Eastern Europe’s market for policy ideas, suddenly opened in 1989, was swiftly captured by an Anglo-American product with a liberal brand name.footnote¹ This policy equivalent of fast food erected barriers to other new entrants and established a virtual monopoly on advice in most target states in the region. While some critics view it as having as much connection with West European liberalism as a Big Mac has with boeuf bourguignon, it has made up for any deficiency by superb advertising and aggressive salesmanship.

The public launch was handled by the Economist on 13 January 1990 with a long article by Jeffrey Sachs of Harvard. Under the significant title ‘What is to be done?’, Sachs wrote in the style of a Lenin of decollectivization against all the assorted Menshevisms of half-measures. Yet the article is worth re-reading for it reminds us of the status of the debate in which Sachs was intervening. It was about how the West should seek to reshape the life of the entire East European region. Only one aspect of the debate and of Sachs’s policy concerned the sequence of domestic changes required of governments in the various individual states. Indeed Sachs’s programme was about creating an international environment in which the domestic aspect of his policy would become the only rational course for any government to pursue.

Sachs’s proposals were enthusiastically supported by both American and British policy-makers and they have become household names in Eastern Europe: every Russian schoolchild learns about the ‘three zatsias’. Such popularization is also widespread in Western universities where the policy is boiled down to an abstract, universal tool-kit for the diy construction of Market Economies out of Communism: an immensely attractive format for university teaching. At the same time, Sachs’s ideas have received the very highest accolades from the Anglo-Saxon academic world. The Harvard professor gave a famous series of lectures on his paradigm at the London School of Economics. These were subsequently published by mit. He is widely credited with founding a new discipline, ‘The Economic Theory of the Transition’. Since Harvard and lse professors would buy it and even sell it, few policy intellectuals in the defeated East could have the self-confidence to doubt its scientific credentials.footnote²

In truth, Sachs has never claimed to be offering either a tool-kit or a new theory. He is not a crude purveyor of ideological nostrums, but a serious and independent theorist who is nobody’s lackey. He is, however, also strongly committed to a vision of a globalized, unified capitalist world which he believes would benefit the whole of humanity and he evidently saw an opportunity for bringing that vision closer by becoming involved in formulating a policy for the transformation of the East European region. Like all rigorous policy, his contains a more or less explicit model of the behaviour of the relevant actors and of the ways in which they will interact in given contexts, faced with given constraints and incentives.

We will first try to clarify what Sachs’s policy model has actually been. We will then examine the extent to which the main actors identified in the model have actually behaved in the way the theory predicted. And in the light of that experience we will attempt to draw some conclusions about the real relationship between Western policy and the ideas propagated by Sachs and his followers, and suggest an alternative model for understanding what has happened. Sachs’s policy has had various names: shock treatment, radical economic reform, Big Bang, the ‘three zatsias’ or shock therapy (st). Sachs himself has not been happy with any of these names but has come to accept the latter name and we will follow him in this, calling his model st.

Sachs’s model has the characteristic problem-solving form familiar in policy analysis: it says, if you want to achieve outcome A, then you must get actor X to produce output Y, which will then interact with its environment in such a way as to achieve outcome A. The model makes assumptions about the behaviour and motivations of the relevant actors, about how they will respond to given negative or positive incentives and about the context in which they act. We evaluate the model by judging whether it really will achieve outcome A and, if so, whether it will achieve it at least cost.

Sachs formulated his model to solve one big problem: how should the entire ex-communist region of Eastern Europe and the ussr be re-organized in order to achieve, in Sachs’s words, ‘a recovery of human freedom and a democratically based rise in living standards.’footnote³