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UN: Transition To Free Enterprise Painful For Many

United Nations, 3 August 1999 (RFE/RL) -- The rapid transition from a state-run command economy to free enterprise in the former Soviet Union has led to dramatic increases in mortality, suicide, disease, crime and corruption, according to a report by the United Nations Development Program.

The UNDP report, released over the weekend, says in part: "At the dawn of a new millennium, the region of Eastern Europe and the CIS reflects on the realities of the latest experiment in social engineering." It says: "Again, people are the objects instead of participants in shaping policies that affect their daily lives."

Anton Kruiderink, director of the UNDP's regional bureau for Europe and the Commonwealth of Independent States, told reporters at the United Nations on Monday: "When it comes to the countries in transition we are still in the midst of an extremely severe crisis."

Kruiderink says looking at the gross domestic product of the former Soviet republics does not give the entire picture of social conditions. "One has to look beyond the economic dimension, which is basically the focus of the world today, and look at what happens to these societies," he says.

Looking at health, education, demography and the role of the state "you see a rather disappointing performance, which the world did not expect when the Berlin Wall came down," Kruiderink says.

"We all rejoiced at that time that the Iron Curtain was lifted and therefore we declared that there was an end to the separation between peoples," he says. "But what we have seen instead is a descent of a Glass Curtain that separate people within countries."

Kruiderink says that while education levels remain high in the region, "the glass means the majority of people see very clearly what happens to those parts of society they feel they no longer belong to."

The UNDP report, called "Transition 1999," points out that life expectancy remained the same or fell in the 23 countries surveyed in the former Soviet bloc, while it has increased in the rest of the world in the past five years.

Deaths of middle-aged Russians have increased dramatically since the transition, due to illness, alcoholism, and psychological depression, the report says. The ratio of men to women in the former Soviet Union has fallen sharply. This has led to the 5.9 million so-called "missing men" in Russia.

The transition to private enterprise has led to "a rise in self-destructive behavior, especially among men" and to a "population crisis of unprecedented proportions" with fewer marriages and children.

"Poverty is increasing, literacy is slipping, things that were not characteristic of this region" before the transition, Kruiderink said.

Education has been hard hit because of the pressure to drastically cut back government control, said Kruiderink. "By shrinking the state somehow nobody figured out there's a vacuum and how to deal with it," he said. "At the time there was the magic word 'civil society' as though it would suddenly blossom up."

Teachers lack motivation in the former Soviet republics because they find they can make better money elsewhere, he said. In Georgia, universities have become empty shells, he said. "Teachers come and say hello, then they go drive a cab. Because for [the equivalent of] 9 [U.S.] dollars a month, who is going to teach?"

Kruiderink said that social services have rapidly eroded throughout the region. In some parts of Russia, for example, teachers are teaching in exchange for potatoes, he said. "How do you measure that in GDP? There is still a commitment by people who believe in their society, that assume the responsibility, but there is an enormous strain and how long can that go before it breaks?" he asked.

The report was not prepared by the UN, but by the countries themselves, Kruiderink said. It is a summary of five years' worth of human development reports written by each country, he said. "They cry out, saying, 'We need attention that goes beyond the economic measurements.'"

Such a focus on economic data alone has served the interests of both foreign and domestic investors, but ignores the plight of the peoples of the former Soviet Union.

"We have to focus much more on governance," Kruiderink said. "Economic policies alone, when there is not an environment that makes them sustainable, are prone to fail."

The report is an indictment of the "overnight miracles" or Big Bang theory of rapid transition to capitalism. "This has been proven, particularly in the CIS, to be failing," Kruiderink said.

He believes that even Harvard economist Jeffrey Sachs, who championed the crash course for capitalism in the former socialist countries, would now "see it differently. He is much more now interested in the right sequence of economic policies and not in doing it all at the same time."

More attention needs to be paid to the strengthening of democratic institutions, independent media, and human rights.

"We are not saying to stop the process of introducing new policies, but we are saying that perhaps instead of massively introducing them -- like privatization -- perhaps you first go for efficiency and effectiveness and measure the introduction of new policies," said Kruiderink.

Privatization should take into account the first ten years of the ex-Soviet experience "to make sure that the impact on societies is not as drastic and as negative as what we have seen," Kruiderink said.

"There is a need for a review of the economic policies that with a certain optimism we introduced ten years ago when we basically had no clue," Kruiderink said.

Ultimately, the report calls for a "mixed" economy with the state taking a stronger hand to help solve the explosion of new social problems. "In effect, neither blind trust in centralized authority, nor in the market as the panacea, have proved capable of producing democratic instruments needed to correct the distortions that both ideologies produced," the report says.

"A viable, dynamic and reasonably equitable market economy requires an 'activist state' to reassure investors that a predictable, rules-based system is in place and that property ownership is protected," the report says.

The report suggested that state intervention is needed to control social problems. Otherwise, private property could become vulnerable to theft and abuse.

"There is too much belief that the crisis has bottomed out," Kruiderink said. "When you look at this report, you see the societies in these countries are under an enormous strain and the process of healing is far, far away."

And when you link these social problems to the issue of ethnic minorities in these countries, "we have a time-bomb ticking," he said.