Book Reviews

Revisiting Russia’s Crash

Martin Gilman

No Precedent, No Plan

Inside Russia’s 1998 Default

MIT Press, Cambridge, 2010, 416 pp., $29.95 (cloth).

The global financial crisis has revived interest in previous crises. Martin Gilman’s book, the most substantial contribution to date on the Russian financial crash of August 1998, is therefore timely. Gilman was the IMF’s senior resident representative in Moscow in 1996 and has lived there for all but three years since; he offers excellent insights into Russian policymaking, the work of the IMF, and the evolution of the crisis. He knows the actors, Russia, and the relevant literature.

The Russian financial crash was spectacular. It hit with a triple whammy: default on domestic treasury bills, sharp devaluation of the ruble, and a three-month freeze of foreign bank payments. Fears abounded of hyperinflation and an end to Russia’s experiment with a market economy. This crash was a turning point—for the better. Remarkably, Russia’s GDP fell by only 5.3 percent in 1998, and it grew by an annual average of 7 percent for the next decade. Most of the domestic debt could be written off.

This book is a chronological-thematic narrative of the build-up, the peak, and the outcome of the financial crash. Gilman tells this exciting story well. His is an easy read without unnecessary professional jargon or technicalities, and the author is refreshingly candid about his own views. His favorites are the Russian reformers and the IMF management of Michel Camdessus and Stanley Fischer, while he harbors no sympathy for red directors, communists, nationalists, oligarchs, or Joseph Stiglitz. His many personal observations are both telling and revealing. “The problem on the government side was that no one was clearly in charge.” Key insights include the miserable state of Russian institutions, the severity of the economic problems, and the weakness of the state after the collapse of the Soviet Union. Concerted policymaking was missing and vital information did not flow. Gilman displays many examples of the absence of policy coordination. Incredibly, the finance minister and the chairman of the central bank refused to talk to one another during the financial crisis, while decisions were often made by people without government posts.

Gilman gives a good picture of how the IMF works. Its access to Russian policymakers was impressive, but often its staff did not know what was really going on. Outsiders will obtain an uncommonly clear picture of what the IMF could and could not influence. Most will realize how great the limitations on its power are. The author rightly emphasizes that its greatest role was to promote good policy discussion. On specific policies, he is critical of his longtime employer for having opposed export taxes, flat income taxes, and the stabilization fund. I think his balance is accurate: the IMF is good at acting fast and sensibly, but its policy thinking is intelligent and decent rather than outstanding.

Gilman takes satisfaction in discrediting three myths. Contrary to widespread but false media reports, nobody stole the IMF disbursement of $4.8 billion in July 1998. Nor “was there evidence that...