Don't Give Up on Russia
The economic news from Russia continues to be gloomy. Prime Minister Yevgeny Primakov's government recently announced it won't be able to pay its foreign debts next year. The Finance Ministry projects that, at best, the economy will shrink 3 percent next year on top of the 5 percent it has contracted in 1998. Worse, it could slide 9 percent.
Reports say Russian soldiers are on short rations. The Russian Far North faces the prospect that it won't be able to import the fuel and food people need to survive the winter.
With the worst grain harvest in 45 years, the government has asked the United States and the European Union for food aid. The US will send $600 million worth and the EU $480 million. Each must insist that food actually reaches hungry Russians and does not enrich corrupt officials or companies that reexport it for profit.
But at a deeper level, the Russian government must realize that its proposals to print more rubles and expand state intervention in the economy are not the answer to Russia's troubles. Both prevent the International Monetary Fund from providing the kind of aid that could move things in the right direction. Both will make things worse, feeding hyperinflation, waste, and increased inefficiency.
Russia needs a realistic budget, a simplified and fairer tax system, reliable tax collection, and a system of business and investment law. Its government must help legislators and public understand that foreign investment is normal and helpful, not to be feared, resisted, or ashamed of.
The West's greatest fears for Russia now are that it will relapse into overcentralized authoritarianism or split into fiefdoms possessing nuclear weapons. Neither need happen.
There are, indeed, hopeful signs in the gloom. Younger Russians who represent the future show a much greater understanding of both democracy and market economics. Russians are not flocking back to the Communist Party. Increased federalism can boost economic progress by eliminating inefficient central bureaucracy.
The West should not abandon Russia. A better policy is patient engagement on many levels and constant assurance to Russians that the West cares about their welfare.
Russia and the West continue to cooperate on a whole range of issues. It's particularly in the West's interest, as well as Russia's, to continue security cooperation such as the Nunn-Lugar program, in which the US helps former Soviet states destroy nuclear weapons under arms-reduction treaties. That program has deactivated 4,838 warheads aimed at the US.
Contrary to the empty theories of ex-Soviet apparatchiks and nationalist romantics, there is no "Russian" way separate from "Western" economics. There is only economics. When enough Russians understand that, they will take the steps Russia needs to leave the current crisis behind.