PERSPECTIVE ON THE SOVIET UNION : Buy the Missiles, Feed the People : The West could buy Soviet weapons outright, paying with a currency delivered directly to the people.

The West’s greatest concerns as the Soviet Union transforms itself are probably the fate of the union’s nuclear weapons and the sinking Soviet economy.

We wonder who is in charge of strategic weapons, since the revelation that leaders of last month’s failed coup had access to the nuclear launch codes. As a result, there has been a stunning change in Soviet attitudes toward strategic weapons--particularly long-range nuclear missiles. They are now perceived not as a way of protecting Soviet interests or even preserving some sort of superpower status, but as an unacceptable risk. Both political leaders and ordinary citizens see these weapons as more likely be used against their interests than in support of them. Thus, several of the republics have called for the removal or elimination of strategic weapons, with some even seeking to become nuclear-weapons-free zones.

The second serious problem, the economic collapse of the Soviet Union, will, if anything, be aggravated by recent political developments including the breakup of the union. This economic collapse is characterized by a nearly worthless currency, a lack of modern capital, the absence of markets and chronic, worsening food shortages. A key element of the disarray is the lack of a stable medium of exchange, which has resulted in degeneration of the economy to primitive barter.

There is an opportunity for the West to treat these two problems together, by having them, in effect, solve one another. Suppose the Western nations agreed to form a consortium to buy the Soviet strategic weapons outright. The threat that these weapons represent would be eliminated and the proceeds of the sale could be used by the Soviets to meet urgent needs for food, for spare parts, for capital and for technical assistance in reforming the Soviet economy.

If this proposal were merely for an exchange of Western credits for arms, it would be just another form of aid to either the central government or the republics, both of which lack institutions to make effective use of it. What makes this proposal different is that a substantial portion of the proceeds would be distributed directly to the Soviet people, in the form of a set grant for each citizen. The republics would merely administer and distribute the money. This direct grant to the people could be partly in the form of a convertible medium of exchange, say “nu-rubles,” issued by the West and backed by a bundle of Western currencies, with the rest in the form of bonds that could be used only to buy financial assets--stocks, bonds, savings accounts and the like. The existence of convertible assets would create incentives for the private sector in the West to sell food and consumer goods that would mitigate immediate problems associated with the transition to democracy.

Since the nu-ruble could be used to purchase foreign goods, its value would remain stable. Individuals would be willing to accept it for internal transactions, so it would serve as a stable medium of exchange within the Soviet Union itself, reversing the slide to barter. In addition, the convertible bonds would serve as a basis for creating a capital market in the Soviet Union, with private enterprises selling shares in return for these bonds, then using the proceeds to buy capital equipment and participate in joint ventures. Thus, both the nu-rubles and the bonds would contribute to the infrastructure necessary to a market economy.

There is a precedent for such creative financing in early U.S. history. The debt of the newly created United States was enormous, U.S. credit in Europe was almost nonexistent and markets were in disarray from lack of a stable currency. In fact, The economic situation was not dissimilar from that facing the Soviet Union today. In 1790, Alexander Hamilton, in a controversial move, had the national government assume the debt of the states and then used this national debt to create a single, stable currency. This was done by making federally guaranteed bank notes legal tender for the payment of taxes, thus ensuring their value. Convertible assets provided to Soviet citizens would serve a similar purpose today.

A most appealing aspect of this proposal is that it is in the best interests of all of the parties involved. For the West it would remove the threat of Soviet strategic weapons. For the Soviet Union it would remove the problem of the control of strategic weapons and eliminate the danger that they might come under the control of extremists, as happened during the coup. At the same time it would help the Soviets overcome immediate economic problems and greatly facilitate the development of a market economy with minimal state intervention.