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  Sunday, November 1 2:45pm PST

Saatchi & Saatchi
 
Russia: is the Cure Worse than the Disease?
 
 
 
Leading economists say I.M.F's prescription has been a disaster
 

The economic crisis currently gripping Russia did not begin in August, as is widely assumed - but exactly seven years earlier when the old Soviet Union effectively ceased to exist, according to one of the country's leading economic analysts.

Vladimir Pokrovsky, managing director of the Russia Belarus Council, told delegates at a panel discussion at the State of the World Forum in San Francisco yesterday (Oct 31) that in the seven years since the fall of communism, various Western economists - taken to mean the International Monetary Fund - have been guiding the Russian economy to disaster. Not that Russia's homegrown economists were very much better, he added.

To illustrate that last point, Rustem Khairov, another Russian analyst, told a political joke about the fictitious leaders of France, the United States and Russia. According to the joke, the French leader has 100 lovers, but must discover the one who has AIDS; the American president has 100 security agents, and must discover the one who is a KGB mole; while the Russian premier is joined by 100 economic advisers, and must discover the one among them who has a credible theory.

"The road to hell is paved with good intentions," Mr. Khairov said.

Western economists, another panelist in the presentation added, have prescribed that Russia run its economy for the benefit of foreign investors and a few wealthy Russians - at the expense of the Russian people. The results have been clear: a few world-class billionaires, combined with economic collapse, soaring debt, mass unemployment, grinding poverty, and unpaid wages and pensions.

According to Mr. Pokrovsky, the "shock therapy," prescribed in 1991 by the I.M.F. - and faithfully, if awkwardly, adopted by President Boris Yeltsin - has failed to take into account both the cultural nuances and human dimensions involved in rebuilding a military-based economy. For example, the I.M.F. insisted that Russia cut government spending, sell off public assets, and raise interest rates to attract foreign investment. But as early as 1992 it was clear that this was a road to disaster, as even the World Bank acknowledged.

Between 1992 and 1995, Russia's GDP fell 42 percent and industrial production fell 46 percent - far worse than the contraction of the U.S. economy during the Great Depression. Even before the most recent currency shock, a quarter of Russians were living below the subsistence level.

What to do? The Russians should be rebuilding the economy from the ground up, Mexican-style, Mr. Pokrovsky said, not bailing out foreign investors, if the crisis of the past seven years is ever to pass.

 
 

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