Yeltsin Firm On Reform As Opposition Talks Strikes
THE Russian government is coming under siege as popular anger mounts over economic reform, but President Boris Yeltsin and other leaders are vowing to press on.
"We believe 100 percent this is the last chance," Deputy Minister of Economics and Finance Andrei Nechayev told the Monitor. "We know what we do now is unpopular, but it is necessary."
A wide array of forces, including labor groups and prominent politicians, have bitterly denounced the government, which freed prices on Jan. 2 as the first step in a move to a market economy. Until now there has been only vocal opposition, but dissatisfied workers are now ready to turn to protests and strikes.
Coal miners in the northern Vorkuta region as well as the Siberian Kuzbas say they may stop working if conditions don't quickly improve. "We are fed up with experiments on the people," the Tass news agency quotes Vorkuta miners as saying. The miners' warning is particularly significant because they formed the backbone of support for Mr. Yeltsin last spring when he survived a parliamentary ouster attempt by hard-line Communists.
"Of course it is easy to criticize the government, and one can derive certain dividends from this," Yeltsin said in a speech to parliament yesterday. "But such a way is hardly acceptable under the given circumstances." Yeltsin spoke a day after completing a five-city tour of Russia to get a firsthand look at the economic situation in his massive republic. In his speech he outlined additional reform measures that he said would be taken in the near future, including the rapid privatization of light industr y, particularly food stores, and the dismantling of local trade commissions, many of which still set prices for stores in the provinces.
Price increases have caused confusion in Russia, sending costs skyward, largely without filling empty store shelves. This week Russian Parliament speaker Ruslan Khasbulatov, among others, indicated the government should be replaced, saying its policies "lead toward bankruptcy." In an interview with the Moskovsky Komsomolets newspaper published yesterday, Mr. Khasbulatov warned that if the government stays its course, it could cause people to lose faith in democratic reforms and give rise to a new dictato rship in Russia.
Deputy Prime Minister Yegor Gaidar, who is in charge of carrying out the economic reform program, said the first two weeks of free prices had been difficult, but added there had been no surprises. He also said the policy's chances for success were good.
"The most serious threat today is panic," Mr. Gaidar said in a speech to parliament yesterday.
Though there is pressure to slow down on reform, the government has left little room for any compromises, says Mr. Nechayev, the deputy economics minister.
"If there are compromises that don't change totally the whole reform process, then we are prepared to listen," he says. But "if we have to change any principle points, then the government will have to resign." Free prices, rapid privatization, and a tight fiscal policy are all untouchables, he says. In his speech, Yeltsin said the new tax system, including a 28 percent value-added tax, would not be significantly altered, adding any drastic change "would pave the way toward uncontrolled hyper-inflation an d ruination of all state structure."
Much of the criticism of the government is undeserved, says Jeffrey Sachs, a Harvard University economics professor who is advising the Russian leadership.
"The government didn't create this crisis, it inherited it," Mr. Sachs says. "You shouldn't complain to Mr. Gaidar that rubles can't buy anything. That complaint should be directed to the central bank."
Calling the Russian central bank's monetary policy "out of control," Sachs blames it for the "hyper-inflation that's now underway." He said the government's program is doomed unless the central bank stops printing money, which is fueling inflation, and restricts its liberal credit practices to make producers respond better to market forces.
Internal opposition isn't the only obstacle that could derail reform, official said. Russia's disputes with Ukraine may force the Russian government to make unwanted changes in its policy. At present the two largest republics in the Commonwealth of Independent States are at odds over control of the Black Sea Fleet and the fate of the ruble.
Of particular concern to the Russian government is Ukraine's desire to introduce its own currency, the grivna, says Nechayev. Ukraine already is issuing coupons that could replace the ruble as the republic's currency by the end of the month, said Ukrainian President Leonid Kravchuk.
If Ukraine unveils its own currency Russia may be flooded by rubles, spurring inflation by stripping the stores of whatever goods they have, says Nechayev. In that case, Russia will have no choice but to take "protective" measures by introducing its own currency, he adds.
Mr. Gaidar says his government will try to save the ruble. But if such efforts fail, a new currency could appear by July, officials indicate.
The course of reforms also can be influenced by the West, said Sachs. Up to $20 billion in aid is needed to help Russia make the transition to a market economy, he continued. Such aid would encompass food supplies, balance of payments assistance, and a stabilization fund to bolster the beleaguered ruble.
Russia's massive foreign debt is increasingly harder to repay because of falling production. But Western governments for the most part have been willing to provide Russia only with food aid.
"I don't feel Western governments have risen to the occasion to provide aid," says Sachs. "But until the central bank shows it can control the money supply, balance of payments support won't come."