Clinton sells a kinder capitalism President urges Russians to take care of their own

Ruble continues to fall

Moscow paralyzed by economic and political crises

September 03, 1998|By Will Englund | Will Englund,SUN FOREIGN STAFF

MOSCOW -- Russian economic reform must move forward, but it can do so only if care is taken to include all Russians -- not just the newly rich and well-connected -- in its benefits, President Clinton said yesterday on the final day of his summit here.

He stuck doggedly to his keep-up-the-reform script, but he began working up another theme: Russians, take care of your own.

Try a little "genuine sensitivity to the personal dislocation of the people who have been hurt," he said.

Put another way, he was telling Russians to stop acting like the rapacious capitalists they used to read about in Soviet propaganda.

Part of the reason Russia is in the mess it's in may be because, when the country discarded communism, too many people took those old caricatures a little too much to heart.

He suggested that a free-market economy doesn't have to be one without a safety net and that strong institutions upholding certain codes of behavior aren't a bad idea, either.

As he spoke, the ruble's value dropped from 10.8 to 12.8 to the dollar -- three weeks ago it was 6.2.

The head of a government crisis committee announced that when regulators took over the third largest bank in Russia, they found it consisted of "nothing more than a sign board and debts."

August tax collections were 15 percent less than expected. Butter became scarce, as all kinds of economic activity ground to a halt along with the banking system.

Near the Kremlin, as if to accentuate Clinton's point, a protest demonstration gathered.

It turned out to have little to do with the current crisis; it was called by angry victims of a pyramid scheme called MMM that collapsed here in 1994. They're still hoping for their money back.

They were pioneers. Now the whole country is a collapsing pyramid. The government built a mountain of short-term debt and eventually couldn't find enough ways to sell more debt, and the crash began.

Clinton flew in Tuesday for a long-planned meeting with President Boris N. Yeltsin. The crisis didn't deter him. Anyone can hop on a plane when times are good, he said yesterday. Friends show up when they are needed.

What he offered over two days was moral support. He told Russia to push onward with reform, but to do it right this time, and to understand that there are certain laws of financial behavior.

"There have been a number of people in Russia for a long time who felt this move to capitalism isn't so hot," said Rep. Steny H. Hoyer, a Maryland Democrat who is with Clinton. "We believe a democratic society with a free-market system will provide the most benefits for the most people."

But the emphasis is on the system and the notion of mechanisms that everyone can understand. Otherwise, the Americans were saying, the system cannot stand.

Clinton said, "I think if other political forces in Russia try to force the president to abandon reform in midstream or even reverse it, what I think will happen is even less money will come into Russia, and even more economic hardship will result."

Clinton appeared, if not dispirited, at least flat and unenthusiastic about his task. He and Yeltsin discussed the situations in Kosovo and Afghanistan, and signed an agreement to destroy enriched plutonium, but this summit was about the economy. Russia, as Clinton pointed out, is a big place, and it's going to be up to Russians to solve their own problems.

Yeltsin, for his part, vowed that reform would proceed. There has been less talk this week from the government about a return to Soviet-era economics, and the head of the crisis committee, Boris Fyodorov, is a hard-headed economist who believes in the market.

Fyodorov's assessment of the Russian economy yesterday: "Today we don't have financial markets, we almost don't have a banking system. There are no investors. The budget still remains heavily over-stretched and unrealistic."

Russia also doesn't have a proper government because Viktor S. Chernomyrdin failed to win approval Monday from the the Duma, the lower house of parliament, as the new prime minister.

Yeltsin has renominated him, and yesterday the Duma moved up its consideration to tomorrow. The political crisis seems to be deteriorating as quickly as the economic one, although in an unexplained move, the nationalist deputy Vladimir V. Zhirinovsky did an about-face yesterday and announced his party would support Chernomyrdin this time around.

"I think the Duma will cave in as it did in the case of Kiriyenko," said Dmitry Ayatskov, governor of the Saratov oblast on the Volga River, referring to Sergei Kiriyenko, prime minister from March to August. "What cannot be done for money can be done for bigger money."

Clinton spent nearly two hours yesterday at Spaso House, the American ambassador's residence, meeting with leaders from the Duma and from Russia's regions.

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