 Dr. Yuri Maltsev is a Mises Institute senior fellow and professor of economics at Carthage College, but he's best known as a Soviet defector who worked as a government economist and witnessed firsthand how the economy of the former USSR worked or didn't work. He's famous for having advised senior government officials on both sides of the Cold War and is sought after by Western media as an expert on the Gorbachev perestroika era. We discussed not only his defection from the former USSR, but also his defection from the Marxist economic mindset, the crime of reading hyacinth, why so many Westerners still have a naive and romantic view of socialism, how the ruble was nothing more than a fiat rational coup pod, and why people with contempt for consumerism never visited a Soviet grocery store. Ladies and gentlemen, welcome to Mises Weekends. I'm Jeff Deist. We're very pleased to be joined by Dr. Yuri Maltsev. Yuri, how are you today? I'm very fine. Yes, very nice to be with you today. Well, full disclosure, I had an opportunity to meet Yuri in Chicago once via a mutual friend. We've had dinner. Obviously, you've been to the Mises Institute many, many times over the years and our listeners are probably already quite familiar with your work. I'd love to throw something out to you because I get this impression all the time is that Americans and rich Westerners still have a naive and unrealistic view of socialism. They don't really seem to get what it's all about. But having lived in the former Soviet Union, do you find Westerners overly credulous about socialism? Oh, absolutely. Absolutely. It's very difficult, I would say, for the Westerners to, who are blessed with all this abundance of material goods, of this wonderful choices they have in life, to believe that somewhere else, somebody else does not have these choices. That's why I would say that many, many rich Westerners, they embrace socialism. They think they will have it, but everybody else would be the same as well. Let's speak about the college students you teach. You've been at Carthage for about 20 years, so today you're teaching the millennials relative to their parents who are mostly baby boomers. Do you find them receptive to market ideas or do you find them also somewhat brainwashed, somewhat, you know, do they lack knowledge about what socialism really is? I would say that during my 23 years already at Carthage, I can see that there is a lot of cultural changes are going on, negative cultural changes are going on in our society. Because the students coming out of the public schools here in the Midwest, I get one of them more brainwashed and we are more socialistic than they were 20 years ago. We have some, the liberty minded people have some dense however in this mentality because on campus we have a thriving Ron Paul group. We have young Americans for liberty group, so I think that we should be very thankful to Ron Paul for introducing ideas of Austrian economics into the mass audience. Today a lot of students know what Austrian economics is all about, while 23 years ago very few, if any, would recognize this term. From another hand, majority of students are still, I would say, still within the so called mainstream socialist ideology, which is predominant in the United States. You mentioned Austrian economics, this is a question I've always had for you, I mean I can understand coming to the United States as a defector from a Soviet economy that was dismal, that you might have an incentive to embrace free market or capitalist principles. But how did you come to be an Austrian as opposed to a monetarist or a Chicagoite or a neoclassical economist? I would think that Austrian school is the most logical, it goes further than any other school in repudiating evil. It's the school which is both scientifically proven to be true and also has the highest moral ground because the basis for Austrian economics is liberty. Because liberty is an individual choice and that's why it's not, I'm not Austrian, not because Austrian economics would lead to, I would say, production of more bathtubs than any other system but because it's based on liberty and liberty, individual choice, our subjective values, this is a real true human values, real true American values. That's why I'm proud to be Austrian. How I became Austrian, I think a couple of years ago I was on a Glenn Beck show together with Tom Woods and we were praising Road to Serdom by Hayek and Road to Serdom was my gateway to freedom. I read Road to Serdom when I was in Moscow State University and that time you could get a jail sentence up to seven years just for having a book, for passing this book around you could get 12 years and today I'm proud to give my students extra credit for reading Road to Serdom. Your physical possession of the book was almost like a black market good, like an illegal drug for instance. That's right. That's right. I would say it was treated as drugs because Karl Marx, his infamous equip is that religion is the opium for the people and so religion would be treated as a drug industry, as a legal drug industry in the Soviet Union. But then they, because communism itself, socialism, is nothing but secular religion. It's a religion which wanted to establish its total monopoly over people's thought. So any deviations from that monopoly and definitely Austrian economics was exactly the opposite from socialist ideology, was punishable and punishable in a very severe way. I'd like to touch on what you mentioned earlier, which is consumerism in America and in the West. There's very few Americans and Westerners really who have ever known anything other than material abundance. Let's say only the older World War II generation that has some memories of the Great Depression, for example. I just wonder, could I get your take on how this colors people's perceptions of economic and government systems, because they've just never lived in a time or a place where there wasn't material abundance? I think it's very easy to be anti-consumerist when you have a lot of things to consume. It's the people, I mean, I have a lot of colleagues in academia who would bash Walmart or would treat McDonald's as a great cultural slayer overseas and would not. They don't realize that people want to consume, that people want to have their kids to be healthy, to be well-fed and to be happy. And consumerism is nothing wrong with consumerism. And I would say that, listen, I met one of my colleagues who was like their Walmart basher on my campus and a Walmart happily buying stuff. So I would say that it's easy to reject consumerism when you're rich enough. And that's why liberalism, as we call them, from one hand they trash capitalism, from another hand, they're happily enjoying the fruits of capitalism. One of the examples you've provided from your time in a system, in a society that had anything but material abundance, the former USSR, is in the form of an article entitled What Soviet Medicine Teaches Us. This was on Mises.org a couple of years ago. I'm just hoping you could speak a little bit about your experience with Soviet medicine, not only the shortages that a collectivized medical system engenders, but also the bribes that I think some people may not understand. Yes. Well, if you ration something, then definitely you are getting a huge black market for these goods or services they're trying to iteration or what not. Obamacare is exactly for rationing healthcare. It reduces choices of people. And according to the president himself, Obamacare, the goal of Obamacare is to reduce costs. And if you reduce costs, how you can reduce? You either squeeze providers, you don't pay medical people enough or you deny care. So in Obamacare, that's both. And I am very much surprised that my fellow Americans are giving up their freedom for nothing for promise that it will be cheaper. Yes, the cheapest healthcare would be no healthcare. Cheapest healthcare would be, I don't know, in 1960, how much you would pay for hard bypass or for hip replacement? Nothing. You would save a lot because these things were not available. And that's why I'm really kind of this, I think this great leap forward to socialism by nationalizing almost one-fifth of the United States economy through Obamacare. I think it is the most disgusting development that United States experienced in its own history. Then in the Soviet Union, definitely the healthcare was provided mostly to the people in power. If you are a high-ranking member of the Communist Party or government, then you have an access to good healthcare. For gray masses, they treated them as slaves, the slaves. And if slaves were in productive age, for example, if they were below 60 years of age, then they would have more healthcare available for them than if you are after that time. Then, for example, old age survivors in the Soviet Union were not provided even with elementary healthcare. They would not be provided with any surgical care. The hemodialysis would be stopped for people after 65. So that Soviet medicine really has a lot to teach us because it was, I would say, the most vivid example of inhumanity of the evil of socialism. Sifting gears for a moment, let's talk about Soviet monetary policy. How did the ruble operate in what was effectively a closed economic system? Yes. Well, the ruble was not the currency, actually. It was also some kind of rationing coupon. I worked for a while as a chief consultant of a Soviet bank for foreign trade. Well, worked was kind of an overstatement of my activities. Nobody worked in that bank. But we had a joke at that time. The joke was, what is the true exchange rate between the dollar, the British pound and the ruble? And the answer was that one dollar cost one pound of dried rubles. And that was exactly like that because the ruble was not based on the market economy. So the commissars would print as many rubles as they can. To some extent, it was a kind of Federal Reserve of the United States, which went completely amok. They would print the amount of rubles according to the plan they make. For example, if they want to build another huge railroad from nowhere to nowhere, then they would need to pay, say, 16 billion rubles in wages to workers who would work on this. And another, say, 15 billion dollars to people who would work for these workers. And so then they would order the Minister of Finance to print 331 billion rubles, new rubles. And then they will see if they don't have enough rubles, they will print more. They will print more. And that's why rubles didn't have much value. And that's why socialism actually didn't work. I worked my first job was at the Soviet Department of Labor. And now a Minister of Labor, another socialist bureaucrat, he thought that we should just introduce new systems of payment, like payment by results. So then would kind of introduce the P3 rate everywhere instead of time rate. And they've tried to. And it turned out that nobody wanted these rubles anymore. Because if you don't have anything to buy with these rubles, then the rubles would be just a ticket, as they would say. There's a ticket for a fight, ticket for a fight for something real. So that's the, I would say that this type of monetary policy is a very good example for us not to follow and to return back to sound money. Any memories, Yuri, of your consumer experiences as a young boy in Russia? What, for instance, what was the grocery store experience like? I remember my first grocery store experience was when I was seven years old. I was spending a lot of time after school standing in long brand lines in Kazan. Because my grandmother, who was working, she would put me in this line. And I would be just standing in this line hours and hours and hours. And then after work, she would come and replace me in this line. And we will get some bread to buy. So that was in 1960s. That was the bleak time of Nikita Khrushchev. And then when we moved to Moscow, Moscow was a little bit better from point of view of supplies. So there were no bread lines. It's like in every concentration camp, the best place to be is near the kitchen. And Moscow was one, was kind of a showcase for the Westerners. But even in Moscow, it was everything was rationed. If you don't have rationing coupons, you don't have access to meat or to things like that. And I remember when Soviet Union was already coming to its end, then it came to its end because Mr. Gorbachev, he had a policy of returning to human face of socialism. He didn't understand at all that socialism can exist only based on mass murder, only based on coercion and crude violence. And he decided to kind of make socialism with human face. And because he made this point, then people thought that nobody would be shot anymore. And people stopped working. And at that time, this shortage became pervasive even in Moscow. Even in Moscow, people were hunting for food. Even in Moscow, you could buy whatever you want only at the black market. So I had a lot of friends in that time in the Soviet Union in medical profession. Can you imagine there, they would be medical people, doctors. And they wouldn't have a telephone at home. The telephones were nine telephones per 100 households. To get a telephone, you would need to go and bribe all these little officials from the government phone company or party people. The same with cars, for example, there was 1.2 cars per 100 households. And that would not be just private cars. 1.2 would be all cars in the Soviet Union, including cars which belong to the military, to the party, to the KGB. They will all be divided by the number of households and then you'll get 1.2. So this was miserable in a country with 11 time zones. The country which could be the richest country in the world, which had almost everything possible, impossible natural resources. Well, it's interesting you bring up the automobiles. Do you have memories of the Tebats or the Soviet limo, if I recall, was the Zill or something along those lines? Yes. The party people, they were driving this limo and usually all the escorts of these limos, while the cars in the Soviet Union were kind of like making it your self-kid for the people. So the people could buy a car. I think it was a famous joke, but it has all the truth in it. That in the 1980s, to buy a car, you would need to pay in advance. You go to the government car distributorship. You pay the full price in advance. There was absolutely no loans, no credit in the Soviet Union. And so you would pay in advance. And then they would tell you that when your car will be delivered to you. And the joke was that one gentleman is coming to the car distributorship, paying in advance and the car dealer is telling him, he said, oh, comrade, your car will be delivered on the 9th of September of 2021. And the gentleman is looking at his appointment book. He said, morning or afternoon, sir? And he said, what's the difference? And he said, well, in the morning a plumber will come to fix my toilet. And that's exactly how the Soviet economy worked. So it's very sad that many people don't realize that socialism is not working. It will never work because it does not have any incentives for people to do anything. Because of that, to make people do what they want, the socialist leaders would resort to murder, would resort to coercion. That's why anywhere from 43 to 60 million people were murdered in Soviet Union alone. 78 million people were murdered in communist China. So if you will look at any socialist state, you would see huge and huge mass graves as monuments to socialist experiments of the 20th century. And the bad thing about this is, as Soviets would say, that the only lesson of history is that it does not teach us anything. And we have people like Mr. Obama and people around him, as well as many others, who think that we can have a free ride to socialism, to have some kind of a socialism with human face, to have everybody living the same way and everybody supporting the government. And that's what I'm very sad to see. I came to the United States 26 years ago, Reggie. And it's very sad for me to see how this country is losing its freedoms, losing its choices and embracing socialism. So that's very, very sad. Ladies and gentlemen, we thank Dr. Yuri Maltsev for his time this weekend, sobering and a cautionary tale for all Americans. Yuri, thanks very much. Good to talk to you. Oh, thank you, Jeff. Very good to talk to you.