As Russia gropes for solutions to its economic crisis, the outlook remains as murky as ever. President Boris Yeltsin has named Yevgeny Primakov as prime minister. The former foreign minister and spymaster is trying to cobble together a center-left coalition. Hes named two centrists, a Communist, and an Agrarian Party member as deputy prime ministers. Hes appointed a former Soviet central banker, Viktor Gerashchenko, chairman of the central bank.
Such a government will have a tough time agreeing on a plan to get Russias economy moving again. The appointments are not encouraging. For example, Mr. Gerashchenkos previous reign as central banker under Yeltsin was marked by hyperinflation as the bank flooded the country with currency. Now he returns, and his answer to the governments inability to pay workers at state enterprises? To print more money. The new government appears headed towards renationalization of some companies and increased state control of the economy. Such voodoo economics will bring only inflation, shortages, and a bigger black market.
What got Russia into this mess is not too much economic reform, but too little. The politicians have never been willing to make the tough decisions necessary to allow the market to function. Indeed, the Communists, Agrarians, and others who control the lower house of parliament have fought reform every step of the way.
Its important to remember how thin is the veneer of modernization that overlays Russias essentially third-world economy. The country still suffers from a lack of business law no way to legally enforce contracts, insufficient property protections, inadequate antifraud controls.
Agriculture is fundamental to any economy. Marxists have never understood that, and successive Soviet governments did little to build rural infrastructure. That legacy remains: Many farms have no access to paved roads. Grain elevators are frequently hundreds of miles away. Produce rots in fields for want of railroad cars to transport it. Rural residents still cannot buy land to farm and Primakov has just put a leading opponent of land reform in charge of agriculture.
Speaking last week at the White House, Czech President Vaclav Havel noted that solving Eastern Europes economic problems will be a matter of years; solving Russias will be a matter of decades. Since the fall of communism, Eastern Europeans have careened back and forth between free-market and socialistic governments. Barring total collapse and civil unrest, Russia may well follow the same cycle.
The challenge for Russias friends in the West will be to remain patiently engaged, gently but firmly encouraging Russia to stick with reform and democracy. Economic reality will assert itself eventually. Better times will come when enough Russians understand that the old, statist ways will never work and that reform is the solution, not the problem.