Gorbachev's pleading didn't quite do the job G-7 SUMMIT

July 18, 1991|By Richard O'Mara | Richard O'Mara,London Bureau of The Sun

LONDON -- "We have made our choice -- we stand for a mixed economy and equality of state, private and all other forms of property ownership."

Those may have been the words that eliminated Mikhail S. Gorbachev's chances for large-scale economic assistance from the rich countries. They were contained in a letter written by the ++ Soviet leader to the leaders of the Group of Seven.

Had his plan ever been considered seriously by the group, that was the one point they all found unacceptable, the fatal flaw in his strategy.

There were other reasons. The Japanese were not prepared to be generous to Moscow until the Soviets promised to hand back four islands seized after World War II.

The United States wanted a pledge that Moscow would abandon the Castro regime in Cuba.

There were other claims by other countries.

But the universal complaint among the Group of Seven was that Mr. Gorbachev's plan for restructuring the economy did not move the country far enough toward a market economy.

Mr. Gorbachev described it as a "synthesis." Synthesizing is something he has done before: Last year he joined a free-market plan by economist Stanislav S. Shatalin and a more cautious plan devised by the former prime minister, Nikolai I. Ryzhkov, and came up with something that was repudiated inside and outside the Soviet Union.

It was clear that the leaders here wanted no more "syntheses." They wanted something pure.

Yesterday, in an unprecedented meeting in Lancaster House, Mr. Gorbachev elaborated for the G-7 leaders on his latest plan, previewed in the 23-page letter to them. Only a couple of hours before, in the summit's economic communique, the Group of Seven had given his reform efforts an effusive cheer.

Presented by British Prime Minister John Major, the communique said, "We support the moves toward political and economic transformation in the Soviet Union and are ready to assist the integration of the Soviet Union into the world economy."

Expressing a special appreciation of Mr. Gorbachev's precarious position back home, the communique said, "We are sensitive to the overall political context in which reforms are being conducted. . . . We are concerned about the deterioration of the Soviet economy."

But not sensitive enough, perhaps, or concerned enough to risk billions of dollars to back the Gorbachev plan.

It was precisely that deterioration and that special political context that Mr. Gorbachev emphasized in his letter as the reasons he could not go all the way and plunge his country into a full market economy.

He clearly hoped that the G-7 leaders would understand that and turn their thinking in his direction.

Though he recognized the need for what he called a "radical economic transformation," he also said that "broad sectors of the population are not prepared to embrace a market economy."

The existing economy, he said, was too weak to take the kind of strain an overall transformation would require. The Soviet economy is weighted down by monstrous monopolies not easily dismantled. And it is deformed by an oversized military sector.

It has "a backward communication system, an underdeveloped service sector and a badly neglected" agricultural system.

"In the last six months of this year . . . national income dropped by 11 percent, industrial output by 5.8 percent, consumer goods production by 4 percent and retail trade by 12.2 percent in real terms. There is a critical shortage of food, children's items and medicines," Mr. Gorbachev wrote.

And once again, he raised the possibility that, should the reforms fail, the ensuing hardships "may prove too heavy a burden fraught with major social conflicts and pose a threat to democratic transformations."

What Mr. Gorbachev did propose, his "accommodating steps," included liberalization of prices, creation of a convertible ruble, establishment of a network of commercial banks and commodity exchanges, privatization of 80 percent of the country's business enterprises, conversion of 80 percent of the military sector to civil production, land reform and tax reform.

Most important, Mr. Gorbachev promised to achieve an agreement with the republics on collecting taxes and sharing revenues.

However, having offered all that, it was not enough. The G-7 saw still too much state control, too much bureaucratic intervention, too much of the way things were.

As Secretary of State James A. Baker III put it, describing Washington's response, "We did not think you could get to a market economy by pouring assistance into a disintegrating command economy."

Mr. Gorbachev received praise from the G-7 in London, the promise of a goodly amount of technical assistance. The Soviet Union will be given associate membership in the International Monetary Fund and the World Bank, which makes all their considerable services available -- except loans.

"I am pinning high hopes on the upcoming meeting in London," Mr. Gorbachev wrote. "There is every reason to believe that it may mark a turning point in the efforts to bring about the Soviet Union's organic incorporation into the world economy."

He was welcomed into the G-7 club -- but only as a guest.

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