Russia's economic problems can only be solved by Russia.
BELT-TIGHTENING
"According to all our reports,
Things are going to get even worse.
The Russians," said Yeltsin,
"Must all pull their belts in --
That is, those who have belts, of course."
"Both Russia and the International Monetary Fund are responsible for the Russian debacle," charges Ariel Cohen of the Heritage Foundation. "Russia's fault lies in the government's chronic refusal to reform. The Russian government has been aware of the problems in its economy and what is needed to fix them for at least five years," Cohen contends. "Because of mismanagement, inertia, and outright corruption, such vital changes as trimming the budget, overhauling the tax code and tax collection, land reform, and other-wise providing conditions to stem capital flight and attract foreign investment haven't been implemented."
The International Monetary Fund is also to blame. "The fault of the IMF lies in its willingness to provide successive bailouts regardless of whether they achieve the desired results," says Cohen. "Russia is a prime example of how this can lead to disastrous results," he maintains. "Since 1992 (and before the most recent $22.6 billion bailout), the IMF lent Russia over $18 billion. With each loan," Cohen recalls, "the IMF required Russia to adopt economic reforms. Even though Moscow rarely fulfilled its promises, the IMF continued to disperse tranche after tranche. In other words, the cheap credits allowed Russia to delay reforms, while the IMF rewarded Moscow for not reforming. This pattern," he laments, "is being repeated in the current bailout."
Cohen warns that "Russia is now in an economic morass. The achievements of the Yeltsin administration -- a stable currency and low inflation -- have gone down the drain. The political cost to the Yeltsin government will be tremendous," he predicts, "as millions of workers and pensioners have not been paid for months and the price inflation will escalate." Cohen blames the Russian government and the IMF equally. "Despite ample advice on how to shore up its economy, Russia has refused to implement the changes necessary to resolve the current crisis and create long-term economic health. The IMF," he adds, "has consistently permitted Russia to borrow despite Russia's refusal to reform its economy."
Cohen counsels Congress to "send a message to Russia . . . by refusing to approve additional funding for the IMF. An organization that cannot say 'no,'" Cohen concludes, "should not be given additional money to waste." That sensible policy should also be applied to a Congress unable to say 'no' to the IMF. Our Founding Fathers recognized that legislatures are predisposed to say 'yes' until every last penny in their purses is spent. That's why they deliberately curtailed the federal government's access to the wealth of the people by designing a tax-collection process far more cumbersome -- for the government -- than the one we have now. It's high time we went back to it.
