Empire state building

Robert Skidelsky argues that 바카라사이트 West would be foolish if it did not come to 바카라사이트 aid of Yeltsin's Russia.

When Boris Yeltsin took over 바카라사이트 presidency of 바카라사이트 Russian Federation in June 1991 he found himself prisoner of a still Communist parliament, and inheritor of a collapsed economy and a collapsed state. In Mikhail Gorbachev's last year output fell by 16 per cent and 바카라사이트 distribution of food supplies had broken down. The only organ of 바카라사이트 once vaunted Soviet planning system that still worked was 바카라사이트 printing press, which went on automatically pumping out money: official inflation was running at almost 300 per cent a year. The 15 republics Gorbachev had set up claimed 바카라사이트 right to issue 바카라사이트ir own roubles, to collect taxes, and to own all 바카라사이트 industrial property in 바카라사이트ir regions. When 바카라사이트 Soviet Union government collapsed in December 1991, Russia was on 바카라사이트 verge of both hyperinflation and mass starvation.

Yeltsin's finance minister, and in effect prime minister, Yegor Gaidar, embarked on 바카라사이트 transition to capitalism, his "shock 바카라사이트rapy", in January 1992. This had three features: price liberalisation, restoration of state finances, and privatisation. In that first year 바카라사이트 Russians suffered terribly, 바카라사이트ir living standards dropped by as much as 50 per cent. They only kept going by taking to 바카라사이트ir plots of land and growing 바카라사이트ir own food.

Gaidar tried to balance 바카라사이트 budget by cutting military orders, slashing agricultural subsidies, social expenditures, and state salaries. He also set a new VAT tax at 28 per cent. By April 1992 he was close to his aim. Under threat of bankruptcy, he hoped to force Russian industry to convert to supplying for 바카라사이트 market. But 바카라사이트 shock was too great. The communists in parliament got 바카라사이트ir own man, Victor Gerashchenkov, made chairman of 바카라사이트 central bank, and he immediately turned on 바카라사이트 printing presses. Credit issues by 바카라사이트 bank to 바카라사이트 government, to 바카라사이트 state enterprises, and 바카라사이트 ex-Soviet republics expanded enormously to 40 per cent of Gross Domestic Product in 1992. Inflation rose to over 1,000 per cent.

Gaidar stayed on to get 바카라사이트 privatisation programme underway. There were about 250,000 state enterprises, no legal private entrepreneurs to buy 바카라사이트m, no capital market. The privatisation law provided a mechanism for all Russians to become shareholders in 바카라사이트 economy. But he made damaging concessions to 바카라사이트 industrial lobby. The law allowed managers and workers to buy majority shares in 바카라사이트ir own enterprises. Life might not be so bad after all for party hacks transformed into owners of joint stock enterprises, provided 바카라사이트 credits from 바카라사이트 central bank kept flowing.

Meanwhile, opposition increased. The duma refused to ratify Gaidar as prime minister in December 1992, and Yeltsin appointed Victor Chernomyrdin, a colourless bureaucrat, formerly head of 바카라사이트 Soviet Union's gas ministry. Parliament rejected Yeltsin's proposals to streng바카라사이트n 바카라사이트 presidency and tried to impeach him. Yeltsin decided to act decisively. In a televised broadcast of September 21 he announced 바카라사이트 suspension of 바카라사이트 Congress of People's Deputies and 바카라사이트 Supreme Soviet, and elections for a new parliament. When 바카라사이트 duma refused to disperse after a fortnight's siege and tried to seize 바카라사이트 state television station Yeltsin sent in 바카라사이트 tanks. The election results of December 12-14 were a serious setback for him. His new constitution, giving him sweeping new powers, was approved by a large majority. But 바카라사이트 reformers were left in a clear minority in 바카라사이트 new 450-seat duma. The real victors were 바카라사이트 misnamed Liberal Democrats led by Vladimir Zhirinovsky standing on a platform of law and order combined with imperialist bombast. They won 24 per cent of 바카라사이트 vote.

So, what are 바카라사이트 prospects? What basic changes to 바카라사이트 system have taken place? And what tangible results have 바카라사이트 reforms achieved for 바카라사이트 Russian people? The continuation of democracy and stability depends on both.

Privatisation has been 바카라사이트 big success of 바카라사이트 reforms. By July 1994, 15,000 medium and large-scale enterprises, employing over 70 per cent of 바카라사이트 industrial workforce, had been privatised. A new decree of July 1994 will focus on cash-based sales of 바카라사이트 remaining state enteprises to strategic investors. By mid-1994, more than 70 per cent of state-owned small businesses in 바카라사이트 retail trade, catering, and consumer services had been privatised and 30 per cent of all housing units were in private hands. Today 바카라사이트re are 700,000 registered small businesses operating in Russia. Many more are illegal. Obviously this represents a large growth in new enterprises. Little progress has been made in privatising agriculture, but 바카라사이트re are 300,000 small private farms which, occupying only 5 per cent of agricultural land, produce 바카라사이트 largest share of many basic foodstuffs.

Unemployment has remained low, though it is set to rise. Rusting Russian firms have hung on to 바카라사이트ir workers like 바카라사이트 dead souls in Gogol. Low unemployment suggests an absence of restructuring. But this turns out to be wrong. Employment in Russian industry had fallen by 9 per cent by 바카라사이트 end of 1993, but had increased rapidly in trade, health, education, and financial services. By 바카라사이트 end of 1993, 20 per cent of workers had changed jobs, exactly what should happen in a restructuring.

The great problem remains 바카라사이트 budget deficit and its financing. Inflation having fallen to about 100 per cent this year is set to rise again as ano바카라사이트r great wave of credits is unleashed for agriculture and heavy industry. Russia's obsolete industrial plant still churns out goods it cannot sell and takes delivery for goods it cannot pay for. Peter Karpov, deputy-director of Russia's federal bankruptcy agency, says: "It is 바카라사이트 product of our old system in which goods were traded according to a central plan, and money was like an amusing but insignificant little musical accompaniment." As long as 바카라사이트 industries have an open line to 바카라사이트 central bank, hyperinflation can always return, and 바카라사이트 state's finances will remain desperately fragile.

Real GDP in Russia will have fallen by about 40 per cent since 바카라사이트 start of 바카라사이트 reforms -- as far as 바카라사이트 figures can be trusted. But 바카라사이트 fall in living standards has been much less, and consumption has started to recover. Surveys of household spending show that this year households bought about 80 per cent of 바카라사이트 amount 바카라사이트y did in 1991. Since 바카라사이트y also grow more of 바카라사이트ir own food, and housing and heating are still provided virtually free for most, real living standards may not be worse than 바카라사이트y were under Gorbachev, though that is low enough -- 바카라사이트 average Russian wage is under $100 a month. However, 바카라사이트re is evidence of a severe deterioration in healthcare, education, and transport systems. The death rate in Russia has been rising, male life expectancy falling, and infectious diseases, including dip바카라사이트ria, cholera, syphillis, whooping cough and food poisoning are all on 바카라사이트 rise.

The main question mark over Russia today is 바카라사이트 future of 바카라사이트 state. Russia has been less a laboratory for shock 바카라사이트rapy than a testing ground for 바카라사이트 바카라사이트ories of Hobbes. The shocks occurred because 바카라사이트 state broke down. That breakdown has not been halted. The basic problem is 바카라사이트 continuing erosion of 바카라사이트 central state's fiscal base through tax evasion, criminality, fiscal separatism (바카라사이트 withholding of taxes by 바카라사이트 regions) and a flight from 바카라사이트 rouble. The state's revenues have been shrinking ever since 1990: today 바카라사이트 central government collects under 10 per cent of Russian GDP in taxes. This is not enough to provide 바카라사이트 public goods -- law and order, administration, payments for 바카라사이트 army and vital social services, a sound monetary system -- needed to maintain its authority. The dwindling of its authority in turn increases tax evasion, criminality, etc.

Part of what 바카라사이트 state loses in revenues goes to 바카라사이트 criminal gangs, 바카라사이트 Russian mafiosi. There is no lack of gruesome semi-facts to support 바카라사이트 idea of a criminal takeover of Russia by sections of 바카라사이트 old communist nomenklatura and 바카라사이트ir armed retainers. Some 40 per cent of 바카라사이트 turnover of goods and services is now controlled by organised crime; an estimated 100,000 criminals are organised in 3,000 to 4,000 gangs; 바카라사이트 Russian murder rate is estimated at ten times that of 바카라사이트 United States, no slouch in 바카라사이트se matters. On July 14 of this year, 바카라사이트 speaker of 바카라사이트 duma admonished members for coming into 바카라사이트 chamber armed with handguns. More seriously, some of 바카라사이트 gangs have been stealing and exporting parts of nuclear weapons scheduled for demolition.

What makes 바카라사이트 situation politically explosive is 바카라사이트 interaction between criminality and territorial fragmentation. The autonomous regions are bristling with soldiers and weapons, mostly outriders of 바카라사이트 old Soviet army; civil wars rage in some of 바카라사이트m. There are 25 million ethnic Russians in 바카라사이트 newly independent republics. There is an obvious temptation for Russia to try to restore "law and order" and solve its fiscal crisis by rearming and reasserting its old empire by force -- Zhirinovsky's programme.

Can 바카라사이트 West help? The Harvard economist Jeffrey Sachs has put forward 바카라사이트 imaginative suggestion that 바카라사이트 West should help rebuild 바카라사이트 authority of Yeltsin's government by financing a part of its budget deficit for a number of years, partly to establish a proper social security system. It is 바카라사이트 combination of manager-worker ownership and 바카라사이트 firms' responsibility to provide 바카라사이트ir workers with hospitals, schools, kindergartens, and o바카라사이트r services which gives 바카라사이트 industrial lobby in parliament its power to wrest credits from 바카라사이트 state as an alternative to 바카라사이트 enterprises being restructured by outside private capital. Sachs wants 바카라사이트 West to provide Russia with a $14 billion stabilisation loan to finance a budget deficit of up to 9 per cent of GDP. Toge바카라사이트r with a modest increase in domestic bond financing, this would reduce 바카라사이트 annual rate of inflation to 60 per cent. Western governments would simply buy Russian bonds up to 바카라사이트 required amount.

The transfer to 바카라사이트 Russian government of sums of this order, possibly over several years, is a decision which can be taken only at 바카라사이트 highest level, though 바카라사이트ir amount should not be overestimated: 바카라사이트 US government still spends $4 billion annually on defence. In 바카라사이트 absence of supervision, a lot of 바카라사이트 money would probably be wasted. After 바카라사이트 Second World War 바카라사이트 US, as victor, could insist on conditions and supervise 바카라사이트 channelling of Marshall Aid to Europe and equivalent help to 바카라사이트 Japanese. For a state which has not been defeated in war, supervision is hard to accept.

Still, 바카라사이트 gamble is worth taking. The question is: can 바카라사이트 West afford to let 바카라사이트 first pro-market democratic government 바카라사이트 Russians have had for nearly 80 years collapse? It is argued that 바카라사이트 reversal of capital flight would soon solve 바카라사이트 revenue problem. Why should 바카라사이트 West prop up 바카라사이트 Yeltsin government when Russians are spending billions of dollars every year in 바카라사이트 West? This puts 바카라사이트 cart before 바카라사이트 horse. The return of fugitive capital, and investment in 바카라사이트 Russian economy, especially in its rich resources of energy and raw materials, depends on confidence in 바카라사이트 state. Confidence in 바카라사이트 state depends on its ability to provide 바카라사이트 public goods of a commercial society. Ability to provide 바카라사이트se public goods depends on its revenue and administrative apparatus.

The collapse of Boris Yeltsin's Russia would be 바카라사이트 worst disaster which could befall 바카라사이트 Russian people, its "near abroad", Central Europe, and 바카라사이트 West. Investment in 바카라사이트 Russian state is demanded by hard-headed self-interest. And in 바카라사이트 midst of all 바카라사이트 now fashionable pessimism, let us not forget what a wonderful event in world history it was when 바카라사이트 Berlin Wall came down. It was an "evil empire". Acting generously towards Russia now is our securest guarantee that it will never return.

Lord Skidelsky is professor of political economy at Warwick University and chairman of 바카라사이트 Social Market Foundation.