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Western Press Review: Russian Economy Viewed For Cause And Effect

Prague, 31 August 1998 (RFE/RL) -- Western press commentary today focuses on political and economic haggling in Russia as a key element in the current crisis. Editorials and opinion writers also say that U.S. President Bill Clinton's visit to Russia starting Tuesday in Moscow comes at a critical juncture. Clinton has the opportunity to tell Russia that the West is not a crutch, but rather an aid, to righting the faltering Russian economy on a path to real economic reform.

TIMES: For all the talk of reform, the old Soviet cashless economy is continuing

Alexander Kennaway in The Times of London says Russia's economy is a "result of Tsarist and Soviet incompetence, allied to modern entrepreneurial greed." Kennaway describes why the system doesn't work and what Western powers must do to pull the Russian economy out of the gutter.

Kennaway writes: "For all the talk of reform, the old Soviet cashless economy is continuing, albeit in a mutated form. Russia's export earnings are limited almost entirely to raw materials, semi-finished goods such as aluminum and a modest amount of arms. All these aspects of the economy are run by the oligarchs who combine ownership and management of the firms involved with high positions within the Government at every level. The situation is chillingly reminiscent of the politically brittle city states of medieval Italy. These people put nothing back into the basic economy."

He concludes by looking at the past for an example on how to guide the future of Russia's economy. Kennaway says: "Foreign firms have to work at the level of the firm, the farm and the railway depot. This is how Russian began to improve in the last decades of the 19th century and the first decade of the 20th century. But for this to come about, the foreign firms require that the Russian Government creates the conditions for profitable enterprise and the confidence that they will be treated according to international norms legally, in taxation and in cross-border customs matters."

WASHINGTON POST: There is in fact no 'third way' to prosperity

A Washington Post editorial entitled "Backward In Russia?" says Viktor Chernomyrdin's recent re-appointment as prime minister could mean the end of all free market reform movement and a gradual acceptance of what it calls "Latin American capitalism."

The editorial explains: "They (Chernomyrdin and the Communist party) prefer what in Russia has become known as "Latin American capitalism" (an insult to Latin America), by which is meant a system in which businessmen and bureaucrats are indistinguishable, insider dealing and corruption are rampant, and foreign investment is discouraged."

"They share, too, a demand that the state start printing rubles, and fast - in the oligarchs' case to save their failing banks and in the Communists' case to rescue the Red Directors who have stripped Soviet-era enterprises of usable assets and now want to be bailed out again. The result of an economic policy based on their shared desires would be a return to hyperinflation, and the impoverishment of most Russians."

The editorial concludes: "Russia is likely to return to the reform path, since there is in fact no 'third way' to prosperity. But whether it takes weeks or months or years to come to a consensus on that cannot be predicted. Nor can the dangers, to democracy and national unity, that Russia will face along the way. Outsiders much applaud Russia for remaining within its constitutional framework at this time of crisis, and respect the choices that its democratic system leads it to. But there would be neither obligation nor reason to provide further financial support for policies that cannot succeed."

DAILY TELEGRAPH: It appears Mr. Yeltsin has not emerged unscathed from a confrontation with the opposition

The Daily Telegraph from London today says economic and political instability are always linked. Its editorial says the consensus plan reached Sunday to give the Duma some of the powers now held by Yeltsin in return for Chernomyrdin's quick approval as premier "holds the key" to solving the immediate political crisis.

The paper writes: "It (the deal) embodies a compromise whereby the President would retain control over the 'power' ministries (defense, foreign affairs, interior, security services) but make the economic portfolios the gift of parliament. For the first time, it appears Mr. Yeltsin has not emerged unscathed from a confrontation with the opposition."

It says: "However, any chance of political stability will soon be jeopardized if the Russian currency and stock market continue to founder. Mr. Chernomyrdin has said there will be no return to the past. But his parliamentary support has now been thrown into doubt by the Communists, who favor state intervention and the printing of money."

INTERNATIONAL HERALD TRIBUNE: Russians have no collective memory of pre-totalitarian parties

Richard Pipes in today's International Herald Tribune says constant changes in Russia's leadership, or 'ministerial leapfrog,' naturally leads to both economic and political mayhem.

Pipes writes: "In contrast to the Poles or Czechs, who had traditional political parties up until the time Soviet rule was imposed on them in the 1940s, the Russians have no collective memory of pre-totalitarian parties."

"There is no consensus on any political issue. The so-called Red-Brown (Communist-fascist) coalition that dominates Parliament shares no common values with the reform-minded members of President Boris Yeltsin's cabinet."

"Hence, Russia is without effective government. To the extent that anyone rules, it is the 89 governors who run the provinces largely independently of the center and each other."

FINANCIAL TIMES: Political weakness at home might lead to adventurism abroad

The Financial Times looks at how the "sorry summit in Moscow" starting Tuesday will influence Russian economic reform. Its editorial today says both Clinton and Yeltsin come to the summit table physically and mentally handicapped from personal and political crises at home. But it says Clinton plays an important role.

The Financial Times says: "As far as Russia is concerned, Mr. Clinton neither could nor should offer any cash to reinforce the ruble. For a start, he would be unable to persuade Congress to pay. More important, without a renewed commitment to economic reform from Moscow, including curbs on the power of the financial magnates who have grabbed control of the economy, any new money would almost certainly flow straight out again."

It concludes: "The best to be hoped from Clinton and Yeltsin, perhaps, is to fix the framework for their future relations on the assumption that Russia will be going through prolonged economic agony. The danger is that political weakness at home might lead to adventurism abroad."

WALL STREET JOURNAL: A lame-duck summit could end up producing a golden egg

An editorial in today's Wall Street Journal Europe says that "...Bill needs to tell Boris --or whoever has the keys to the Kremlin next week-- that the answer is not further bailouts from the West, but letting the dollar help."

It explains why the dollar is so important: "With the ruble collapsing and foreign investors now fleeing in earnest, there is the danger that Russia might turn very nasty. The small piece of luck here is that even before the collapse of the ruble the principal means of exchange in the Russian economy was barter, and most Russians who have cash at all are long used to thinking in dollars, and when possible saving in dollars. To provide a currency that permits economic recovery, Russian politicians merely need to let the dollar circulate even more freely, as legal tender in Russia."

The paper says: "Circulate rubles in tandem if they want - as Argentina lets the dollar circulate with pesos linked to it through a currency board. But let people freely deal in a currency they can actually put stock in. If Mr. Clinton were to get that message across in Moscow this week, what's being called a lame-duck summit could end up producing a golden egg."

NEW YORK TIMES: Clinton is obliged to speak out strongly

Finally, a Sunday New York Times editorial encourages Clinton to put the summit to good use, despite his political wounds. It says: "With Communists surging in power and nationalists waiting expectantly in the wings, he (Clinton) should encourage the Russians not to give up on democracy and free-market economics in the despair of the current crisis. He should also caution them to resist the false notion that recovery can be painless with a return to discredited policies."

"Whatever short-term relief might be bought by printing rubles and renationalizing factories and banks will be paid for many times over in extra suffering by workers, savers and consumers as investment evaporates and inflation rockets out of control in the years ahead."

The New York Times concludes: "...Clinton is obliged to speak out strongly for political stability, diplomatic continuity and America's long-term determination to help Russia establish a viable democracy and a successful market economy."