Institute today.
What about Gaidar’s return to the Institute? To what extent was this process natural for the team headed by Gaidar? From the common point of view, after being the Prime Minister a person may always find a sinecure, and it is hardly a research institute, which constantly has to fight for survival.
S.: As far as I know, on the day the Supreme Council refused to appoint Gaidar as the Prime Minister and Yeltsin nominated Chernomyrdin, Yeltsin asked Gaidar, if he wished any other high office. Gaidar answered that he intended to return to the Institute.
Gaidar was appointed as an unpaid Presidential adviser and he held the office for a rather long time, until the beginning of the Chechen war, when Gaidar made public his disagreement with the political line Yeltsin pursued.
M.: When Sinelnikov and I on Gaidar’s initiative actively began to reanimate the Institute in the autumn of 1992, everybody told us that it was pure madness, since it seemed improbable that Gaidar would ever return. However, we knew that in spite of many tempting offers he would head the Institute. Indeed, we managed to create a rather rare type of institution engaged in applied studies turning into politics per se.
What was happening at the reorganized Institute?
S.: A serious work has started. Gaidar took care of new approaches and most serious problems, and we focused on training young scholars to create the scientific base the Institute could stand on, and we spared much time to conduct our studies. At that time it was decided that we would spare considerable time to studies and, of course, consulting.
In other words, you constantly felt that the Institute was needed, didn’t you?
S.: We consulted the government, the State Duma, regions, large enterprises.
Do you recollect a first regional project?
S.: Yes, Yaroslavl, although we had had contacts with regions before that, but those projects were on a smaller scale. We worked with Nakhodka, Kaliningrad – Free Economic Zone.
Pirkhodko: The Yaroslavl project was the first large long-term project. We contacted Mr. Lisitsin, Governor, for over a year, elaborated the program, investment projects, feasibility plans. At that time we sought investors from abroad, since domestic ones hardly deserved the name. Some other consultants proposed to build a track for F-1 racing. Regions advanced a standard set of ideas at that time: for instance, an international airport, a sea-port (in maritime towns), a business-center. The first considerable benefit our recommendations resulted in was that the project of racing track was abandoned.
Among our projects we worked on at that time I would mention the project for establishing free-trade zones in Dagestan; it was implemented during the first Chechen war. One of the enterprises involved in the project – Kizlyar Electro-Mechanical Plant was located just five kilometers away from the Chechen border, so during our business trips we used to stay in a dispensary where soldiers were stationed.
What did happen to the Institute later on? For instance, 1993 was a dramatic year in the history of Russia.
S.: The next stage of our work was connected with the aggravating conflict between the executive and legislative authorities. B. Fedorov executed a rather tough budgets, while the Duma insisted on absolutely inconceivable budget figures.
Did expenses considerably outrun revenues?
S.: Yes, the budgetary deficit was set at about 25 per cent of GDP. The government could not execute such a budget. Naturally, it is only one instance of this conflict. This conflict was to a considerable extent a clash of ideologies: the “red” Supreme Soviet resisted B. Yeltsin.
The Institute professed liberal values. How did opponents reacted, what did they say about the Institute? What criticism did they voice? How did it manifest itself in 1993?
S.: Indeed, after Dr. Gaidar left the government, there were mixed attitudes toward our Institute. Many representatives of regions asked the Institute for consultations, assistance in facilitating economic recovery. Two our first projects were for Norilsk Nikel and consultations for the Yaroslavl Region. Both projects, from our point of view, were rather good. However, somebody did not like them, and some negative comments appeared in the press.
It was impossible to discuss the Institute’s activities in academic terms, was it?
S.: Make your own conclusions. In 1994 we made a contract to elaborate the concept of economic development for the Bryansk Region. We completed the first phase of the project: the analysis. Much money was spent, including Institute funds, the parties signed the acceptance certificate for this stage of the work. The costs outran the advance payment we had received. So, the administration of the Bryansk Region should transfer to us the remaining amount, but at that time there was elected a new governor, Communists took power. They did not pay us anything; moreover, they say that we did not completed the work and that are us who should pay them. The Communists initiated the hearing on the topic that Gaidar’s Institute received the money, but did not complete the work at the Duma Committee on Security.
M.: In 1995 and 1996 our Institute was subjected to an investigation concerning alleged mishandling of public funds. The investigators’ finding was that the Institute did without public financing at all. So Communist members of the Duma Committee on Security initiated a new investigation to find out to whom and at what price the Institute sold state secrets. All this nonsense quickly faded away in the autumn of 1996.
Let us return to the discussion of the events of the autumn of 1993.
S.: At a certain stage B. Yeltsin realized that the government headed by Chernomyrdin should be made more popular by appointing Dr. Gaidar, who would attract the support of the democratically minded strata of the society. In September of 1993 Gaidar accepted the post of the first Vice-Premier for the economy.
Had this fact some impact on the Institute?
S.: In October through December of 1993 all our draft documents on the economic policy became sought after again. Many serious government documents were based on our projects.
Speaking about the time of the dramatic conflict between the President and the Parliament, Gaidar’s vigorous actions at the time are well-known.
A number of those working at the Institute (although this number was less than in 1992) took government posts. Gaidar formed his staff of Institute’s experts, he again invited A. Uliukaev, V. Mau, A. Radygin, me, and many others. A. Chubais and B. Fedorov still remained in the government.
In December Gaidar’s influence on the government started to quickly fade away.
Why was that?
S.: It happened after the elections, when much less voters than expected supported the Democratic Choice of Russia (Russ. abbr. DVR). The outcome was the diminishing Gaidar’s influence on the government, Chernomyrdin now took many decisions, which were within the competence of the Vice Chairman for the economy, without consulting Dr. Gaidar. This was the case of the monetary union with Byelorussia, the new building for the Parliament. Gaidar and Fedorov rather demonstratively resigned in January.
I think it positively affected the later economic policy at large. From that time on Chernomyrdin was the only one wielding the levers of the economy, therefore he had to carry out a sound monetary policy. In case Fedorov and Gaidar kept their offices, the policy might have been a softer one, since there would be scapegoats to blame. In 1994 Gaidar regained his post of the Director of the Institute and has been heading it ever since.
May we say that there was a progress in the work of the Institute in 1994 through 1999, both in quantitative and qualitative terms? Did the number of projects increase, did new experts join the Institute?
S.: It would suffice to compare the shares of researchers under 30 and above 50 years old. This ratio has changed sharply in favor of the young. Many researchers were employed immediately after graduating. They have realized that the people here are engaged in research, that there is an opportunity to earn much, because the Institute works on many contracts and receives many grants. At the same time there is an outflow of researchers from economic institutes of the Russian Academy of Science.
Many of them have already joined the core staff, the former young inexperienced researchers have turned into distinguished experts. Some of them have already defended their theses, some are preparing to obtain the degree in the near future. This is our main achievement. The inflow of the young signifies that the Institute is growing, not dying.
The same may be said about the amount of orders. Each year the number of orders grew; therefore the Institute required much less amounts of budgetary financing. We have been doing without financing from the federal budget for at least six years.
M.: An important indicator is that six doctoral theses have been defended at the Institute over that time.
What are Institute’s products? At the start of the discussion it was mentioned that the Institute published its first semi-annual survey of the Russian economy in the autumn of 1991. How has the situation changed since that time?
S.: We continue to publish surveys of the Russian economy on the regular basis. As a rule, we publish the surveys twice a year.
In 1993 we initiated our monthly surveys of the Russian economy. For a time this work was directed by V. Ivanov, later this responsibility was vested with S. Tsukhlo, who is currently the editor of this publication. Monthly surveys are completed by the end of a month, in five to seven days they are published in Russian and in English. Of course, their quality improves. The consumers of our products are, first of all, various governmental agencies, both federal and regional, large companies, banks, mass media, foreign press including, etc.
How many copies do you circulate?
A.: The number of printed copies is small. They are circulated only among governmental agencies; therefore, the circulation is small – about 200 to 300 copies. We focus on the circulation by e-mail and publish the data on our Internet site.
The Internet is a milestone in our development. Since the Internet had become available we could widely circulate our products in spite of Institute’s limited financial resources. Judging by the number of visitors on the Institute Web page our products are in strong demand.
How does the regional cooperation develop? What are its dynamics as compared to the first regional projects? Could you please just outline the main results?
P.: As concerns recent years, we have been carrying out more projects, the projects have become more focused. The regional cooperation is wide in geographical terms: from Norilsk to the Krasnodar Area, from Kaliningrad to Nakhodka, I might mention the Republic of Altai, Tyva, the Kaliningrad Region. I think we have been cooperating with the latter for the longest time.
The cooperation starts when a representative of a regional administration contacts us and asks to carry out a project concerning the regional economic policy. The Institute practices price differentiation, for instance, we are ready to work for free if a region lacks the funds, but strives for the reform. In some cases the Institute and the region find a grant to finance the project. For instance, we receive grants from Know-How Fund, EU, etc.
There occur some rather strange situations. For instance, we carried out a project in Kaliningrad than under the administration headed by Mr. Matochkin. He is a democrat, he often invited the Institute to carry out some project or other, an expert evaluation, some planning. As a result of an election he was replaced by Mr. Gorbenko, who won because of a strong Communist support. As it turned out, he needed advice along the same guidelines Mr. Matochkin had followed: what to do with the free economic zone, why it functions so poorly, how to gain access to international markets for amber products, what agrarian policy to pursue. As soon as the ideological shell is removed it turns out that a pragmatical manager needs assistance along the same guidelines and often takes similar decisions.
A large regional project is aimed to settle the so called “problem of the North,” isn’t it?
P.: Yes, over recent years we have been working on the problem of facilitating migration from the Northern regions on the contract with the World Bank. It is well known that under the Soviet regime the Northern regions experienced the overflow of population. As the restructuring of the Russian economy progressed, the price structure changed, the budgetary financing of Northern towns and regions dwindled, many people, mostly pensioners and unemployed, were stranded in the North. How might they be helped?
We analyzed the situation and found out that the state financing of the migration from the North not only could help alleviate social problems, but was beneficial for the budget in economic terms, since the costs required to maintain the safety net for the unemployed living there were too high. It would be much cheaper to assist their migration even providing housing in other regions. We worked much with Northern regions: Vorkuta, Magadan, Norilsk.
What about the international cooperation?
S.: The Institute maintains a broad spectrum of international relations. To a large extent they depend on Dr. Gaidar, since the Institute use the relations he established, and Dr. Gaidar’s authority is the authority of our Institute at large.
Since 1992 we have maintained close cooperation with the University of Grenoble (France), this cooperation was supported by TACIS. This cooperation is still underway. Thanks to this cooperation we could improve the economic education of younger researchers and render our studies more effective. Four our scholars defended their theses at that University.
In 1994 we carried out a large project in cooperation with the University of Maryland. We also established working relations with the Ford Foundation. After the term of our cooperation with the University of Grenoble had expired we received some other TACIS grants in the framework of the PROMETEE project. We cooperated also with the Carnegie Endowment. We have been receiving a considerable aid from the US AID (US Agency for International Development) over two last years, while working together on a large project. Thanks to this project we could focus on a number of serious fundamental studies, which allowed us to take an active part in working out the Tax Code and the Governmental Program.
The assistance provided by the US AID over two last years and the materials we were able to prepare due to this assistance allowed us to present the concrete recommendations currently discussed by the government, at the State Duma, etc.
On the regular basis the Institute holds international conferences, takes part in a number of scientific economic forums. Our researchers often travel abroad, we gladly finance such trips, search for grants, since this broadens the range of their vision. We plan to actively develop international relations.
What other remarkable events have taken place over last years?
S.: Two years ago we established a post-graduate department, it also was a stage in the development of our Institute.
Who entered the post-graduate department? How many post-graduate students attend the courses?
S.: The post-graduate students may be conditionally divided into two groups. The first group includes the people wishing to be scholars. These are mainly those working at the Institute. The second group embraces the businesspersons striving to improve their qualification. They work on their theses not merely to facilitate their careers, but to learn and upon getting modern education write good theses. To facilitate the rapid development of the Institute we need additional qualified staff: the demand the society places upon the Institute outpaces our development. In other words, we either have to abandon the fundamental research, or limit the output of applied studies.
Two years ago we started to work out a project related to training of personnel we need in cooperation with the Moscow Physico-Technical Institute (Russ. abbr. MFTI). MFTI is among best Russian institutions of higher education, its diplomas are recognized around the globe; however, this institute is known mostly as a forge of physicists, mathematicians, programmers. Together with the rector of MFTI and the Higher School for Economics we decided to train economists as well, the more so that the modern economic science requires an extensive acquaintance with natural sciences.
May it be said that the Institute has completed its development over the last decade, or does it continue in quantitative and qualitative terms?
M.: The Institute has never developed in quantitative terms, the number of scholars has always been at approximately the same level. It is important to mention that our Institute is in transition not only because of its name, not only because we study the economy in transition, but because of its organizational model as well. Judging by its form it yet belongs to the Soviet past, because as a rule a modern institution consists of the director and some clerks, five persons altogether at most. However, the Institute operates as a modern institution, i.e. the Institute is oriented toward orders and grants. It is especially important that the Institute aims to balance between carrying out orders and conducting scientific research. Our Institute in its present form is a transitional model, its form resembles a Soviet institute, while the working style is up to modern realities.
What do you wish the Institute to become in five years from now?
S.: At present we have a sufficient number of researchers speaking the same academic language as scholars belonging to leading world schools of economists. I would like that in five years all Institute staff could work at the level of best international standards.
M.: In the future the Institute may become an association of research groups sharing similar academic views, as sometime in the future the rising generation of scholars will want to establish their independent research groups.
How can ideological stereotypes affect these plans? The extreme scenario: can anybody attempt to close the Institute?
S.: I think it could be possible in the environment of 1991. I believe that now the society is well beyond permitting to close any institute. Of course, there are various indirect ways, but I hope it will not happen. Moreover, it is apparent that there appeared voters defending liberal values – look at the results the Union of the Right Wing Forces (Russ. abbr. SPS) achieved in the course of the last election. Moreover, it seems that the liberal economic views were freed from the ideological component. Many people have realized that liberalism is good, even if it differs from the Socialist dogmas of our recent past.
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