DATE=12/2/1999
TYPE=BACKGROUND REPORT
TITLE=RUSSIA / SHOCK THERAPY
NUMBER=5-44890
BYLINE=ANDRE DE NESNERA
DATELINE=WASHINGTON
CONTENT=
VOICED AT:
/// Eds: This is the second in an eight-part series on
Russia. Among issues to be raised: I-M-F loans,
President Boris Yeltsin's legacy and NATO-Russia
relations. ///
INTRO: The "Who lost Russia" debate currently under
way in the United States centers around whether or not
the West used appropriate policy measures in the early
1990's to foster economic reforms in that country. In
this second of eight reports, former V-O-A Moscow
Correspondent Andre de Nesnera looks at one of those
controversial economic policies, so-called "shock
therapy."
TEXT: After the demise of the Soviet Union in 1991
and the emergence of Russia led by Boris Yeltsin,
Western economic planners were faced with a key
question: how do you help move that country from a
centralized economy to one dominated by a free market?
What emerged in the West as a solution to Russia's
problem was known as "shock therapy" - a combination
of measures including liberalizing prices, cutting
subsidies and stabilizing the country's budget. Such
measures were used successfully in Poland and
advocates of "shock therapy" felt the same could be
done in Russia. In the early Nineties, most of the
policymakers in Moscow - including then-acting Prime
Minister Yegor Gaidar - felt that was the way to go.
To this day, experts differ as to whether that
approach worked. Some say the measures did not go
far enough; others say Russia got a dose of "shock"
and no "therapy."
Harvard University's Marshal Goldman believes Russia
should have undertaken economic reforms in a much more
gradual way.
/// GOLDMAN ACT ///
In part because the assumption was that Russia
had institutions in place that could absorb
these changes, that could react to these changes
much as happened in Poland. And my feeling - my
very strong feeling - was that these
institutions were not in place. After 70 years
of communism, they had all been eliminated. So
when you brought in money or you expected prices
to change, what you had is not a competitive
system, as the advocates of that approach had
assumed would be the case. What you ended up
with was monopoly and the oligarchs and the
controls and the distortions and a very strong
feeling that you could steal from the state and
there would be no price to pay for that.
/// END ACT ///
But other experts disagree with the view that Russia
needed gradual, slow-paced reforms. One of them is
Ariel Cohen - a Russia expert with the Heritage
Foundation research center (in Washington)- who says
"shock therapy" was not an unmitigated disaster.
/// COHEN ACT ///
Yes indeed, it resulted in high inflation and
the savings that were not indexed were wiped
out. On the other hand, Russia was facing famine
at the time - this is 1992: the shelves in the
stores were empty and as a result of freeing of
prices, the market reached equilibrium and the
shelves filled, the stores filled very, very
fast. This broke the backbone of the central
distribution system that the USSR was practicing
for over 60 years at the time and it was a
necessary measure. All the alternatives of slow
economic reform that were undertaken in
countries like Romania and Ukraine, showed that
as a result, the corruption was even greater and
the macro-economic results were not necessarily
better.
/// END ACT ///
Whether or not "shock therapy" worked - or was even
implemented to its fullest - Russia's experience with
it was short-lived. By December 1992, radical reforms
were on the way out. So was acting Prime Minister
Yegor Gaidar. And since then, Russia has not had a
consistent economic policy. Successive Russian
governments have wavered: moving in the direction of
reforms, then putting on the brakes.
Jack Matlock was the last U-S Ambassador to the Soviet
Union. A long-time Russian scholar, he says during
those first years following the end of communist rule,
Western economic planners knew very little about the
challenges they were to face in trying to tackle
Russia's problems.
/// MATLOCK ACT ///
There were no sure bets. Nobody had a road
map. Of course, we understood generally where we
would like Russia to be and where most Russians
wanted to be. But nobody knew how to move from
where they were to where they needed to be. And
this was an enormous task. There was no roadmap
and everybody knows that when you are doing
something new, a lot of mistakes are going to be
made.
/// END ACT ///
Many analysts say mistakes are inevitable as Russia
moves ahead toward a market economy. But experts also
say the West must continue to help Moscow in that
difficult transition. (Signed)
NEB/ADEN/KL
02-Dec-1999 14:16 PM EDT (02-Dec-1999 1916 UTC)
NNNN
Source: Voice of America
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