Republics Ill-Prepared for Solo Economies
As the Soviet Union's 15 republics move toward political sovereignty, decades of central planning have ensured that they are interdependent in every economic sphere, from energy to industry
AMBITIOUS in their political aspirations for independence, the breakaway Soviet republics are reluctantly recognizing the economic limitations to full autonomy.As the once all-powerful Soviet center dissolves, local leaders have been trying to literally capitalize on the long-repressed republic pride. Soviet President Mikhail Gorbachev's desperate pleas for some semblance of an economic union have been met by local leaders' calls for their own national currencies. Management over every aspect of the economy once held by the tight-fisted central government in Moscow - including budgets, money supply, trade, production and natural resources - is up for grabs by leaders in all 15 republics. Both Soviet and Western economists warn that a total break now from the giant, if tottering, Soviet economy would only leave individual republics scrambling for survival. Decades of Moscow's central planning have ensured that the republics are interdependent in every economic sphere: energy, food, consumer goods, light and heavy industry. The ailing Soviet economy would collapse without at least a central clearinghouse for production and distribution by republics, says Leonid Grigoriev, Soviet economist at Moscow's Institute of World Economy and International Relations. Mr. Grigoriev has spent the past several years doing economic plans for local republic leaders as well as for Mr. Gorbachev. He was a co-author of the controversial 500-day plan for Soviet economic reform announced last fall. Not one of the individual republics, no matter how mineral-rich or industrialized, can afford such a collapse of the larger economy as it embarks on its own, he says. The collapse of the Council for Mutual Economic Assistance (Comecon), which coordinated trade with former Soviet satellites in Eastern Europe, has made inter-republic barter trade even more crucial. Because Soviet agricultural and industrial production has been largely region-specific, individual republics are poorly diversified. With the exception of the food industry and machine-building and metalworking sectors - each present in almost all geographical areas - regions tend to be dominated by clusters of specialized manufacturing plants geared to the national market.Skip to next paragraph
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Regional interdependence Uzbekistan, for example, is the principal supplier of cotton to the Soviet Union. This so-called "cotton monoculture" leaves the republic vulnerable to blight and incapable of feeding, clothing, or housing itself. Opportunities for entering the global marketplace are few. Aside from certain raw materials, such as oil and natural gas, there is little that republics can now export internationally. Soviet manufactured goods are mostly sub-standard and probable losers in the highly competitive world market. Except for natural gas, the energy sector is degenerating. Severing links now means that the republics would be cut off from their automatic markets and suppliers. This would exacerbate economic troubles, says Matthew Sagers, senior economist at PlanEcon Inc. in Washington. Dr. Sagers says political changes in recent weeks will give economic restructuring a jump-start on the local republic level, but republics will need each other. Local leaders recognize the folly in now venturing out on their own and abandoning all former Soviet commercial ties. Highly indebted and cash-poor, these republics are now incapable of sustained self-sufficiency or financing economic reforms by themselves. "No one has any choice but to join an economic union of some sort," Mr. Grigoriev says. Last week there was an ironic twist in the union's disintegration. As the richest republics were busy forging new relationships with each other, the poorest declared their independence. Russia and the Ukraine, the two most populous and productive Soviet republics, agreed to establish new ties. Kazakhstan and Russia, the two largest republics in terms of territory, also pressed for a new economic union. The heavily subsidized Central Asian republics of Uzbekistan and Kirghizia announced their secession as a way of jockeying for a better economic position with the economically dominant Russian republic, Grigoriev says. "Republics, totally unprepared for economic independence, are taking advantage of the collapse of the center," agrees Jonathan Halperin, president of FYI Information Resources, based in Washington. Mr. Halperin's advisory firm is involved in the community of 500,000 independently operated businesses (not state-run) in the Soviet Union.