G-7's Enlightened Caution
THE West's program to aid Russia, as seen last week when Boris Yeltsin took home $1 billion from the Group of Seven summit in Munich, has been characterized by a kind of enlightened caution.
It is enlightened because the West, particularly US President George Bush, has been pushed into agreeing both that Russia is too big and potentially dangerous to fail and that with huge natural resources and a broadly educated middle class, Russia could become a prosperous member of the world community. Mr. Bush's firm prodding of International Monetary Fund head Michel Camdessus to cut loose funds for Russia, despite Moscow's inability to meet all the IMF requirements, is an example of enlightenment. Hi story and grinding political realities in Russia won't wait for clipboard-carrying economists in Moscow to tidy up the ledgers. The country needs immediate help.
Yet at the same time, some IMF caution is required. Unlike Mikhail Gorbachev last year, Mr. Yeltsin did not come to the G-7 merely promising change. He delivered in a radical way through price reform last January. Yet what hasn't changed in Russia can't be overlooked: No set of laws govern taxes, property rights, and the rules of business, without which no foreigners can risk significant investment. Local mafiosos and corrupt officials abound. Also, when are those troops in the Baltics finally coming hom e? Perhaps Yeltsin should have gotten more than $1 billion in Munich - but not much more.
Enlightened caution must continue. Throughout the old East bloc, the calculation is between the social tension and the backlash created by reforms - weighed against the capacity of a country in deep transition (post-totalitarian but by no means democratic) to waste money and revert to bad habits.
Russia has, responsibly enough, agreed to pick up the debts of the former Soviet Union - about $70 billion. In return, Yeltsin is asking the West for debt relief for two to five years to help Russia get on its feet. The relief should be granted. If economic reforms fail, the West won't be paid back anyway.
In considering why to aid Russia in a time of turmoil, one must consider what it costs not to.