If Totalitarianism Returns to Russia, Blood Will Be on West’s Hands : Russia: Boris Yeltsin’s free-market plan brings all shock and no treatment to an unprepared economy. Without a safety net, disaster looms.

President Boris N. Yeltsin’s reckless decision to free most prices in Russia is a tragic mistake doomed to failure. The terrible damage caused by the communist experiment of the past 75 years cannot be repaired by “shock treatment.” Already, there is widespread shock, but no treatment.

The consequences will be disastrous unless the decision is modified. What is needed is a comprehensive recovery program jointly developed by the commonwealth states and the Western industrial democracies. It will take time to implement--far more time than the Marshall Plan for the recovery of Western Europe after World War II, because the former Soviet Union is less developed economically. But unless the Western democracies act together, and soon, the progress made toward civil society and freedom during the Gorbachev years will be lost.

The Soviet threat to Western security has substantially disappeared, but there remain important reasons to promote democracy and stability in that vast territory. There are more than 15,000 tactical nuclear weapons. Washington doesn’t want any to be sold or transported to other nations, nor does it want personnel with expert knowledge to take jobs with potentially hostile nations.

We must also fear the consequences of food riots, strikes and civil war. Large-scale disarray could create horrible refugee problems in Eastern Europe and Germany, with serious economic and political consequences for all Europe and, ultimately, the United States.

There is no sense of urgency among the G-7 nations, especially the United States, though the signs of imminent disaster are everywhere. American advisers to Yeltsin complain he is not moving fast enough to “privatize”--to sell the 45,000 state-owned factories to private owners. Jeffrey Sachs, a Harvard economist, says that, without privatization, the lifting of price controls is not likely to stimulate a broad industrial recovery. He says: “Right now, there are no proper incentives anywhere in the economy and it is a very, very dangerous situation.” True, but why, then, did Sachs and other U.S. advisers urge Yeltsin to take the leap to free prices in the middle of the winter, with no safety net?

Freeing prices and privatization are essential to a market economy, but the process requires time and careful planning. To move too rapidly on a piecemeal basis makes failure inevitable. Nicolai Smelev, one of Russia’s few hard-headed economists, notes, “Margaret Thatcher spent 10 years privatizing a dozen large state companies, but our monsters are far larger than those British monsters. And in order to privatize them, if we’re going to do it seriously, and not just for show, we will need much more time than Margaret Thatcher. We still don’t even have a primitive market in stocks, and bonds and the overwhelming majority of both work collectives and the population at-large don’t have the faintest idea why we need stocks.”

The political reverberations of Yeltsin’s ill-advised action are already apparent. Alexander Rutskoi, vice president of Russia, says, “‘We have entered not the market, but anarchy.” Georgy Matukhin, chairman of the Russian Central Bank, says the freeing of prices is “wrongly conceived and could lead to social unrest.” Ruslan I. Khasbulatov, speaker of the Russian Parliament, called for the resignation of Yeltsin’s Cabinet, because they are responsible for “uncontrolled, anarchic, non-regulated price increases.” Unless he changes course, Yeltsin may not survive through the year.

The people with the most economic clout today are the former communist apparatchiks, who manage the giant military-industrial complexes; the mafia bosses who run the black market and control vodka distribution, and several hundred millionaires who emerged during the last five years. For the most part, these are hard-boiled conservatives with little interest in democracy. Some Yeltsin advisers already say the model for future Russian capitalism should be authoritarian--akin to what developed in Pinochet’s Chile or South Korea.

The beginnings of civil society and freedom achieved under Mikhail S. Gorbachev will almost certainly disappear unless the industrial democracies come to the rescue with a multilateral program devised jointly by the Commonwealth of Independent States and the G-7 nations. The current tendency for bilateral programs between Western states and commonwealth republics will be inefficient and expensive. This is because the economies of the republics of the former Soviet Union are interdependent--especially those of Russia and the Ukraine. The commonwealth states must learn to cooperate in interests of their mutual economic survival. This runs in the face of the nationalist tides flowing today, but if the G-7 nations insist on a joint program, the inducement for cooperation will be substantial.

The meeting this week in Washington to coordinate plans for delivery of food and medicine to the commonwealth nations is important. Current uncoordinated efforts, both public and private, have resulted in waste, theft and diversion to the black market because of inadequate planning and the lack of control over distribution. A joint program of humanitarian assistance will probably be necessary for two or three years.

But the essential need is a multilateral program. It would allow the commonwealth nations membership in the International Monetary Fund and the World Bank, which can provide indispensable economic advice and assistance. The program should call for a Central Reserve Bank, convertible currency and the avoidance of trade barriers. The G-7 nations should agree to reschedule payments on the principal of the former Soviet Union’s $65-billion debt and should forgive interest payments for 1992. There should be further agreements for drastic reductions in arms, both nuclear and conventional. Demilitarization of the economy is vital for recovery.

One of the highest priorities should be restoration of the oil and gas industry. The greatest oil reserves in the world should prove a vital source of hard currency. During the ‘70s and early ‘80s, the former Soviet Union earned more than $200 billion on oil and gas exports. Today, because of unrealistic domestic price controls, producers don’t receive enough money to maintain the oil fields. Western nations and Japan have great self-interest in providing investment capital for the recovery of the oil and gas industry.

The combination of closing down substantial military production and the inefficient enterprises will cause large-scale unemployment. Thus, the commonwealth nations will need to borrow at least $30 billion a year--for three or four years--to provide a safety net of imported consumer goods, job training, job relocation and work projects. The U.S. share might be $10 million a year. The current U.S. defense budget is $270 billion--$140 billion still earmarked for programs to defend against the former Soviet Union.

This is an election year in the United States and most politicians say any grand scheme for rescuing the former Soviet Union will have to wait until 1993. That may be too late if we hope to avoid the return of totalitarianism in the former Soviet Union. When U.S. Ambassador Robert S. Strauss, a Democrat, was in Washington last month, he said: “I reject totally the notion that when we send money over there we are neglecting domestic interests. . . . One of the things we can afford is to help these people to get rid of the chains that have been binding them all of these years. I just think this is a damn good selfishness on our part.” Amen.