Russian Reform

From the March 1999 issue

Russian Reform

In "When Property Is Theft" (December), Edwin Dolan ascribes Russia's failure with capitalism to a dysfunctional court system that does not protect property rights and a corrupt banking system that puts profits before stability. Dolan sees a long period of drift and experiment until the "government" (some future government) stops "enriching the ruling class at the expense of ordinary people."

After a steady stream of articles on government as the problem and market forces the solution, it is startling to find REASON suggesting that the private sector can be at fault and in dire need of government intervention. Of course libertarians have always believed that the little government they would allow should uphold property rights and enforce contracts, but was it ever thought that free-minded individuals (bankers, no less) would conspire for quick profits at the expense of the national economy?

Perhaps the "answer" lies back at the beginnings of laissez faire, as conceived. People will pursue their own self-interest, constrained only by market forces. According to Dolan, however, market forces are not in place in Russia and will have to be imposed by a determined government. Apparently the invisible hand is not self starting; it needs to be set up and regulated, at least until there are appropriate institutions and the avarice of the population has cooled.

Denton Porter
Long Beach, CA

Edwin Dolan replies: In asking whether the invisible hand is "self-starting," Denton Porter raises a point that is at the heart of the "who lost Russia" debate now raging among Western observers of that country's efforts at reform.

There are three points of view:

1) Yes, it is self-starting if only government would get out of the way and dismantle such barriers to enterprise as the bad tax system, corrupt bureaucrats, protectionism, etc.

2) No, it is not self-starting, because Russia lacks the "soft infrastructure" of a market economy, e.g., civil courts, property protections, and rational accounting standards, which took centuries to evolve in the West but should have or could have been imposed by government fiat if only Russian reformers and their Western advisers had recognized them as a high priority.

3) No, the invisible hand will not self-start in Russia, because of cultural and ethical factors, such as lack of trust, prevalence of "black envy," dominance of the "guardian" moral syndrome over the "commercial" moral syndrome, and a history of authoritarianism under czars and commissars. Holders of the third view are the real pessimists because, unlike holders of the first two, they don't see any possibility that government could help either by stepping aside or by imposing solutions.

My own view has changed over time. When I arrived in Russia in 1990, I, as a good libertarian, was a strong adherent of the first view. I now lean toward the third, although I think there is some truth in the second in terms of misplaced priorities of both the Russian government and its Western advisers.

By the way, Russian bankers are not, for the most part, "free-minded individuals" but sophisticated con artists who have systematically defrauded their depositors, creditors, and minority shareholders.

Radon Reaction

Concerning "Gaseous Menace" (December), there is a radon study that Kenneth Silber did not mention. Bernard L. Cohen, a professor of physics at the University of Pittsburgh, headed up a 10-year study of radon and lung cancer. He looked at radon concentrations and lung cancer deaths in more than 1,600 U.S. counties.

The results surprised Cohen, who was sure radon caused lung cancer. The counties that had the highest radon concentrations had the lowest lung cancer death rates. And the counties with the lowest radon concentrations had the highest lung cancer death rates. Cohen did not want to believe the results. He tried to find some factor to prove the study wrong. He could not find one.

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