Harvard's Sachs Becomes Yeltsin Economic Advisor After 'Grand Bargain' for Soviet Support Rejected by Bush Administration

Harvard economist Jeffrey Sachs became a formal economic advisor to Boris Yeltsin’s economic team in December 1991, after Yegor Gaidar—soon to be acting Prime Minister—contacted him in September requesting he come to Moscow to discuss Russia’s economic crisis. At that stage, Russia faced hyperinflation, financial default to the West, collapse of international trade, and intense shortages of food in Russian cities. Sachs had begun informal work with Gorbachev’s economic advisors during 1990-1991 and had worked on a project at the Harvard Kennedy School with Professors Graham Allison, Stanley Fischer, and Robert Blackwill proposing a ‘Grand Bargain’—large-scale financial support by the U.S. and G-7 countries for Gorbachev’s ongoing economic and political reforms. They published the report ‘Window of Opportunity: The Grand Bargain for Democracy in the Soviet Union’ advocating Marshall Plan-style assistance. However, the proposal for large-scale Western support was flatly rejected by what Sachs called ‘Cold Warriors in the White House’ under President George H.W. Bush. Gorbachev came to the G7 Summit in London in July 1991 asking for financial assistance but left empty-handed. The rejection meant that when shock therapy reforms were implemented in January 1992, they proceeded without the substantial Western financial cushion that Sachs and others believed was essential for success—the same financial support that had helped Poland’s reforms succeed. Sachs later placed significant blame for the reformers’ defeat and Russia’s economic collapse on Western policy, stating ‘Western assistance was promised but never came…The reformers never got the backing they needed.’ The decision to deny financial support while encouraging radical shock therapy reforms became one of the critical policy failures that contributed to Russia’s economic devastation and the rise of oligarchic kleptocracy. Sachs would resign as advisor in January 1994 after anti-reform officials replaced his key allies Gaidar and Finance Minister Boris Fyodorov.