Will Inertia Slow Economic Bust?


IS the Soviet economy heading for a collapse? Some radical economists - those who urge a speedy introduction of market-oriented reforms - look at the five-year plan for 1990-95 and predict disaster. Through 1992, the main goal is to stabilize the economy and rebuild popular support for perestroika (restructuring), which has declined as consumer goods have become increasingly scarce.

Only in 1993 will more fundamental reforms, such as in pricing and decentralization, begin to be introduced. By then, the radicals say, it will be too late.

Other specialists foresee a less ominous future. Rair Simonyan, a senior economist at the prestigious Moscow-based Institute of World Economy and International Relations, sees tough times ahead for at least the next two or three years, but not a complete collapse - for ironic reasons.

``The economy has great inertia and can't be altered quickly, neither for the better nor for the worse,'' says Dr. Simonyan. Within the economy, ``there exist stable links and, independent of external factors, the economy somehow continues to work.''

Longstanding economic links will keep Eastern Europe and the independence-minded Baltic republics closely tied to the Soviet Union for a long time, despite the evolution in their political relations, he says.

Much, of course, depends on how one defines ``collapse.'' Otto Latsis, an economist at the journal Kommunist, says one sector of the economy - the consumer market - has essentially already fallen apart.

``Out of 1,000 ... basic consumer goods,'' Dr. Latsis says, ``only about 100 or maybe even less, maybe 50, are freely available. There are no television sets. No cars. No irons. No building materials. ... By 1989, the consumer market had deteriorated to such a point where, without rationing, it could not function.''

But the problem is not in production levels, he says. Production of TV sets, for example, has even increased. The problem is in the money supply, which was dramatically increased over the past few years, in large part to raise the salaries of disgruntled employees.

The result has been inflation, a boom in the budget deficit, and the emptying of store shelves.

As faith in perestroika and in the ruble has declined, consumers with excess cash have sought increasingly to put their money in goods, especially in precious metals. In January, the government moved to profit from the run on gold by raising the price of jewelry by 50 percent.

``What could happen now,'' says Latsis, ``is a mass running away from money, like in Poland in 1982. Everybody withdraws their money, and the shelves are empty. It's a danger that now threatens. ... If this happens, the market will be broken and there will be no goods left. Trade will vanish.''

Rationing has become increasingly common. In Leningrad, for example, the sale of scarce items is now restricted to residents who can show permission to live there. The system was introduced early in January, after Estonians - who now pay higher prices for some items under their economic independence plan - started driving to Leningrad to buy cheaper goods.

Technically, Moscow does not have widespread rationing. But in effect it does. More and more, consumer goods such as clothes, household appliances, cosmetics, and furniture are sold through the workplace and not in stores, the way food has been sold for years. This system has made life especially difficult for those who don't work, such as pensioners, invalids, and students.

Inflation is another source of anxiety in a country unaccustomed to this problem. Around the country, inflation statistics vary according to the supply levels. Officially, overall inflation stood at 2.3 percent in January, but other experts variously measure it at between 7 percent and 20 percent annually.

The biggest factor destroying the consumer market, says Latsis, is the budget deficit, which sky-rocketed from 47 billion rubles in 1986 to 90 billion rubles (US$150 billion) in 1988.

In 1989, the government capped the deficit at 92 billion, and this year plans to slash the deficit to 60 billion rubles. A deficit of 20 billion to 25 billion is acceptable, says Latsis.

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