Even the title of USA Today's interview with Mikhail Gorbachev, Soviet Union 'should have been preserved', indicates that he never understood what it was he was doing. Here's a simple rule I have for deciding if politicians understand how markets work: If they use the words "mismanage the economy" or some synonymous phrase, they're clueless. And sure enough, here's Gorby:

Q:You opened up Russia to democracy and a market economy. But President (Vladimir) Putin seems to be rolling everything back, seizing the independent media and even imprisoning an oil tycoon who was a rival. How do you view his presidency?

A: Putin inherited a terrible situation from (former leader Boris) Yeltsin. With Yeltsin, the Soviet Union broke apart, the country was totally mismanaged, the constitution was not respected by the regions of Russia. The army, education and health systems collapsed. People in the West quietly applauded, dancing with and around Yeltsin. I conclude therefore that we should not pay too much attention to what the West is saying. Putin has now stabilized the country. What he has done is not perfect. But Russia needs stability as a foundation for continuing to modernize.

Stability of what, exactly? The political structure, as he points out himself earlier in the interview, needed liberalization but ran into resistance from the nomenklatura, the political class of red managers who eventually tried to arrest Gorbachev and stage a coup. And the economic situation was a nightmare, as output fell 20% over the two years before the coup.

Opening up an economy to market forces doesn't mean managing differently. It means STOPPING management of the economy. Yegor Gaidar, the first prime minister of post-Soviet Russia who attempted to create a market economy through shock therapy, explains:

What do we mean by the strengthening of the state? If we mean that we will have effective, non-corrupt tax service, non-corrupted courts, a non-corrupted police, effective armed forces, then I would vote for that strengthening of the state with both hands. But we don't have that.

The best way to get non-corrupted government is to reduce its power and thereby its allure to the corrupters. This point has always been lost on Gorbachev, and it eventually lead to his own downfall. After fifteen years, he still doesn't get it.

Categories: economics