Russia has created basis for progress

By Jonathan Power

LONDON (JP): It is quite astonishing, but nevertheless visibly true, that since the apparent success of President Boris Yeltsin's heart operation Russia has all but dropped off the lead pages of our newspapers. Does this mean that Russia, only recently described as "disintegrating," "mafia-ridden," even "on the verge of another revolution," has found an equilibrium, has turned its historical propensity for hurtling to self-destruction into the humdrum business of making a life out of what there is, and perhaps quite successfully too?

Quite successfully? Isn't that overstating what is probably just an accidental lull? I think not. Having watched all manner of Third World countries move from the path of despond to the trajectory of success only to fall back or build up unmanageable problems--India, Brazil, China, among many others--Russian efforts to find traction on the slippery surface of modern-day capitalistic economics now look rather suspicious. Some experts are even predicting growth rates that will better the high achievers in eastern Europe.

In a relatively short time Russia has shed the most constraining and containing of all economic systems, not to mention its political straight-jacket, and has laid the foundations for what could well be continuous progress. Russia won't be a flash in the pan like the Brazil of the 1970s. Nor stuck like India was for too long after its post-independence industrialization, bogged down in red tape and over-regulation. Nor like China which, while growing fast, has taken extraordinary risks with high inflation and too rapid urban growth and country- to-town migration. Moreover, China still has the enormous albatross of a huge, inefficient, state-owned industrial sector round its neck and an unreformed, uncertain, inflexible political system, quite unsuited to the needs of a modern economy.

Russia, in contrast, has rather deep foundations--in industrial life, in transportation and, above all, in education, the great legacies of the Soviet system. All that was needed to make this dough rise was the yeast of individual freedom and benign political institutions. The transfer of power from dictatorship to democracy, from perestroika to private initiative, has been rough and bumpy, but it has been done.

A just-published book backs me up on my relative optimism. The Coming Russian Boom, written by a London School of Economics professor, Richard Layard and the former Moscow correspondent of The Economist, John Parker, not only oozes positive thinking it shoots down much current criticism.

Like before the market was freed the monopolies should have been broken up and firms privatized. But the shock tactic of ending price controls and eliminating the endless lines and queues was the right one, even if it meant much higher prices. It gave "supply" the chance, which it has taken, to meet "demand."

Could the high inflation which racked Russia until quite recently have been avoided, as it was in Poland? Very difficult, say the authors. Russia began its reforms with much more excess money and much longer lines than Poland ever had.

Could the suffering of the last five years have been avoided? The answer is in two parts. Yes, there's been a lot but it's been overstated. The dramatic rise in the death rate for men should be balanced by the fact that women no longer have to spend on average 20 hours a week in lines, often in the biting cold. Living standards where housing and heating are still almost free have not fallen fast as is often suggested.

As for the second part of the answer: much of the suffering that has undoubtedly gone on could have been avoided if the West had been more forthcoming. It missed the moment of truth in November 1991 when Yegor Gaidar was appointed economic overlord with his mandate to carry out sweeping reforms. The Supreme Soviet and the president were still on good terms and there was a clear window of opportunity. But the West held back, seemingly a prisoner to its old beliefs that Russia was somehow still a future threat. The top Westerner to come to Moscow at this time was David Mulford, the U.S. Treasury's undersecretary who on behalf of the Group of Seven wanted to know who would pay the debts of the old Soviet government.

If the west had made available the kind of financial aid it did to Poland it would have advanced by three years the time it took for Russia to reach its present stage, with a lot less personal suffering and political turbulence along the way. Two percent of NATO's defense spending would have done the trick and made Russia a firm friend.

The West must learn from this mistake and not compound it with another slap in the face, this time pushing NATO's reach right up to Russia's borders. If the West gets its historic opportunity with the new Russia wrong on the two most important counts it will deserve whatever a humiliated and hurt Russian bear has in store for it--and the scary Cold War headlines that go with it.