Boris Yeltsin, Continuing the Tradition of Wretched Russian Government

"Under capitalism, man exploits man. Under communism, it's just the reverse."

Boris Yelstin is dead. He was like a drunk driver who drives the car out of the ditch, shoots across 9 lanes of traffic, and gets stuck in the ditch on the other side. His is a story of wasted opportunity.

For one thing, we sent economists to advise Yeltsin and his country, economists who knew all about how to manage an economy assuming one had savvy business people. We also sent business consultants, people who knew all about how to manage a business assuming a stable economy. It wasn't obvious that anyone knew how to create chickens without eggs or eggs without chickens. In that sense, Russia would have struggled with this, its latest attempt to circumvent the gradual progress of the rest of Europe, a tradition that began with Peter the Great.

Secondly, Yeltsin gave away the state, privatizing large chunks of the economy in a way that favored an elite few. Today, 36 men own 25% of Russia's wealth - a ridiculous concentration of wealth that seems a caricature of the inequality found in the West. This is not the result of entrepreneurship - it is a result of government-sanctioned theft. It is this more than his role as the first elected president of Russia that will be Yeltsin's legacy.

These two issues would have been enough to make Russia a mess. But I suspect that there is a third no one talks about: capitalism died about the same time that communist communities realized that they had a non-working model. Yeltin tried to lead Russia from communism to capitalism late in the 20th century, the equivalent of moving a society from 8-track to cassette just as everyone was buying mp3 players.

The battle between communism and capitalism wasn't a battle over the importance of capital. Both sides saw it as paramount to a working economy. It was Marx's, not Adam Smith's, landmark book that was titled Capital. The battle between capitalists and communists was a battle about who should control capital, the state or the banker. It is true that the banker proved superior to the state and the tyranny of robber barons was harder to maintain than the tyranny of police states. In that sense, Russia was overdue to transform away from communism. But the question is, towards what?

In today's $40 trillion global economy, capital is no longer the limit to progress. In the period of time when the average worker is now a capitalist - when even Sears and GM have become huge bankers - trillions of dollars of capital are sloshing around the globe in search of returns. Capital is essential, but it doesn't limit the development of today's leading economies.

What the leading G-7 communities have done in the last century is create hybrid economies. Most citizens are vested in social security and a 401(k) or pension plan. The state regulates some business activity yet businesses are free to do things that regulators haven't even thought about. Laws that prohibit child labor and regulate work place safety have transformed the world from the late 19th century world of Dickens’s and the robber barons who hired Pinkerton men to beat up or kill union organizers. But these laws do not prohibit bankers and entrepreneurs from creating a greater number and variety of businesses than ever before. The best communities have made government and businesses both accountable by using each, in turn, to call the other into account. The point is not to submit to the tyranny of either, but to play each off against the other in a way that gives the individual a fighting chance. It is, finally, the individual who should be empowered and protected by institutions. Failing that, the community itself eventually fails. It isn't communities that are subordinated to bank or state that succeed but those that manage to subordinate both to the average person.

Russia has a history of contempt for the average person. The imperialism of the Tsar's, the communism of dictators and the democracy of Yeltsin and Putin are governments that share a basic contempt for the rights, freedom, and plight of the individual. Whether Russia adopted communism or capitalism is almost unimportant in comparison to this. Until Russian institutions show genuine regard for the individual, Russian society will continue to be a threat to its citizens and its neighbors. Sadly, that doesn't look likely to happen any time soon.