Aid to Soviets called political gesture

December 26, 1990|By New York Times

If the faltering Soviet state can no longer deliver food to anxious city dwellers, what reason is there to believe that CARE packages from the West will reach the intended destinations?

Not a lot. That is why some advocates of emergency food aid see it primarily as a gesture of political support for Mikhail S. Gorbachev -- and by the same logic, why skeptics wonder whether it makes sense to bet so heavily on the winded Kremlin thoroughbred.

If both farmers and local governments are withholding food to show their independence from Moscow, foreign aid may only undermine a healthy movement toward decentralization.

But many Western economists believe that both sides have it wrong.

While a mix of rebellion and inefficiency have no doubt added to the Kremlin's problems, food shortages are largely a result of too much money chasing too few goods. Without drastic efforts to control purchasing power, the Soviet economy will be consumed by hyperinflation.

The current food problem has little to do with production. Padma Desai, an economist at the Harriman Institute of Columbia University in New York, contends that agriculture represents one of the few success stories of perestroika. When adjusted for weather variations, grain yields rose sharply during the Gorbachev years; the output of 240 million tons this year was the highest ever.

Everyone agrees, however, that a shockingly large percentage is wasted in transit and storage.

Vladimir Tikhanov, the Soviet Union's highest-profile agricultural economist, estimates that 40 percent of the grain rots or is eaten by pests.

Everyone also agrees that it has become increasingly difficult to find staples at price-controlled stores, most notably in Leningrad, Moscow and gritty industrial cities of the Russian heartland.

But here the stories diverge. The conventional wisdom, shared by both democratic reformers and closet Stalinists, is to blame the collapse of central authority.

Some of the food is being withheld by producers and local governments bent on bartering it for industrial goods. Some is sidetracked by old-guard bureaucrats eager to discredit perestroika. The rest is being diverted to the black market by criminals who no longer worry about ending up in the gulag.

But there is a more innocent, and more ominous, explanation. Soviet wages have risen sharply: Official figures show that 15 percent of workers earned more than 300 rubles a month in 1989, up from just 6 percent in 1981. But the output of consumer goods has hardly changed -- in 1990, production fell -- leaving Soviet citizens hundreds of billions of rubles in savings and little of value to buy.

What is available at free-market prices has become unbelievably expensive, confirming fears that the price dam must eventually burst.

It thus makes good sense for producers to withhold food. "Why take rubles?" asks Ed Hewett, an economist at the Brookings Institution, when the currency is sure to be worth less by the time one finds something to spend the rubles on.

And it makes equally good sense for consumers to snap up anything available at state-controlled prices; those cans of Bulgarian fruit salad are bound to be worth more next month.

The only way to break inflationary expectations, Desai argues, is to correct the economy-wide imbalances that feed it. That means curbing open-ended subsidies that allow both government agencies and inefficient enterprises to suck scarce resources from the economy.

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