U.S. executives talk trade in Moscow as Soviets brace for market economy

September 14, 1990|By Scott Shane | Scott Shane,Moscow Bureau of The Sun

MOSCOW -- A team of U.S. chief executives bubbled with enthusiasm yesterday about capitalism coming to the Soviet Union, while the top economic adviser to Soviet President Mikhail S. Gorbachev talked tough about the bankruptcy and unemployment that will come with a market economy.

"I find it very exciting to sit at a table with Soviet officials and hear them using words like entrepreneurship, profit, stock, shares, capital, etc.," said Lodwrick M. Cook, chief executive of the Atlantic Richfield Co. "This really is a watershed."

"I'm like a kid in a candy store here," said Mark C. Hungerford, who said his Transcisco Industries Inc. is making money selling heated railroad tank cars to Soviet industry. "I think the Soviets are learning very fast, and I like them."

Mr. Cook and Mr. Hungerford are among 15 top U.S. businessmen, led by Secretary of Commerce Robert A. Mosbacher Sr., dispatched by President Bush to explore trade and investment opportunities in the Soviet Union. They spoke to the press yesterday in the nearly finished, Western-style Radisson Slavyanskaya Hotel, a cavernous marble palace that seemed to suit their upbeat message.

The delegation had met for more than three hours yesterday with Mr. Gorbachev, who explained economic reform plans and invited Western investment.

Oil and gas executives, who make up six of the 15 visitors, have discussed deals in which Soviet resources would pay for U.S. technology. Other delegation members investigated the small but burgeoning Soviet private sector, discussed joint production of prefabricated wooden housing and negotiated for the construction of a modern telecommunications system.

A few hours earlier, Gorbachev adviser Nikolai Y. Petrakov defended plans for a rapid privatization of the economy but painted a harsh picture of what the transition to market will mean.

"If several thousand bureaucrats lose their jobs, then personally for them, it may be a tragedy," Mr. Petrakov told reporters. "But from the point of view of society, it's fair.

"Or if there's a worker who now makes televisions that explode [a major cause of Soviet house fires] ... if he loses his pay, or if the factory closes and he loses his job, from the point of view of that worker it's a major misfortune. But from the point of society, it's fair," he said.

Mr. Petrakov is widely credited with having persuaded Mr. Gorbachev to abandon the economic theories of a lifelong Marxist and embrace the principles of free enterprise. He is a co-author of the 500-day radical economic program, developed with Gorbachev adviser Stanislav Shatalin, that has just been passed by the Russian parliament and is apparently headed for passage by the Soviet parliament.

Now that the victory of the Shatalin plan over the more moderate program offered by Prime Minister Nikolai I. Ryzhkov appears assured, Mr. Petrakov made no attempt to deny the pain the plan will cause.

Most of the national ministries, whose ministers are still the czars who rule the economy, will be liquidated, he said. Enterprises that can't compete will go bankrupt.

Overall there should be no shortage of jobs, Mr. Petrakov said. But the creation of a balanced, modern economy will require a massive shift of workers from heavy industry and defense to the underdeveloped service sector, he said. Large-scale temporary unemployment is the likely result.

On the ultrasensitive question of prices, Mr. Petrakov rejected in strong language Mr. Ryzhkov's idea of full state compensation to workers for all price increases. He said the government does not have enough money to pay compensation, so it could do so only by printing more money, thus fueling dangerous inflation.

By implication, he was saying, the 500-day plan will permit market prices next year on more than two-thirds of all goods without paying compensation. For millions of pensioners and low-paid workers, that is bound to mean severe hardship.

But Mr. Petrakov did not apologize for his advocacy of painful medicine for the Soviet economy. He said that the centralized command economy built by Stalin amounts to "sadism" and that its dismantling is absolutely necessary.

He accused the central bureaucracy, and indirectly Mr. Ryzhkov, of carrying out a "scorched-earth policy" as it retreats before the advocates of the market.

A series of decisions by the central government, mainly the uncontrolled emission of money, threaten to destroy the ruble, Mr. Petrakov said. He said the decisions were designed deliberately to sabotage attempts at reform and force a frightened public back into the familiar embrace of central planners.

Mr. Petrakov did not call directly for Mr. Ryzhkov to resign, but he strongly implied that, having lost the battle over reform plans, the prime minister should step down.

It appears increasingly likely that Mr. Gorbachev's attempt to keep Mr. Ryzhkov on as prime minister while abandoning his reform plan will fail. Mr. Ryzhkov's resignation is expected by many parliamentarians next Monday, when the U.S.S.R. Supreme Soviet is expected to adopt the Shatalin plan.

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