-Caveat Lector-
from:
http://www.economist.com
http://www.economist.com/">The Economist
Russia, financial outcast
Russia has been in default since last August on most debts and will soon
want more money from the West so it can roll over the rest. The West
should say no
Print and Web Edition subscribers get 50 more articles each week. To
order a subscription, please go to the Subscription Centre.
We are currently offering a one-month free trial to The Economist Web
Edition. Find out more about this Special Offer today.
This offer closes on March 31st 1999.
=
Russia, financial outcast
Russia in default
Russias economy
Search archive
THE jar is all but empty, and once again Russia is looking to the West
for more honey. Once again, the spectre of bankruptcy looms. Once again,
Russias apologists present the prospect of the bear, once rebuffed,
sinking even further into resentful degradation and nerve-racking
unpredictability, and bristling all the while with nuclear missiles.
This time, however, the rich countries should steel themselves and say,
Sorry, not until youve put your house in order. Unless Russia gets a
radically new economic regime, any further western money is likely to be
squanderedat best used to prop up a system that does not work, at worst
to find its way into the pockets of corrupt politicians, officials and
businessmen.
Since the roubles crash last August, many of the tentative gains of the
preceding few years have been blown away. Misfortune has been piled on
misfortune. Last autumns worst harvest in 45 years means that even
bread may soon be in short supply. The price of oil, Russias main
earner of foreign exchange, has tumbled. Investors, bruised by the
collapse of Asian markets, do not wish now to be crushed in Russia. The
inflation rate, judging by Decembers figures, may rise to 100%, or even
higher if the government decides to pay off wage arrears by printing
money. As it is, many public-sector workersteachers, for instance, who
are supposed to get a princely $20 a monthhave not been paid for a
whole year. Much of Russias nascent middle-class has been pulverised.
The monetised economy is barely half the size of the Netherlands. The
murder rate may be the worlds highest. Male life expectancy has fallen
to African levels: 58 years is now the average life-span, and the
population is contracting by 800,000 souls a year. The country seems to
be dying on its feet.
True, Russia now has in Yevgeny Primakov a prime minister who, as a
former head of the KGB, is gathering power and has the experience to
make use of it. But he is not a man with a vision of the future or the
determination to make changes for the better, more someone to manage the
countrys decline. With Boris Yeltsin yet again shoved to the margin by
ill health, Russia has no presidential guidance. The federation
threatens to fragment. It has no real leader, no moral compass, no
tangible hope that things material will soon improve.
Mr Primakov has chosen the path of least political resistance, eschewing
virtually anything that smacks of economic risk or reform. He has hired
old sweats from the days of Soviet central planning to run the central
bank and what passes for economic policy. He has salvaged a shred or two
of national pride by continuing to behave awkwardly abroad. Above all,
he has managed to avert civil strife, at least tempering Russias steady
decline with a measure of political stability.
Soon Russia will face some big bills for the repayment of various loans
(see article). It has no chance of paying them all without more
borrowing. The argument for helping it out rests mainly on the belief
that a refusal to do so could upset whatever equilibrium exists. A
general default on debt, of which some $17 billion falls due this year,
would mean Russias exclusion from the worlds financial markets. In the
short term, Russia wants only $7 billion, partly to roll over
repayments to the IMF that fall due throughout this year; it is not
asking for budgetary support.
A bankrupted Russia, say those who would give it the money, would become
an economic outlaw deprived of any incentive to co-operate on many
issues, foreign and financial. It would turn its back on democracy. It
could bully its neighbours with impunity. It would topple backwards into
nostalgic communism or forwards into Slavophile fascism.
Really? The benefit of the doubt that the West has repeatedly granted
Russia on a range of questions, from abiding by IMF conditions to
rooting out corruption or behaving better on such matters as Iraq,
Kosovo and the sale of nuclear technology, has reaped but the scantest
of rewards. Why should the record change? Mr Primakov, after all, is a
past-master at reassuring the West of Russias good intentions at one
moment and then abetting the Wests enemies at the next.
When the importuning has to stop
Not that the West should turn its back on Russia for ever. It is still a
land of mag
