The Russian ruble has been devalued in the midst of some stark apocalyptic statements about the state of the economy. For instance: “Russia’s financial crisis could spin out of control as banks collapse” wrote Garth Alexander in New York and Mark Franchetti in Moscow” (The Sunday Times,August 16.).
The European evaluation is even worse: “Thinking that a rise in fiscal receipts and a trimming of public spending will solve Russia’s problems, as the IMF does, is to miss the self-evident point that the Russian economy is bust, plain and simple. All the statistics about economic activity are probably hokum. The foundation stones of a market economy—a legal structure to enforce mutual obligations, corporate responsibility and transparent accounting—are non-existent” (August 17-23).
Says American columnist Patrick Buchanan: “It is time for truth. The Russian economy is a corpse. That $15 billion, which comes on top of the $9 billion the IMF has already committed and on top of the scores of billions from Europe and the United States, will never be seen again. Russia is bust. Indeed taking out new loans to pay interest on old loans is a definition of bankruptcy” (The Washington Times, July 20-26).
But more than bad economics is at stake here. The world has a very heavy interest in Russian economic stability. The country still has too many nuclear weapons for comfort. And any temptation to sell weapons technology to unstable dictatorships for badly needed cash frightens the West.
In terms of Russian economic well being, too much was expected too soon. A nation pays a heavy price for 70 years of communism. The attempted conversion to a free market economy and a full free enterprise system has rocked the nation’s social fabric. No wonder Gorbachev wanted to go slower.