Moscow's Challenge to the Group of Seven

WILLIAM PFAFF

July 15, 1991|By WILLIAM PFAFF

PARIS — Like it or not -- and most of the participants won't like it -- the

London economic summit meeting which opens today will be dominated by the Soviet aid question and the presence in London of Mikhail Gorbachev.

There are other things for the industrial countries' leaders to talk about: lowered interest rates (Washington's chosen topic, but not that of others), how to boost a feeble U.S. recovery, the dollar exchange rate, trade reform. All dull, dull.

Mr. Gorbachev brings drama: a vast economy in crisis, a disintegrating political union, threats of mass migration, of the progressive breakdown of one system with the promise -- only the promise -- of the progressive construction of another.

But with his call for assistance, Mr. Gorbachev offers only uncertainty. There can be no assurance that the Soviet Union's great economic and political upheaval will have a positive outcome, no matter what the Western industrial nations do to help. The challenge conventionally is described as to create a market economy in that country. The mechanisms of the market, however, do not confer the economic culture of the marketplace, which is lacking in the Soviet Union.

This is the objection to be made to aid proposals of the kind offered by the Soviet economist Grigory Yavlinsky and Graham Allison of the Kennedy School at Harvard. Theirs proposes a schedule of Western financial and investment help tied to the completion by the U.S.S.R. of identified stages in political reform and economic legislation.

The list of things the Soviet Union is supposed to do includes ''sharply reducing government budget deficits and curbing monetary and credit excesses,'' freeing prices, legalizing private property, freeing trade, opening the U.S.S.R. to foreign investment with repatriation of profits, terminating government investment direction, investing in education and in transportation infrastructure, creating a social safety net, etc.

It is a list of requirements which the other governments meeting in London would fail. The United States is scarcely a model of fiscal discipline, social safety provisions, or good public education. France and Japan owe much of their success to government direction of investment. Japan is no example of free trade or open markets, nor Britain of public infrastructure.

Even if Mr. Gorbachev were able to fulfill these conditions, the Soviet Union would not thereby become a successful and

''normal'' market economy -- not in the foreseeable future. Not only is there a lack of entrepreneurial and commercial culture in the Soviet Union, there is, if one can put it this way, no consumer culture.

The Western market economies do not succeed through some mechanical and universally applicable interaction of individual advantage-seeking, resulting ineluctably in the greatest good for everyone. To think that was Margaret Thatcher's error, and it contributed to bringing her down. It is the mistake made by many American conservatives, whose simple faith in the market's impartial benevolence is unswayed by empirical observation.

The Western marketplaces function because the mass of people in Western countries understand how business works and recognize both the merits and the limits of commercial relationships, making commerce an instrument but not an end in itself.

Western markets are constantly adjusted and their operations modified by public and private agents, both moved not only by gain but also by conceptions of the well-being of society and its non-economic goals, of society's long-term needs and the prudent trade-offs of public and private interest. This is a function of government and politics, but also of a complex public dialogue and debate that constantly goes on in the Western countries, shaping not only the public agenda but society's conception of national interest and national purpose. This dialogue has only begun in Soviet society, after 70 years of a terrible silence.

My argument thus is not against aid for Mr. Gorbachev. Nor is it that aid should not be conditioned upon political concessions and structural change. It is simply that to join the modern economic world the Soviet Union -- or Russia, the Ukraine, the other republics of what now is the U.S.S.R. -- must become part of that modern world in its large sense.

Peoples who did not experience the Renaissance or Enlightenment, or the Industrial Revolution, or a successful political revolution, who have not known mass democracy until now, whose social traditions are communal rather than individualist, must make a vast and painful accommodation to a Western industrial civilization that is the product of all these things.

This is not accomplished through foreign aid or by carrying out limited economic or political programs. It represents a cultural transformation which certainly is not impossible, but is inconceivable as a short-term affair. Everyone must be prepared to live with a Soviet society in upheaval for a very long time to come. Aid to this society can only be a palliative, not a solution.

William Pfaff is a syndicated columnist.

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