TRAC
Interview Transcript

Kirill Razlogov   (cont)

First of all, the first step of the economic reforms was very simple.  Just keep the salaries at the same level and liberate the prices.  The prices go higher, the salaries are blocked.  So to get more money, people start to work better and start to work more, and productivity increases.  The only problem was with the salaries blocked and prices went up, the salaries were so low that they didn't have the sense to work more, because even if you worked 10 times more, you still get nothing.  So the reaction of the society was pilfering and stealing and reselling things.  And this way, the people could survive and go on living.  And this is one of the not revealed reactions which might be condemned from a lawful point of view, but was the only way for 90 percent of the population to deal with the reforms, because otherwise, they'd just die from hunger.

Another example is given by the privatization process.  A small group of young researchers went to a plant that was to be privatized.  They conducted discussions, met experts, discussed how we could modernize it, what will be the output and the marketing, etc., and at the end, everything was decided.  They decided for a strategy.  At the end, they went to see the general manager and the group of managers of the plan, and in the final discussion, they had been asked only one question: okay, we've decided what we will do; now tell us who will do it.  The answer of the experts was: you will do it.  The answer of the manager was no, now we are owners.  We have to get the money, and you have to find someone who will do it for us.

And that was the general feeling about privatization by people working at an enterprise, that, at the point of becoming owners, they become people who get the money without doing anything.  And it's not something that can be changed quickly.  It's something that has to be point by point.  It changed a little bit at the time, because otherwise, the reactions will be unforeseeable.

So my feeling is that, in this very delicate changes that were already happening in the society, you have to be very careful not to hurt not only the population's feelings, but also the way they used to think about what they are doing here, how they will develop.  Because, anyway, they are more powerful than the political elites.  They can change the way the political elites are acting.  It's not an accident that the outward political elites tried to emigrate very quickly, because they had tried to say bad things about the Russian people, as was quoted by Sasha because they're really afraid of what the reaction of the people might be to what's going on.

And my feeling is that that's why when Aganbegyan spoke about the training sessions of professors and especially training of managers that is going on in every European country and the United States forever--the funny thing about it is that when these people come back to Russia, if they use their training properly, their companies get broke in 15 minutes, because the economic life in Russia is regulated by different--in a different way.  There are two very simple laws in economic life.  One is the law of the kickback, economic kickback--that means when you get some state money or private money, you have to pay in cash, part of it to the person who decides it and who signs the paper.  So if it's 10 percent, you have a decent chance to get the money.  If it's 15 percent, you're oversure to get the money.  If it's 5 percent, you never get anything.  It's a very simple rule, but it works wherever, whatever territory, on whatever place, in whatever office.  And no money's distributed without that.  And the second rule is the rule of the Kalashnikov.  That means the armored force combat between groups that are competing for different economic advantages.  It doesn't mean they're really shooting.  It only means that the armed force that are backing you are meeting the armed force that are backing your competitor or your client was not paying the debt, and they are deciding between them how to deal with the problem.  Who is more powerful wins, of course.  It's also an advance to society overall, because, despite shooting themselves, they are discussing contracts; they are trying to establish some reasons to decide who owns what.  If you want to get a debt back, you never go to court because it doesn't make sense.  So you go to the persons who are backing you.

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