Free-Market Envoys

By , a 1992-93 Walter Mondale Fellow, is an assistant professor of economics at Carleton College, Northfield, Minn. He recently returned from a semester of teaching at Kuban State University in Krasnodar, a city of 800,000 in southern Russia.

AS Russia struggles with economic reform, the West seeks to find ways to assist the process. Most attempts have focused on large-scale government-to-government aid, but the most recent idea is to enlist individual citizens. The Peace Corps, which has been very successful in assisting less-developed countries, is modifying its approach to meet the special needs of Russia.

Peace Corps volunteers in Russia will not teach English or dig irrigation ditches; they will teach business. Almost all the volunteers have either business experience or MBAs. Their commitment, however, might well be wasted because it is based on an incorrect assumption about the economic situation in Russia. It presumes a plethora of energetic Russian citizens-cum-entrepreneurs who understand the basics of a market economy but lack basic business experience. The only missing ingredient is the business-s chool knowledge about the nuts and bolts of starting a new firm or managing an old one.

This view of the Russian economic situation is flawed in two ways: First, many Russians are deeply ambivalent about a market economy in their country; second, even those Russians anxious to push ahead with reforms do not truly understand some of the basic institutions of a market economy. They fail to understand the essence of the market as free exchange between individuals. Discussions with Russians about market economics offer ample evidence of skepticism:

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* Alexander is director of the foreign trade office for the whole Kuban region, a large agricultural region south of Moscow. He talks about developing foreign ties to promote exports from the area. Yet when the conversation turns to local economics, he decries as "a speculator and profiteer" the individual who fortuitously finds a pair of shoes in a state store, and then turns around and legally sells them for a profit in a local, private market.

* Vassily is a language teacher who earns several times his government salary by moonlighting as a Russian-language teacher for foreign service business people. By any definition, he is part of the new class of entrepreneurs, but that is not how he sees it. "Businessmen only look out for themselves." What is the difference between his moonlighting and other market activity? "Common people can't protect themselves from the high prices charged by businessmen." Foreigners, capitalist of course, can protect themselves.

* Andrei is a mathematician whose research institute is seeking creative solutions to financial difficulties. The research staff was told that the institute is going to be split into several smaller organizations which will be expected to find much of their own funding from outside investors. The institute is going to be "privatized." With a mixture of amusement, frustration, and disgust, Andrei says, "We are trying to solve our problems with a foreign word."

Equally troubling is the lack of understanding exhibited by those Russians who are actively trying to bring about economic change. The market economy for many Russians is taken to be those often superficial economic institutions that do not exist in Russia. Enterprises want to learn how to advertise and market their products abroad. Professors and students seem to think that business education simply consists of marketing classes. Forget manufacturing a quality product or engaging in research and develop ment.

* Igor is a young law student representing a group of companies who are interested in starting a stock market in the city of Krasnodar. Igor has read a lot about stock markets and seems to know all the technical terms and jargon. But there is some confusion. Could the companies Igor represents legally sell themselves to the public; that is, make a public offering of stock? "Oh, no. These companies don't want to sell their own shares, they want to own the stock market."

Were there companies that did want to sell stock? "Well not yet; it's not legal, but we need to get the stock market set up first." If we build it, they will come. After all, in the business sections of Western newspapers, news of the stock market dominates, therefore a Russian market economy must require a stock market.

The situation in Russia presents a different challenge than Peace Corps volunteers might be expecting, but it offers an opportunity to make a contribution to economic reform.

The volunteers' primary responsibility will be to offer a realistic explanation of the strengths and weaknesses of a market economy in order to overcome Russian skepticism born of uncertainty. And they must offer an education in some simple economic concepts like markets, supply and demand, and consumer sovereignty. This kind of education could go far toward transforming the Russian economy.

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