Putin’s economic team gained a new member with the appointment of Andrei Illarionov as presidential adviser. Illarionov, director of the Institute for Economic Analysis, joins German Gref and Mikhail Mau of the Center for Strategic Research as Putin’s putative gurus. None, however, has as yet a real government position. The key man in the cabinet remains Finance Minister Mikhail Kasyanov, tipped by the press as Putin’s choice for prime minister.
Illarionov is one of the few prominent liberal economists–you can count them on one thumb–who is untainted by the policy failures and corruption of the Yeltsin era. In 1992-1993, Illarionov was second in command at the Working Center for Economic Reforms, under acting Prime Minister Yegor Gaidar. He signed on in late 1993 as an advisor to Prime Minister Victor Chernomyrdin, but signed off in early 1994, publicly criticizing Chernomyrdin’s policies and high-handed style. After the “Black Tuesday” crash in October 1994 that wiped out the savings of millions of Russians, Illarionov attacked the government, and particularly Central Bank President Viktor Gerashchenko (who once again holds that office), for inflating the currency to fund the budget deficit with increasingly worthless rubles. With greater foresight, Illarionov in 1995 denounced the practice of government speculation in its own short-term paper (GKOs); the GKO debt pyramid collapsed in August 1998, taking down the banking system and wiping out savings once again.
In an 1995 article Illarionov predicted that by 2000, Russia’s economy would look like Argentina’s under Juan Perón: “a highly monopolized economy with large and … incompetent state interference. Gigantic financial-industrial groups will be formed [whose strength] will be defined not by their competitiveness but by their proximity to the state.” A 1996 analysis of the role of the emerging oligarchs contains more than a few semi-prescient gems: “The state is not a single entity–it has been privatized in the sense that the officials are being used to further private interests of specific private groups. This is the biggest obstacle not only to reforms but also to any purposeful government policy.”
Putin says, rather cryptically, that “the stronger the state, the freer the individual.” Illarionov also wants a strong state–but his model is the Asian tigers of Taiwan, Korea, and Singapore, where the state regulates and guides the economy but plays a relatively small role in production and in distribution of income and wealth. Communist China, Illarionov says, is economically freer than “capitalist” Russia. But Illarionov last week told a reporter that Russia must uphold democratic freedoms and human rights. That view separates him from dictatorial reformers like Deng Xiaoping and Augusto Pinochet, and perhaps also from his new boss, Vladimir Putin.