Heritage. Org web se. Those who ll be joining us on a future occasion on cspan become tv. Inhouse we ask that you see that our mobile devices have been silenced or turned off. For those watching online, we remind them that theyre welcome to send questions for comments at any time, simply emailing speaker at heritage. Org and we will post the program for the heritage home page for your future reference. Leading our discussion is ted broman, Senior Research fellows. He looks the angloamerican relationship, the u. S. Leadership role in the world. Before join hisas yale associate director or International Security studies and also a lecturer in history and International Affairs for yales master of arts program. He is now also an adjunct professor of strategic studies at Johns Hopkins university. School of advanced international studies. Please join me in welcoming ted vroman. Thank you. Normally win we cold events in february i thank those who attend because of the atortious weather because of the snow and sleet. Today i want to thank everyone for attaining edition spite its 65 degrees out there and feels like spring. So thank you for joining us here. As my boss says, sometimes its important for us at think tanks, centers on Public Policy options, to step away from immediate policy concerns for a little while and turn to longer, more historically informed questionses and discussions. When you look the kind of things were worried about here at heritage, certainly in the Foreign Policy realm, a lot of them tend to resolve around questions relating to russias Foreign Policy, russias domestic economy, chinas Foreign Policy chinas domestic economy, and i dont think its colorful to say the common perception out there today is that china is a very strong and rising nation, and russia, although perhaps tactically fairly strong, is in the long run in a relatively weaker position than china. Now, short advertisement were having Event Next Week on tuesday, speaking about asia, which will question a little bit the idea that china is a strong as we believe it is, but certainly thats the common perception. How did we get to this night well in the early 1990s, there was sort of a common perception out there, and i just was digging around in my own personal archives a parent on russia and china and this is the would informed and senior activities were thinking about the question in 90s. If there is a lesson to be gained from the comparative experience of the ussr, hungary and the post soviet city is that common just leaders gamed more stable regime transition when they chose to seek democratic support. It seems the past china is determine to follow, abandoning communist is destabilizing. So in thearm 1990s and one has to remember the importance of Tienmen Square and the notion that the soviet union was 0 the right path, the path to reform and china was on the wrong path, the path of repression instability. And Tienmen Square. It was just prefer goldstone and others who were interested in the comparison between the ussa and china. Mikhail gorbachev what also very interested in this comparison and it in fact comparison and the effort to learn lessons is the center of our event today. Its my pleasure to welcome to hair canaling dr. Chris miller. The associate director of the brady program in yale university, program i know extremely well having been involved in its foundation in 19992000. Dr. Miller was leak tourer in moscow, the visiting researcher the and he has hell fellowship in the german marshall found me and Hoover Institution and received his ph. D ma from yale and day history from harvard university. Join me in welcoming dr. Miller to speak on his first book the struggle tsave the russia economy. Published in 2016 by unc press. Dr. Miller. [applause] thank you very much. An exciting time to talk about russian history not only because russia is in the news a lot tied for good reasons and bad reasons and this is an anniversary for russia. September was the 25th 25th anniversary of the soviet unions collapse and this year is the history of the russia revolution when the communists took power. So very timely period to look back at. The source of russian history that led to the current government taking power. Would like to turn back to period 25 years ago when the soviet union wag beginning to fall apart and ask what went wrong and why. To do so id like to compare that period of history with china. The period the end of the cold war in 1989, the fall of the berlin wall, establishment only democracy in central and Eastern Europe you may not thing o beijing as central but in may 1989, you have photos of a mass in Tienmen Square, but gorbachev was a prophet of democracy. And the chinese protesters were April September belled in may coming to visit beijing, the first visit bay soviet leader to china from time of khrushchev. A period of new relations between the two countrys governments. After 1989, the two countries diverged sharply, heres a chart of chinese and russian gdp. And china has done very, very well, and the soviet union and its successor states have done rather poorly. If grew back to 1985, the year that Mikhail Gorbachev took power, becomes clear that although the soviet union is in stagnation from the entire post war ford 1985 it was not in state of crisis in 198 5689 the budget deficit is at zero when gorbachev took power and then the budget collapses and the question i would to ask what was about perestroika that led to the entire country hurdling towards economic disaster. Why did that happen . There are two basic schools of thoughts in explaining the collapse. One on the left end, the other on the right end and beth arguments make reference to china. On the left of the political speck truck the argue. Is that the soviet union should have followed chinas more gradual economic transition. That capitalism created to much corruption or not enough output and if only gorbachev followed the chinese economic path he would have head better results. On the authoritarian right, the argument is very different but made a reverence to china. The argue. If only gore chef had abandoned democracy and kept authoritarian rule others the he could have pushessed reforms that would lead to better outcome. Soen oright to very different arguments but both assume the soviet union could have learn something but china but failed to do so. And i was struck when i first began my research in soviet archives and i spent two years in moscow digging through papers to find dozen of references from gore chef and his top advisers as the study the chinese example. That the chinese were doing to make their economy grow, how were the chinese transitioning from a socialist economy to a market economy and what lessons could they learn from chinas experience. So first maybe rolling back as to why would the soviets be looking the chinese as a model Economic Growth to begin with . You might expect that as the soviets transitioned towards market socialism they would look at hungry or yugoslavia which had a mixed economy. But by the 1980s in perestroika was being form lated the were in the midst of derecessions. This is gdp in several European Countries none of them looked like appealing examples of market sojim when perestroika was being designed. At the same time to many soviet officials and many in the west america was a less appealing mod of capitalism. It was the era of stagflation and then when the feds hiked Interest Rates many in west questioned whether capitalism hat a future across the world as a period over japan as number one, and Many Americans believed that japan found a new model of combining democracy and capital limp that provide higher growth rates and less social division. Fewer strikes, a lot of Political Tension less political attention and. And it went only in the u. S. Where people were looking at japan. I was surprised to find dozens of footnotes in soviet sources citing the book, jap is number one, Say Something new is going on here. But if you were the soviet union looking for asia models of capitalism, then the natural place to turn was not japan or south korea or the asia tigers but to the socialist country in east asia, china. And that dozens on dozen of leading soviet economists, officials, political advisedders, visited china in 1980s and visited shanghai to lauren about Chinese Industrial forms and visited the countryside to learn about agriculture and after all the visits they wrote memos to tone leaders saying this how china is transitioning to capitalism and these are the lessons the soviet union could learn. So across the soviet political system, everyone was aware of what china was doing and everybody was thinking about what lessons might be drawn from that experience for the soviet union. So i hope ive convinced you that the ideas about what was going on in china during the 1980s, the next question is how do the new examineds interact with the political structures that dominated soviet politics. Here, too i was my research was very much shaped by the archives i visited. Three types of sources. The first are papers from soviet research institutes, the think tanks of the soviet union. The second sores are papers from government bodies like the state bank or finance ministries that were actually implementing reforms and third, the most important, records from the soviet politburo, th policymaking party that made all editions. From 1985 to 1991 a view instinct into the papers because for most of to post war period the papers closed but when gore chef was in power, three of his aides took regular notes testify moot examination deposited the notes in a different archive and we have the this unique glimpse into the top levels of soviet politics unlike any other period during the cold war era. When you look through the sources, you immediately discover that not only was the communist party itself powerful, naturally enough, sings it was running the government, but also Interest Groups that played an enormous role in soviet politics and the first group is the military industrial complex, the second was the fuel energy complex, the network of gas and Oil Companies that made up russians biggest export industry. And the their its the agroindustrial complex are words that i didnt these are russian words translated into english. The words they used to describe groups that bread an imsentence role in soviet politics. Found as the soviet union debated reforms they saw china implementing, these three Interest Groups played a big role in shaping the outcomes and gorbachev had to compromise with these groups who felt threatened. Want to give you to okayed studies of gorbachev announcing new reforms and the Interest Groups pushing back and demanding they get benefits in exchange. The first case study is industrial reforms, it was a province in china which fit experimented with industry forms. So the soviets visited china to study what they were doing to toe make industries more efficient. And they realized that china had provided a knew set of incentives for state opened form and replaced the policy of profit confiscation, to suddenly having incentive to make a profit. Soviet officials believed they chinas new incentives were illinois couraging enterprises to be mow efficient and produce more and make money, but when the ideas were introduced into the pollitt bury rove they failed the politburo they faced pushback, the new ideas threatened socialism the basis of the soviet political system and the second push back was Interest Group based. These ideas threatened Interest Groups which were powerful in the soviet political system. When gore chef introduced the idea of introduces more incentives to make the soviet enter prizes one more efficiently. The longtime soviet foreign minister pushed back in two different ways. First he said this questions the basic foundation of our socialist regime. Capitalism, not socialism, and not a good thing. In a socialist country. The second pushback which grow mikko was that actually its tough for military factories, our industries are lean on legs and no movement, equipment is extremely old. So, a. , these ideas threaten our ideology, and b. , by the way, can you please spend more money on factories that are associated with me. Always this onetwo punch of critiques, threatening socialitt and plies spend money on my favorite industries. All the response. Bogey chef and his advisers were not impress but had no choice but to deal with them. The Interest Groups were too powerful and by the end of the soviet union, 1991, the compromised and they were similar to china. The 1986 it walling now legal to work out of the stateowned business in the soviet union. The law in the state enterprise of 1987 strengthened the incentives for interpries to work effective live and by 1988 the law on cooperative legalized private businesses. Human steps kurds capital him chinaing china. But one big difference between what the soviet union did and the compromises that gore chef had to cut with gorbachev had to cut and he had to promise a huge way of new Capital Investment, all which was wasted but that whats quid pro quo to buy off support from the industrial Interest Groups and i have a chart of a number tv Industrial Production members. They shoot up after 1985 as gore chef summers money into the industrial sector. That the industries demand in exchange for support but the soviet destroys are no mow efficient in 1987 than 1985 sew investment is wasted but stress stretches the budget. The huge cost of the program but no economic benefit. Second indication study, agriculture. Like in industry, the soviet union was very interested in arningbo chinas agricultural reforms. China had this large collective farms like the see yet union where round farmer worked on the same fashion an incredibly inefficient system because individual farmers lacked incentive to produce grape because you were paid not how much grape you prowls elfed but the fact you were a member of the collective farm. The soviet union watched as china moved to individual farming where individual household were given control over their own production and you can imagine this improved incentives and led to higher output. So the soviet union says this looks very sensible, we can implement this measures on our own collectives. But this idea face aid twopart push back. One was ideological and the second was Interest Groups based. The person directly before gore chef influential, he argued in 1989 that the czechs are very worried by the publics on agrarian questions, threatening the victory of social. You. Gorbachev said bullshit. Tame he follows that up by saying by the way, our Capital Investment in agriculture was very effective and we need more spending on agriculture. Turned out that the soviet union in the early 1980s, even were perestroika had by one estimate the largest Farm Subsidy Program in human history. Farms were immensely inefficient and owned far too many tractors, spend too much or first lieder and far less output either per acre or worker than comparable farms in western europe or the united states. The problem wasnt a deficit investment. It was investment was used very poor bailout from the perspective of the farm lobby it made them better off. So as in the industrial sector, gorbachev cut a deal and by 1991 he was able to push through reforms that on paper looked very similar to china. For example, 1991, individual farmers could at least on paper lease land, could de facto own their own land. Payment was based on outand it farm land is decheck tithized and farms were broken into peaces and all this was very similar to china, but like in the industrial reforms, gorbachev had to agree a quid pro quo. In exchange for the legal changes he had to promise more spending on farms. We have a chart of farm subsidies and you can see any measure they increase steadily throughout the 1980s, and they reach the point whereby the increase an form subs did were half over the see eyes of the total budget deficit for the soviet union, an enormous Farm Subsidy Program when you think become to the chart of deficit have of that was explained by increase inside farm subsidies so theit is a enormous. To step can back to the comparison win china, what went wrong. I hope showed that agricultural reforms on paper were similar to china and industrial reforms an well an paper were copied off china but the big difference was the budget deficit. China didnt have to do these deals so didnt have to develop this massive budget deficit and gorbachev had no choice. I he wanted to push reforms through he had to cut deals with Interest Groups and had to spend money to do it so thats how you get this is the same graph i showed the begin this massive budget deficit reaching a third of gdp by 1991. Eform mouse figure. Makes greece look like a very wellmanaged country. In some ways unprecedented. Hard to find other examples of dat where countries with such a large budget deficit. Theres a common theory that one of the major causes of the soviet budget deficit in the 1980s wall decle in International Oil prices. Its true the oil presses fell and this hurt the soviet union ask decrease the export revenue. But its also important to recognize that the decline in oil export rev enough explained only a portion, less than half of the increase in the budget deficit. So certainly oil stressed the budget situation but so too did farm subsidies and there is no i think its important not to blame it all on outside factors like oil prices when in fact there were many domestic causeses that were no less important if not more important. Any government that has a budget deficit faces three basic options. One, you can cut spending. Two, you can increase taxes. And, three, you can issue debt. Gorbachev felt and accurately in my view, deeply, this, that the first two options were not if you tried to cut spend organize raise taxes either the industrial lobby or farm sector would throw him out of office ump if you tried to increase taxes and cut spending on civilians and households there would be a huge surge of pop unease unrest that lead to him being removed. This couldnt raise tax or cut spending and the only option to run the deficits was to issue debt. In the early years of perestroika is was pack to bauer from abroad so american, german other, lenders, issued debt to the soviet union but in 1989 the markets were closed because the soviet union was seen too risky. So the on option lift was to print money and they did in a truly massive scale. Deficit find by money creation. Theres basically no deficit finance money creation until 1989 and then shoots upwards and this is gorbachev paying the cost of the deals he cut with the farm lobby and industrial groups. Thats surge of money throughout the soviet economy. In a capitalist economy win the money supply increases rapidly so, too, do prize but in a planned socialist economy prices are set by the government so prices cant increase. At least in legal markets. But the incentive you face when the money supply is increasing rammedly and prices are controlled are to sell your goods in nonlegal markets, and so beginning in the late 1980s and 1990s production rushed the black markets as everybody reelized made no sense to sell in state markets when you could only goal two you could get 200 rubles in the black market so as producers of gods rushed to black market the tax state collapsed because the market was not take expelled the ability to gather resources for spending just disappeared. So by 1991 when you get to famous military coup guess gore chef in 1991 when the was locked in this crimean dacha. Gorbachev had no more control of the levers opor anwas recent stalled briefly as the lead are burt later gore bore the government what abolished in 1991 the soviet union was no more. Going back to my initial question and the compareson with china, why did this indian a view very nonand russia and china and also to a i call the beijing consensus, about what went wrong in soviet union. A couple of quotes from chinese leaders here. One argued that the problem is that gore chef was a traitor like trotsky. Ironic given that hes the first person to formally welcome business classes into the Chinese Communist party. Xi jinpings son said my father thinks gore chef is an idiot. A popular interpretation in russia today, and most interestingly right now is xi jinping i argued why did the soviet syndicate, nobody was a real man and nobody resies and thinking of tienmen and the Chinese Party revisited and if you visit beijing theres talk about how xi jinping is looking at putin how a mod toll evolve the chinese system. So the strong man, authoritarian idea remains alive in well in beijing. What hope i suggested toy that the comparison between china and ruia or the soviet union misplays the vast diffences in their politics. In the see yet union Interest Groups were strong and gorbachev was weak. In the soviet Union Political were a threat rather than an opportunity and the communist party in soviet union was strongly opposed to reform rather than a proponent of it and all these things were different in china almost everybody supported reform effort sod the domestic poll sicks where the exact opposite. And one of the ironies is that one reason that gorbachev tries tome brace democracy, the critique he had given from the authoritarian right today, that whats only hope of outmaneuvering the communist parties to push through reforms so couldnt use the party apparatus. He had to find legitimate so. It was an Economic Strategy to find a way around the Interest Groups that dominated the party. This is the graph that colors or perception of the cold war china, shooting upwards and the see wrote union collapsing but i hope i showed you today this isnt simply evidence of chinese wisdom in reform are more slowly or keeping authoritarian grip on power. Its evidence of the failure of soviet dome poll sicks to bring a Reform Coalition to power that could hey found a way from communist to capitalism without political collapse. So with that id be happy to take any questions that you have. Great, thank you very much, dr. Miller. [applause] ive never heard of a country with an enormous budget deficit financing thing biz create midnight on a large scale. I certainly would would never do such a foolish thing in the united states. Soso with that small comparison, im going to take the usual moderateyear roz privilege of asking thest questio we have not seen lot of these for a while but tom friedman has a regular series, in pray of Chinese Government is strong, strong government is Good Government, Good Government can build highspeed railways and Tall Buildings and canals and whatever else the thought was a good idea. Well, ive never said this sentence before in my life but tom freedman was wrong. Strong, authoritarian Chinese Government is a good idea. Can you take on the contemporary china in light of his newspaper columns. For sure. In many ways actually china today faces situations very similar to sovietout in the 1980s. Very different but if you look the soviet union then and china knew theres similarities. China is not facing economic collapse but if you look the political structure things are more similar that jinping xi jinping would like to admit and its the economic role Interest Groups make in policymaking in china. Am everyone agrees that government invests too much on ways that are economically inefficient and have been saying this since the mid20s. So too much investment. Not enough Household Consumption and note waste money on inneeddednvestmt. Xi jinping makes comments regularly. If you actually look at chinese Economic Data you dont see much evidence of that at all. In fact theres no shift that is politically visible towards chinese loud households the reason is because whatever xi jinping says, the Economic Policymaking process and the chinese commune nist party is dominated by Interest Groups which have a great interest in keeping investment levels high. There are concerns Chinese Enterprises are leaping towards huge wastes of money as investment is increasing rather than decreasing and so there is some concern that although on paper chinese leaders have immense power in rate xi jinping is very powerful in comparison in the citizen in the party elite he is trying to wrangle he has fail to do that and actually leading china a more sustainable economic path. So there some real lessons that china ought to learn from the 1980s, and not lessons but authoritarianism but lessons before making sure you have the right interests in your party to make sure you have checks on the power Interest Group inside your political structure. Great. Thank you very much, dr. Miller. Ill be loud. Doctor muller could you repeat the question for the benefit of future visit ewers. [inaudible] [inaudible] the question is about soviet expectations of chinese Economic Growth after the 1980s. You can go back into the soviet archives and look at the Economic Forecasting institute of the soviets had which was developing forecast for chinese growth in the 1990s and 2000. What you find is that soviet forecasts were fairly optimistic about growth. They didnt expect to repeat the cultural revolution, they they didnt expect to repeat the leap forward, they believe Deng Xiaoping had finally change the political economy. They were optimistic about china which is one of the reasons they thought it was an interesting model to work from. Gentleman seated in the back i just recently graduated from the school of economics in london and one thing i took a class on the rise and fall of the soviet union and one thing that we said in the gorbachev class was that the end of the cold war affected soviet economic performance. In your opinion did the end of the antagonistic relationship between the soviet withdrawal and americans and afghanistan and angola, ethiopia, north, North Vietnam affect the soviet military complex which affected the ability oforbachev to implement reforms . The answer is not quite that much. When gorbachev was meeting with president george w. Bush in malta this was right after the when wall had fallen colin everyone was withdrawing forces from Central Europe and bush said to gorbachev were cutting military spending and home why dont you try to do the same thing itll be good for your economy. Gorbachev said to bush, listen we need to reduce arms so that the military doesnt to. He feared correctly as he turned out that it would lead to a coup. The reality was that gorbachev might have wanted to cut military spending, the reality that it was politically infeasible to the crew was delegitimized. Basically theres not much evidence that any increase in military spending until 1991. Certainly the soviets were redrawing from places in africa and elsewhere and fighting proxy wars but these were marginal costs compared to the total size of the soviet military budget. Thats just the immense power of the soviet military politics. I saw another hand. Yesim a retired u. S. Navy and i was repressed impressed and i wonder if thats the extent translation for bs. Do you happen to know the russian for that word that he used . I translated it but i forget what the exact word is but its a fairly exact translation. They didnt always use the cleanest language. [laughter] in the 1970s one of the common diagnoses to a certain extent of american politics certainly british politics was the democratic system riddled by Interest Groups. To the. That any sort of meaningful economic political change turned out to be impossible. That diagnosis fell on harder times in the 1980s and in the uk with Margaret Thatcher and the us with reagan, turned out to be systems were malleable when Interest Groups were less significant and theorist in the 70s had argued that they were. Is there any comparable soviet discussion before gorbachev comes along, were building up enormous Interest Groups mac weve built up enormous Interest Groups in this country and it lacking the system into a kind of historical science and literature even now on this question as relates to the west. Its a rather high quality. Did the soviets conceive of this is a problem before they got to the cliff of 87, 88, 89 or did it not just come up . Thats a really important question. It cuts to the core of soviet politics. If you think of the mindset of soviet leaders in the 1960s, 70s, 80s, all of them had lived through stalinism which is a. When soviet officials were rotated rapidly sent to the gulag, shot in large numbers and that was stalins way of rotating various elites around the country and making sure Interest Groups simply didnt form. Under stalin if you we a factory manager you had a strong incentive to make sure your factory produce efficiently because the cost with high if you displease the leader. When brezhnev came to power in the 50s and 60s, they actively try to move away from stalins methods in part because there was so aversion in the party to the leads having the brutal methods used on the lead itself so joe was the first to move away from a largescale use of violence in the political and brush that had a policy called the stability of padres. This promised that there would be a lot of rotation either among political lead. He was an active and attempt to have rotation as a response to the chaos of the stalin. The effect of that is sclerosis and stagnation. As you had fewer people moving between different groups and no incentives to act efficiently and be efficient, it declined rapidly. This is nothing compared to china. Its not a coincidence that Deng Xiaoping was able to enact these immense reforms after the cultural revolution and this was an immense shock on the communist party. Whatever groups existed were torn apart by the violence of the revolution in china. There is an uncomfortable silverlining in china because destroyed the Party Infrastructure and made it possible for Deng Xiaoping to push through large scale reforms which would have been possible at the cultural revolution not taken place. In the soviet contact everyone had lived through stalinism and didnt want to see it repeated. There a lot of resistance about those methods. The gentleman at the very back, please wait for the microphone to get to you. [inaudible] i think the answer is not that much direct economic effect. One of the things that you have the labor camps certainly they were political tools but they were economic tools. I wouldnt say there was a direct tie between the decline of the labor camps in the perestroika reforms that you see later on. I wouldnt try a one to one comparison on those two different trends. Gentleman, yes, please wait for the microphone. Looking forward after the gorbachev years if y might comment on how these Interest Groups politics affected the privatization process in russia for smart. Thats a good question. When the soviet union collapsed in 1991 it had different effects on the different Interest Groups. Because the military had led the coup against gorbachev, it was largely discredited and also heavily damaged by the fact that the country split into separate countries. You had military spending fall sharply in 1992, 93, 94 because it was politically possible to reduce the amount of spending under the early years when gorbachev was president. The agricultural faced the cuts because they lost their representation in moscow. The patroness that had sustained them for the entire soviet was destroyed in the party collapsed and subsidy costs declined. The industries however remains very influential. Not only in russia but in other soviet countries so when you got to the. Where privatization was be discussed in 92, 93, 94 the industries basically dominated the dumas. The dumas only allowed certain pride is a station if it gave benefits to the managers of those indices. The soviet era managers that were still in place and 93, 94 forced the duma to pass a law against its wishes of ownership shake for free. It affects privatization when it steps back and it looks like a significant change in russia in part because even before privatization happened in legal terms it had already weakened in de facto terms. The soviet managers after 1991 of these control of their businesses, took the profits for themselves and iran them as if it was their own personal property. As outsiders look at privatization was actually a legalization of what had already occurred by force. The mafia groups using connections that had been forged in the soviet period. A lot of the literature that focus on privatization in the 1990s actually misses the fact that privatization had artie happened threatened during the collapse in the legal changes that had artie shifted. Will save the way Interest Groups avenue and flow reminds me of the books of all the, the rise and decline of nations. If anyone in the audience has not read this work i encourage you to read it. Mid 1970s, 78, 79 i think. Olson argues Interest Groups build up in society and polities especially ones that dont lose wars and that the best thing in the long run is to lose a war occasionally so you have a chance to flush the system out. Cultural revolution is made a war on the Chinese People its not a vengeful war but its a war and the soviet union from this perspective feels sort of like aartial war, though not not a complete one. Olson wasnt writing about communist china or the soviet union mostly about western society but its remarkably insightful book and confirmed certain assent by the research youve done. One of the things that you realize when you look at the comparison between the soviet union and the western economies is that it turns out that when you look historically from 1945 to the present democracy in the long run has proved a reasonably effective means of shifting elites in a way that leads to Interest Groups not forming in a two detrimental way. Nowhere near on the scale that they had in the soviet union, and i think the question for us looking at history is what are the institutions that we need to make sure that we dont have Interest GroupsEven Stronger than they are certainly in the long run Interest Groups that gain power is bad for everyone. Its a question for us to think about. Gentleman in the right front, please wait for the microphone. [inaudible] im a cfo and you can see by the name i know a lot of that stuff. Im from bulgaria, graduate of business and planning. Unfortunately i missed the beginning of your lecture but basically going with the chinese comparison, first of all we do know china will be successful in second it misses the fundamental difference between china and russia on the economic. China is homogeneous natn and the ssians have a multi structure, china is now people are the only resource of china and russia is the opposite people people are the only problem for russia [all the economy is based on which National Resource which all the local guys being ethnically and having a federal structure from the beginning were trying to get control. The most important thing in you alluded to it, is that russia is more militarized than china. The Defense Budget is basically that the Defense Ministry is in a position of any other market that was useful in any way. Those three things are very important and incorporating your description but the most important thing and you alluded to that but the emphasis is not enough. Gorbachev created a democracy and a conference and 87 or or 80 pass the law that congress of the soviet peoples deputies which for the first time created legal competitive elections and created a body which were not directly party and the system which were completely based on vertical power, this open the door for corruption. You have all these rich assets oil, gas, you name it and you have the collapse of Central Control and people expect all of these laws that you mentioning to become irrelevant. It was a de facto privatization going all through the 80s already. It makes him not relevant. It makes a big difference between the chinese controlling the Government Party and they were change the rules and enforce the rules. The final comment very petty, one of your slides were talking about picture of risk off. Youre losing credility between eerts. Up pick up on a couple of those comments. The centrality of democracy of gorbachevs reform efforts. Thats right. Its important to realize that democracy was an Economic Strategy. If youre running a communist Party Hierarchy that is dead set against Economic Reforms you cant work through the party. Your only option is to find an option away from the party and gorbachev thought that he held elections to bring new people into power and these new officials would be more pro reform than the old ev ones. It is an entirely different situation. They were with supportive of economic reform and thought theyd be better off as a result. The top had to turn the democracy and its Economic Strategy pushed through. It wasnt only a political effort. Will you comment on the soviet regionalism first russian or russian centralism. Its easy to over emphasize chinese centralism. Theyre worried about missing john and theyre worried about these theyre not as confident on the centralism as we might think they are. The second issue is that when you look at chinese Economic Policy making over the past 30 years is largely a debate between region in the center. For example, one of the challenges they have is in reducing its investment rate which theyre trying hard to do is that Investment Decisions are made at the local level and local government officials can get direct from the center but they dont have to listen. Right now theres a big backandforth push between local and central in china spent going on for a long time where china to struggles to get local officials to follow it. I dont see that as being substantially different from the soviet case. In the soviet case the government had no more tools to disciplined local leaders d to incentivize them to follow their instructions. They had no tax base, youre less appealing as a central leader and in trying out the government has arties been able to get a tax revenue coming to beijing so its been able to incentivize and punish local leaders when they dont follow rules from the center. I see centralism as been managed better in china because they had more resources. I left the final question and then will close. There is implicit on a lot of which were seen, the idea that things could have gone better for the soviet union and things could have gone worse for the chinese economy. One of the ways out of the way soviet union might have been cutting spending, not raising taxes, not getting broke but you needed to through options and the fourth option we didnt get. China gets growth. The soviet union gets collapsed. Growth even of a moderate kind kind i dont know if you would have saved for the soviet union but it went have hurt. Why was china able to get some growth fairly rapidly out of its reforms in the soviet union by your telly didnt get any growth at all . Its a hundred in the time lag. Deng xiaoping denies power in 78 and he starts his reform very early and there is not in immediate demand for results. They start in the countryside, slowly moved to the city and he has a decade to prove that his reforms are working. Gorbachev because he faced opposition doesnt have the time. He has to make a big push and hope that it pays off. He makes a big bet by making his deals and the result is that he only has a couple of years and he needs rapid growth in a very couple years and doesnt get good results. He doesnt get that growth in the short time. And then you have this big fiscal inflation crisis that leads to a collapse. If you look at statistics of privatized business over time you do see a pretty substantial growth, improvement but it doesnt happen in the right timeframe for gorbachev political frame. He has to rush and hope that Growth Growth will come rapid enough and it doesnt come rapidly enough. Thats a good note to close on for this story is always a question of time and we have run out of our time today. There are copies of doctor millers book available outside for purchase. I didnt ask him but im fairly sure hed be able to step around and sign copies for a few minutes. In either case ill hope you join me and thinking him for his presentation. [applause]