Grandson of Bolshevik Hero Masterminds Market-Style Economic Reforms in Russia
EVERY Soviet schoolchild grew up with the inspiring tales of Arkady Gaidar, a hero of the Bolshevik Revolution at the age of 14, later a writer of children's books. His most famous work, "Timur and His Team," chronicles the exploits of a group of boys who perform heroic and selfless deeds for the sake of the revolution. The book was modeled on his own son, Timur, now an admiral in the Soviet Navy.Today Arkady's grandson, Yegor Gaidar, is also engaged in a "heroic" task - the dismantling of the communist system. The young economist is the author of the radical reform plans of the Russian government of Boris Yeltsin, designed to rapidly shift Russia to a market economy. The smiling, round-faced former economics editor of the Communist Party newspaper Pravda was recently appointed deputy prime minister for economics and finance, in effect Mr. Yeltsin's economic czar. Early in November Yeltsin unveiled the reform plans, which together constitute a Russian version of the "shock therapy" reform in neighboring Poland. As in Poland, the Russians will free prices from state control, except for a handful of basic foods and fuels, allow enterprises to trade freely with other countries, let the ruble's value be determined solely by the market and take the first steps to make it freely convertible into other currencies. Price liberalization is now set to start on Jan. 2, in coordination with other former Soviet republics now grouped in the Commonwealth of Independent States. The most widespread criticism of Mr. Gaidar's approach is the decision to begin by freeing prices, a move even he admits will usher in a huge wave of inflation. But the Russian economist hopes this will bring goods into the now empty stores, as it did in Poland. After doubling or tripling, he hopes prices will stabilize by next fall. Critics say making this move in advance of privatizing farming and other sectors, will be ineffective. "It is clear no price reform will lead to a big influx of goods because we simply don't have them," argues St. Petersburg mayor and prominent liberal politician Anatoli Sobchak. The key to controlling inflation is to bring the huge Soviet budget deficit under control. During the past several years the Soviet financial authorities - the Finance Ministry and the Soviet State Bank - have been printing money at an astounding rate to cover the budget gap and subsidize state-run enterprises. This reality is the key behind Gaidar's Russia-first reform strategy, including moves to take over the Soviet central banking institutions and end funding of all central institutions with the exception of a seriously pared down military. Russia prefers a common banking union, modeled on the US Federal Reserve, and preservation of a single currency, the ruble. "Each republic will have to pay heavily for separate currencies," Gaidar says. Inflation would surge in Russia as rubles rushed in from the Ukraine and elsewhere to buy Russian goods. The new Commonwealth treaty provides for use of the ruble with national currencies to be introduced only later and by special agreement. Gaidar is well aware of the political dangers surrounding this radical shift. He rejects, for example, an attempt to impose wage controls as an anti-inflation measure, arguing that this did not work in Poland. Wages will be constrained more by lack of money, by a strict monetary policy, than by attempting direct controls. "In this country, I don't believe any government can politically withstand the pressure for wage increases connected with price inflation," he says. But politicians such as Mayor Sobchak accuse Gaidar and his team of having their heads in the clouds. "They are boys who very much want to do something but have never done anything in their lives. [Gaidar's] never been a leader. In my two years as a leader, I learned how complex it is. As a theoretician, I could write 10 programs like Gaidar, but when it comes to practice, that's a different matter." Gaidar, perhaps recalling the courageous life and tales of his grandfather (who died fighting the Nazis in 1941) has his own reply: "It is a very serious risk to do nothing. It is a serious risk to do anything unpopular. It is a serious risk to do anything popular because everybody understands that anything popular leads you nowhere."