Russian people wait for reforms to work

Georgie Anne Geyer

January 22, 1992|By Georgie Anne Geyer

Moscow -- HARVARD economist Jeffrey Sachs did not look happy.

Sitting protected from the gray cold of an early Moscow morning in the elegant Hotel Metropole restaurant, while a harpist incongruously played for Western businessmen, he put together in one sentence the kaleidoscopic truths of these dangerous days.

"This has to rank as one of the worst collapses in the 20th century," he said, shaking his head.

Outside, people looked too tired even to have the energy to collapse -- and the scenes were increasingly bizarre.

It has been a full two weeks since the reformist Boris Yeltsin government freed prices, believing the "shock" would bring hoarded food to the shops and begin the process toward a market economy. But the shops are only emptier.

Instead of foreign businessmen bringing dollars into the banking system, thus beginning the building of a modern economy, they are carrying thousands of dollars around Moscow in briefcases and paying in cash. Industry is at a standstill because plants aren't getting raw materials, the ruble is (at this moment) worth one cent, a "merry night" with prostitutes has gone up from $100 to $300, the government is printing rubles around the clock, and banners demand of an increasingly desperate Boris Yeltsin, "Who is organizing hunger in Russia?"

Jeffrey Sachs, the dedicated and charming young American economist who has an office near Yeltsin's in the building called the "White House," believes it will still work out, even though he admits the feared hyperinflation is already upon Russia.

"The situation is terrible," he told me that morning, the harpist in the background. "But that is not the fault of the economic reforms but the situation that was inherited here. What has happened is that the market is showing people just how impoverished they really are."

A well-informed economist at a Western embassy here, trying to figure out why after two crucial weeks food is just getting scarcer and scarcer, finally threw up his hands and asked:

"Is the food out there and they're hoarding it, or isn't it there? Nobody has the answer. The only thing is something had to be done here. Nothing like this has ever been attempted before. It's like coming to a door, and it's blocked on the other side, and you don't know whether there's another room there or a dangerous staircase."

But the unmistakable fact is that the reforms -- which were to jolt this turgid, decaying state into a semblance of modernity -- are not working. And more and more, thoughtful people are wondering whether a gradual policy of preparing Russians for this unknown new system would not have been wiser.

"I was actually very concerned about just lifting prices as the first step," said Boris Mihailov, a leading liberal political scientist at the Institute for the U.S.A. and Canada. "I thought it was more important to privatize first, to establish readjustment training, and to use state procurements to fill the market in the first phase.

"Now I see that I was right. What happened was the prices are free but the shops are still empty."

The reforms have been made with the best possible intentions on both the Russian government side and the American economists' side. But the process is already taking too long, and now officials worry about February and early March when the food and the rubles really give out.

Meanwhile, the dangers are more real every day. It is not the danger of a military coup, ironically, that is the greatest danger here. A military government would have to construct forms of economic freedom, too. Indeed, the most popular model here is that of Gen. Augusto Pinochet of Chile, during whose authoritarian military rule in the '70s and '80s the Chilean economy was dramatically reformed.

The greater danger is that capitalism itself will be so discredited by this present unpleasant period that the people will turn their backs on it as well. Economists tell me they give odds of 30 percent for a collapse -- but that was yesterday.

Meanwhile, once again in Russian history, two worlds are developing here. In the handful of fancy Western hotels, foreigners live as they do in Dusseldorf and listen to harps at breakfast. Rooms cost generally $400 and $500 a night in a city where the general standard of living is back where it was in 1945.

Meanwhile, the Russian people wait, as they always have, to be shown that this will work, instead of taking part in assuring its success. They don't seem to even know what is happening.

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