Russia Still Needs Shock Therapy

December 22, 1993

President Clinton would be well advised to check with the Treasury Department before going along with efforts elsewhere in his administration to ease pressures for stringent economic reforms in Russia. Strobe Talbott, his ambassador at large to the former Soviet states, whose predictions misfired in the Dec. 12 elections, is now urging that reforms be "broadened" to improve conditions for Russians who gave their protest votes to ultra-nationalists.

Mr. Talbott sounds perfectly reasonable when he says "there should be a balance between the economic imperatives and the political imperatives" in the policies of President Boris Yeltsin's government. Or when he says there should be "less shock and more therapy for the Russian people."

But when translated into the cockpit of Russian politics, such sweet verbiage out of Washington could undercut real reformers behind the beleaguered Mr. Yeltsin. In the Moscow power struggle, Deputy Prime Minister Yegor Gaidar and Finance Minister Boris Fyodorov are under attack from Prime Minister Viktor Chernomyrdin, who wants to slow dismantling of the command economy.

The trouble is that Russia needs more shock therapy, not less. Its high inflation rate, poor currency management and lagging pace in privatizing state enterprises are due to what Mr. Fyodorov calls "the inconsistency [and] insufficient speed" in introducing a market economy.

Radical reform hurts. But to stretch out the hurt over a long period only makes it worse and encourages the regressive forces that would stop reform in its tracks. Poland went through misery in sticking to shock therapy. But the result today is less inflation in a year than Russia experiences in a month. And its political situation is more stable that Moscow's. The other extreme is represented by Ukraine, which has undertaken no reform whatever and now suffers from economic collapse.

Unfortunately, Mr. Chernomyrdin got the ear of Vice President Al Gore in Moscow last week. As a consequence, Mr. Gore issued a blast at the International Monetary Fund for holding back half of the $3 billion earmarked for Russia this year. Such policies, he said, play into the hands of demagogues like Vladimir Zhirinosky, whose extremist party did much better than Mr. Talbott expected.

What should be noted is that Russia twice failed to meet IMF goals it had accepted. The IMF -- never popular anywhere -- must hold to worldwide standards or lose its credibility. The only real solution lies with the Russians themselves and their ability to make their economy sound enough to attract investment from the private sector around the globe.

Treasury Secretary Lloyd Bentsen tried to set the record straight by saying the blame for Russia's problems should not be placed on efforts to reform too fast. Quite the reverse. Mr. Clinton should heed this advice before he goes to his Moscow summit with Mr. Yeltsin next month. His best gift would be quiet backing for actual reform -- not just talk.

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