Wednesday, June 15, 2005

Dragged-out case settled 

I have had more than a passing interest in the case of Andrei Shleifer and the Harvard Institute for International Development, the latter of which folded after a scandal in Russia. In 1997, Shleifer and an associate Jonathan Hay, who worked for HIID on a U.S. government contract for Russian privatization, were accused of insider dealing themselves and with their wives, both of whom worked in the investment field. The government has pursued a civil case against them, and both the defendants and the university were found liable last July.

Today's Harvard Crimson announces that a settlement at last has been reached in the case. Shleifer and Harvard President Larry Summers are good friends; they worked with Jeffrey Sachs, who at the time of the scandal was the director of HIID. Sachs and Hay are no longer at Harvard; so far, Shleifer remains in the faculty.

The problem created is more than the greed of two people. It is that the validity of voucher privatization (something Shleifer explored academically) for distributing state assets was undermined by their actions. Their usefulness is still in doubt theoretically, but the discussion has been curtailed by the scandal. That's too bad, because some places it seems to have worked.