Yeltsin Seeks Assistance From Hoover Fellows

In an unusual alliance that could place a major American think tank in the middle of the power struggle in the Soviet Union, the Hoover Institution plans to enter into an agreement to provide economic advice for Russian leader Boris N. Yeltsin.

The director of the conservative Hoover Institution, John Raisian, said the arrangement was proposed by Michail A. Bocharov, chairman of the Supreme Economic Council of the Russian Republic and a close adviser to Yeltsin, after four Hoover fellows spent two weeks with Russian officials last month.

Although Yeltsin has used some of Hoover’s free-market economists’ suggestions in his continuing challenge of Soviet President Mikhail S. Gorbachev, Raisian insisted that he has no desire to get enmeshed in the conflict.

“I want to emphasize that we’re not going to play politics here,” Raisian said, adding that he would dispatch Hoover experts to help Gorbachev in a minute if the Soviet leader requested it. “We’re not betting on a horse.”

But so far, Gorbachev has not called and the Hoover fellows are advising Yeltsin. Raisian said he believes the agreement is a first, and noted that no other U.S. academic institution has entered into a consulting arrangement with any of the Soviet republics that are trying to pull away from domination by the Kremlin.

The Hoover fellows contend they can help ease the Russian republic’s transition into a free-market economy, even though it is still unclear that such a transition will ever come about. They also concur with Yeltsin that Gorbachev is moving too slowly in his pursuit of economic reforms.

The proposal comes as the Hoover Institution, known for its conservative political and economic views, continues its program of advising officials from Eastern European nations that only a few years ago had regimes that the think-tank scholars viewed with contempt.

Under the proposal, Hoover would provide experts to help bring about economic reform. They would consult on areas ranging from fiscal and monetary policy, to credit and banking, private investment, pricing, privatization of government industries, labor, and provisions for unemployment benefits.

The Hoover Institution plans to bear the financial burden of the program, paying all travel and hotel expenses when its fellows visit Russia.

A two-page draft proposed by Bocharov calls on Hoover and the Supreme Economic Council of Russia, which he chairs, to enter into a “long-term cooperative effort concerning economic reform through free markets in Russia and the Soviet Union,” Raisian said.

As Raisian envisions it, Hoover’s economists would visit Moscow regularly to consult with Bocharov and other Russian economists, and write position papers for the Supreme Economic Council of Russia. The next visit could occur as early as this month.

In Moscow, Bocharov, sitting in his office in the “White House,” the imposing government office building of the Russian Federation, said in an interview that there “will be no domination by Hoover (of Russian economic reform), but there should be cooperation.”

“They propose things to us, but the experts of the Supreme Economic Council . . . of course will make the decisions,” Bocharov said.

Bocharov noted that he has sought advice from economists of other countries, and would welcome counsel from other U.S. institutions. But he also said, “It could be the Hoover Institution, with its particular approaches, is exactly what’s needed.”

Bocharov singled out for particular praise the advice about taxation that was provided last month by Hoover economist Charles E. McLure Jr., who as a Treasury Department officer under President Ronald Reagan helped write the proposals that resulted in the Tax Reform Act of 1986.

“We have a big problem with taxes. I think we should have something like this,” Bocharov said, holding up a 1040 form left by the Hoover fellows.

McLure, on the other hand, said he cautioned that any attempt to duplicate a U.S. taxation system would be “dumb.” Russia has no bureaucracy like the Internal Revenue Service to collect taxes, he said, and a system in which people would have to declare their income could not work because of the Russians’ deeply held distrust of government.

McLure said Russians should consider a system in which income taxes simply would be withheld from workers’ pay. There would be nothing akin to deductions or April 15 filing deadlines, he said.

“It was more than friendly,” McLure said of the exchange. “There was a great deal of trust. I think of us as being a part of their team, trying to build Russia and the Soviet Union out of their problems.”

The other economists who visited Russia in March included labor specialist Edward P. Lazear; Mikhail Bernstam, a Soviet emigre and former member of the Soviet Academy of Scientists, and macro-economist Thomas Sargent, an expert on inflation.

They gave advice on issues ranging from the breakup of government-owned monopolies to how to convert the ruble to hard currency so it can be readily exchanged, to developing a commercial banking system and a stock market.

The Hoover contingent spent an hour with Yeltsin, who said he hoped it would be “the first trip of many,” said Lazear. Some of the team’s proposals have been introduced as legislation before the Russian Republic’s parliament. Through Bocharov, some suggestions may be proposed to the Supreme Soviet of the U.S.S.R., Hoover fellows said.

But some Soviet experts point out that it is unclear whether any of the ideas will actually be implemented, given the uncertainty that Yeltsin will succeed in his drive for an independent Russia, or that he can seize power from Gorbachev.

“(The Russians) have no power to speak of, but they are very seriously going about making this plan,” said Sargent, who advised Bocharov about setting up a central bank and on monetary policy.

Lazear said he made suggestions about labor issues. He suggested an unemployment insurance plan in which workers would get half of their wages for six months or a year. When benefits expired, he said, unemployed people would get welfare that pays far less, thus giving them incentives to find jobs.

“They were writing the reforms,” Lazear said. “They were using us as a sounding board. We were like engineers talking about the details.”

The fledgling alliance began when Bocharov visited the Hoover Institution on the Stanford University campus in late January, then contacted Raisian in February and sent visas. The scholars were in Moscow from March 11 until March 27.

Raisian said he decided to move forward with the arrangement this week after conferring with former Secretary of State George Shultz, who joined the Hoover Institution at the end of Reagan’s presidency.

Raisian said that although Shultz is not eager to get involved in the struggle between Yeltsin and Gorbachev, Shultz believes that the institution must “be willing to do business with anyone who wants to along these lines.”

“I think we’re going to nail it down by the end of the week,” Raisian said of the agreement, adding that he intends to embark on a fund-raising effort to pay for future trips to Russia.

The Hoover Institution gained prominence during the 1980s when many of its scholars went to work for the Reagan Administration. Raisian, who served in the Labor Department, said that while the Russians have not embraced Hoover’s point of view in a “religious way,” they appear to agree that a free enterprise system is key if there are to be individual liberties.

In Moscow, Bocharov said he has heard no criticism from hard-liners about his plan to work with Hoover’s economists. “Reagan did a lot for the people of America,” he said. “So we’re happy to work with Reagan’s people.”

Morain reported from Stanford and Goldberg reported from Moscow.