Martin Wolf, at the Financial Times, has one of the world’s
most peculiar blogs: you can read all the comments in full, but, unless you’re
a subscriber, you can’t read the article they’re commenting on. So I’m not entirely
sure exactly what Larry Summers is responding to when he leaves
a comment
on Wolf’s obituary of Boris Yeltsin. But the exchange between
Summers and Wolf is fascinating.
Summers, to give some background here, was part of the "Committee to Save
the World" which bailed out Russia in 1998 before it defaulted on its domestic
bonds and set off a devastating chain reaction in debt markets around the world.
Summers seems to defend the bailout, on the grounds that the funds were, eventually,
repaid in full – even if the bailout didn’t achieve what it was designed
to achieve. Wolf responds harshly, saying that the bailout was a mistake because
Yeltsin was "morally bankrupt".
Summers also seems to defend Yeltsin’s indefensible "loans-for-shares"
scheme, in which Russia’s patrimony was sold off at a bargain price to a small
group of politically well-connected oligarchs. Summers suggests that the scheme
might have been "a necessary price for Yeltsin to pay when he paid it for
winning against the communists"; Wolf dismisses that theory elegantly,
showing that the oligarchs had every incentive to support Yeltsin anyway, and
that the deal "tainted capitalism in Russia for the indefinite future".
Summers is careful to phrase his arguments as questions, so it’s hard to be
sure that he’s defending his actions while he was at Treasury. But I think Wolf,
with the benefit of hindsight, clearly has the better of this argument –
and it’s interesting to see how Summers seems to be incapable of admitting that
US policy towards Russia in the aftermath of the Cold War was actually disastrous.
But then again, he’s a politician, kindasorta, and politicians are notoriously
allergic to admitting mistakes.
(Via DeLong)