The 1990s was a time of great hope and chaos in eastern Europe and the Soviet Union. The Cold War had ended and a new Russia was being nurtured by Washington and its allies – at least, in theory. Dr Harry Broadman was part of this ambitious reform programme, acting as the World Bank’s lead for Russia’s cross-sectoral reform of the national economy, including privatisation with an emphasis on foreign investment, trade and corporate governance.

In a career that spans more than three decades, Broadman has worked across 90 emerging markets, be it for the World Bank, PwC, the Executive Office of the US President or as a management consultant. He is currently a fellow at Johns Hopkins University in Washington, chair of Berkeley Research Group’s emerging markets and committee on foreign investment in the United States (CFIUS) practices, and member of several corporate boards. From this vantage point, Broadman shares with Investment Monitor his views on why reforms failed in Russia. 

How far has the Russian economy come since the 1990s? 

When I look at the landscape of the Russian economy and its market structure today, it is not a heck of a lot different than what it was in 2000. Foreign investment is still a relatively insignificant share of GDP, and the economy is not very diversified either in terms of sectors. 

Russia’s privatisation programme failed because Moscow failed to enforce reforms it agreed to, which just led to a more concentrated market. The nationalisation of foreign companies law that was proposed by the Kremlin [in March] shows just how much the lessons have not been learned. Just announcing this proposed law has a disastrous effect for the future as it will now be very hard for Russia to re-establish credibility as a host for foreign businesses. On the flip side too, consumers in emerging markets have longer memories than in advanced economies, so even if some of the big Western brands do re-enter Russia one day, trust will have been broken on both sides.

Ultimately, it is really quite sad that a lot of time and money went into trying to help Russia’s leadership but with small results. I was there during the Yeltsin era and when Putin began.

Do you think the West was a little too optimistic in how it dealt with Nato and Russia after the Cold War? 

Probably, yes, and I do think I was a part of it. The effort that was spent on the ground in Russia during the 1990s was huge. Remember, you had Boris Yeltsin come in, [and] the fever in Washington and other capitals about Russia was: ‘Oh my god, this is so great, Russia is finally coming on our side.’ We spent a hell of a lot of time and money investing in its democratisation and economic liberalisation. 

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But I happen to be one of those people who did think that we misjudged things. I spent years on the ground working with the Russians, and I don’t think people who make policy in Washington and elsewhere really understand the mindset and culture in Russia, or China, where I worked prior to Russia, for that matter. It is going to take a couple of generations for Russia to shift. It is not going to just happen overnight. I spent hours with the senior most people just under Yeltsin and Putin and I saw very quickly that this was going to be really hard. We were starting from the very beginning, since the country had been Communist for so long. It was obvious that many people still held onto the idea of a Russian empire and wanted to revive it. 

On the other hand, the companies and businesses I worked with were much more ready to reform. It was the politicians that weren’t. There is so much inertia in the Kremlin, and I don’t think Joe Biden’s people still fully grasp that. They still think it is sort of like a light switch: ‘We will just do this, and we are gonna win the hearts and minds of the Russians.’ When you go on the ground across all 11 of Russia’s time zones, you will find a lot of people in Russia who really believe what Putin thinks. 

But if you saw this inertia, did you not think that Nato should be disbanded or rebranded, so that it could not be weaponised by Putin’s narrative? Or that maybe the West should have insisted that Ukraine stay Nato-neutral?

It is difficult, but I have a very simple answer to you, which is: if we didn’t take the optimistic route, the alternative would have been really sad. I saw all the barriers I just talked about, but I don’t know what other choice we had. I really don’t know. We acted in hope, and maybe that is my Americanism coming through, but I have also spent a hell of a lot of time in East Asia, India, Latin America, the Middle East and Africa, and elsewhere and have seen how successful reforms can be. So we had to try with Russia,Ukraine, and the rest of the FSU. It would have been a depressing alternative to just tell Ukraine and the rest of the FSU that: listen, it is just safer if you suppress your self-determination. 

So does this mean that you buy Putin’s argument about Nato being the aggressor? 

Putin might actually believe that Nato is a threat to him, and believe the propaganda lies that he has propagated, but at the end of the day, it is all a question of what you think the initial conditions are: do you think Ukraine is a sovereign country? He does not. His invasion reinforces that Nato should be even stronger. Although he does have the support of pro-empire people in Russia, Putin doesn’t understand what is happening in eastern Europe and Ukraine at the ground level, and how people, consumers and companies are behaving and moving towards the West. Or maybe he does. Maybe he sees this reality, fears it, and thinks he can use force to shut that down.