Harvard Receives $40 Million USAID Contract to Advise Russia's Economic Transition: 'Harvard's Blank Check from Uncle Sam'

Harvard University’s Harvard Institute for International Development (HIID) received a $40.4 million contract from the United States Agency for International Development (USAID) to provide advice on privatization and market reforms in post-Soviet Russia, awarded without normal competitive bidding procedures. The project was headed by economist Andrei Shleifer, a protégé of Harvard economist Lawrence Summers, and lawyer Jonathan Hay. According to a Government Accountability Office investigation, this unusual contract granted HIID extraordinary power over the distribution of USAID’s entire $300 million portfolio for Russian development, meaning it effectively supervised its own competitors. Professor Janine R. Wedel of George Mason University described the arrangement as ‘Harvard’s blank check from Uncle Sam.’ The HIID team worked closely with Anatoly Chubais and Russia’s privatization program, providing policy advice that shaped the rapid voucher privatization and later the loans-for-shares scheme. However, the project would later collapse in disgrace when investigations revealed that Shleifer and Hay used their positions and insider information to profit from investments in Russian securities markets through their wives and girlfriends, violating strict conflict-of-interest provisions in their government contracts. The Harvard project became emblematic of how U.S.-backed economic ‘reform’ in Russia enriched a small class of oligarchs while devastating ordinary Russians. Critics argue the effort, touted as democracy promotion, instead helped consolidate power among oligarchs and fueled the economic inequality and corruption that laid the foundation for Vladimir Putin’s authoritarian rule. The scandal would eventually cost Harvard and the individuals at least $31 million in settlements with the U.S. government and contribute to HIID’s dissolution in 2000.