Boris Yeltsin's Economic Strategy
RUSSIA has managed to survive without a recession since the 1950s. But no recession meant no technical modernization. Calmly and peacefully we rolled along, falling farther behind other nations. Forty years - and we find ourselves on the brink of the abyss.We were supported by oil dollars, but the old fields are practically exhausted, and there are no resources to develop new ones. We have reduced exports. Imports have fallen. Funds that were borrowed must be repaid, and the peak of the repayments come during the 1990s. All of these economic misfortunes have come at once. The stagnant socialist economy seemed to collapse suddenly - though many economists had predicted it as inevitable. Production levels are declining. The reasons: declining imports, destruction of economic ties that were maintained by force, the fall and devaluation of the ruble in conditions of administrative price-setting. But at the same time the democratic government is adopting broad social programs, attempting to placate the electorate. What is our task? The situation can't be changed by government measures dealing with just one or even several visible conditions. The economy must change down to its deepest essence. It is time to reject medieval socialist logic and adopt the course of civilization and the market. We need not planning and government, but freedom and private enterprise. The main requirement for any program to extricate Russia from its crisis is a transition to a market economy. Even stabilizing the currency is a palliative compared to the need for marketization. Economic transformation requires developing a new psychological type - the owner-investor. To truly educate such a person by means of TV or a business school is impossible. They must be given property and income from property, the opportunity to prosper or to go bankrupt. Russians do not have the resources to buy property. A Russian does not know the meaning of stock or dividends. To give away the state's property is dangerous. To transfer factories to workers' collectives is even more dangerous for the economy. There are no good alternatives. The easy path means no transformation will take place in the next decade. We believe, however, that a careful combination of all the methods of creating a strong private sector can produce a positive result if we attentively consider the mood of the population, and its inclination to save and invest. Russia's program is based on this. Privatization of shops and enterprises in the service sector will take place by purchase. Where difficulties develop, we will offer credit on special conditions. In some regions it is possible that such property will be transferred to the workers without charge. Large and medium-sized enterprises will be auctioned. Stock will be given to stockholders in a way that avoids monopoly. People will be given privatization checks that roughly equal the cost of the private property. This won't be the real market value. No one knows the market value - Russia has not had a market. By stages, together with the issuing of privatization checks, the stockholders will sell their stock for these checks and for rubles. Gradually it should become clear what the real marketprices of privatized property should be, and these prices will replace the nominal values originally assigned. Economic reformers will be able to increase or reduce the share of property being sold or distributed at no cost. Annual dividends to property holders will be paid initially, and even a second time. How much should these dividends be and where should they go? Should they go into the consumer market or invested in property? Should production be expanded on the basis of private investment? Here tax policy is important as a means of supporting investors. Will Western investors arrive, attempting by modest investments to make fortunes - or will they wait while Gorbachev and Bush keep them under thumb? DIFFERENT scenarios are possible. The Russian Republic is preparing for many possibilities and has worked out a flexible policy enabling us, whatever happens, to facilitate a rapid and irreversible transformation. We anticipate in two and a half years to privatize 30 to 40 percent of the Russian economy. Privatization and commercialization will extend to the military industrial complex. It is time to move from grand words about disarmament to genuine conversion of defense industry. Our people are like a compressed spring. We anticipate that by 1994 the crisis situation will be halted. By then we can begin housing construction and will see other signs of growth. The structural improvements will not have been accomplished in full measure, but the necessary conditions will have been created. It is in this period, when property-owning investors and entrepreneurs capable of competing have appeared, that the harsh measures needed to convert the currency will be taken. Until then we will seek to keep inflation within bounds, though we can't keep it to the minimum. The measures needed are complex, as is the task before us. Promises of simple solutions are irresponsible. We are not asking for help, but would rejoice at any mutually beneficial cooperation.