THE MALTA SUMMIT : Gorbachev Won’t Bring Tin Cup : Economy: Despite food and fuel shortages, Soviet officials don’t plan to seek U.S. financial aid at summit.
MOSCOW — Soviet President Mikhail S. Gorbachev is trying to drag the Soviet economy into the 20th Century before the 21st Century arrives. But as he prepares to meet with President Bush this weekend, his nation’s horse-and-buggy economy is mired ever deeper in the mud.
Soviet economic growth this year is only 1%, according to official statistics, and Western economists are predicting no growth or even an economic contraction next year. Wages are rising about eight times faster than productivity.
Gorbachev’s partial reforms have only aggravated some of the systemic problems of the Soviet economy. As expectations have risen, so has social discontent--rapidly and dangerously. With winter approaching, there are severe shortages of most foodstuffs and other daily necessities, of manufactured consumer goods and fuel.
Yet, Gorbachev is not going to the meeting with Bush holding out a tin cup. Although Bush has said he wants Gorbachev’s reforms to succeed, the Soviets say they have no plans to seek his help.
Foreign Minister Eduard A. Shevardnadze, announcing the summit meeting at a Moscow press conference on Oct. 31, flushed with indignation when an American reporter asked him about U.S. assistance for the Soviets’ restructuring campaign, which is known in Russian as perestroika .
“I shall say frankly that when (people) say, ‘Help the Soviet Union,’ our national self-esteem is wounded,†he said, “because we have everything to implement the plans for perestroika and to carry to a logical conclusion what has been begun.â€
Soviet officials insist that the United States was responsible for placing the issue of the Soviet economy on the summit meeting’s prospective agenda--and they are not happy about it. But Bush aides say the Soviets were responsible because Gorbachev wants to open an economic relationship with the United States. The view in Washington is that Gorbachev needs all the help he can get.
“The problems confronting Gorbachev are ever more intractable, and he faces an internal crisis of enormous magnitude,†a White House official said.
Another White House official said: “His prospects for achieving his program are waning.†While Gorbachev’s new economic program appears bold on paper, he said, “he has been retreating from major elements of economic perestroika “ in practice.
If direct U.S. economic aid to the Soviets is not on the horizon, expanded trade between the two traditional enemies is a very realpossibility. In advance of the summit, U.S. officials have said that Bush may offer to speed negotiations toward a new U.S.-Soviet trade accord.
Moreover, Secretary of State James A. Baker III said the Administration might ask Congress to grant most-favored-nation trading status to the Soviet Union if the Soviets formalize their recent policy of free emigration to the West.
Officials even said Bush may tell Gorbachev that the United States has abandoned its opposition to observer status for the Soviets in the General Agreement on Tariffs and Trade, the Geneva-based organization that administers world trade rules.
Regardless of whether he receives U.S. help, Gorbachev’s goal for the Soviet economy is something he calls “market socialismâ€--a sort of hybrid of socialism and the free market. He plans a three-phase program of transition, beginning next year and lasting five or six years.
Vice Prime Minister Leonid I. Abalkin, the Gorbachev “point man†who drew up the program, warned last week that hard measures, certain to be unpopular, will be required at each step to implement the program. It will be put before the Congress of People’s Deputies, the national parliament, on Dec. 12.
The plan drew high praise in Washington from Ed A. Hewett, a Brookings Institution expert who along with 1,000 Soviet economists attended a three-day Moscow conference at which the program was drafted. He called it Gorbachev’s “most serious effort†so far to address the economic crisis, “several steps ahead†in coherence and creativity of his earlier efforts.
“It emphasizes that the centrally planned economy has to be totally rejected, not partially rejected,†Hewett said. Essentially, he said, it “advocates a denationalization of the bulk of state assets†in the manufacturing sector. This would create private property, to be purchased through new stock markets to be created in 1991.
“This is the most no-nonsense, clearly written document I’ve seen come out of the Soviet state apparatus in all the years I’ve been following the Soviet Union,†Hewett said.
But it may be too late. A senior White House official said the economic plan is “extremely radical†and encouraging, but he wondered: “How much strain can the social fabric take with these radical changes? . . . What will be the effect if they let prices go with that huge ‘ruble overhang’? (The term refers to surplus currency banked by people who have no goods to buy.) You could have triple-digit inflation.â€
The Soviet people are rapidly coming to blame perestroika for their economic hardships. So far, the programs of perestroika and glasnost (openness) have brought great political change but no improvement--for some, a decline--in living standards. There are complaints that during the “time of stagnation†under the late leader Leonid I. Brezhnev, there was at least food in the stores.
Gorbachev has become vulnerable to criticism and political pressure from conservatives, who are opposed to the reforms as a departure from socialism, and radicals urging a complete abandonment of socialism even at the price of a year or so of economic chaos.
Gorbachev himself acknowledges that the fate of perestroika will be decided in the next year or so on the basis of economic performance. Abalkin says the government has even less time, perhaps six to nine months.
Among the many ironies, according to some U.S. experts, is the fact that while Gorbachev’s personal hold on power in the Kremlin has never been greater, his influence with the people and the party is sagging dangerously.
“It will be extremely difficult for Gorbachev to escape blame (for economic problems),†George Washington University Prof. Peter Reddaway said last week at a seminar organized by Radio Free Europe/Radio Liberty. He predicted that Gorbachev “will not survive for long.â€
But other experts, noting Gorbachev’s remarkable political skills and the absence of a credible successor, believe that he will survive even if his program fails.
The consequences to the West if perestroika should fail and Gorbachev should fall began to be considered more than a year ago.
On a visit to Moscow last October, Ciriaco de Mita, then the prime minister of Italy, urged the West to consider a “Marshall Plan†to aid the economic reconstruction of the Soviet Union and its allies in Eastern Europe as these countries move from one-party political systems and centrally managed economies to political pluralism and free markets.
West European countries--Britain, France, Italy and West Germany among them--offered lines of credit that, to the consternation of the United States, totaled more than $8 billion to finance Soviet purchases of their products. But Moscow used only limited amounts of the credit, not wanting to increase its foreign debt and unsure of how it wanted to proceed in importing new plants and equipment.
“The main work must be done by ourselves,†Vice Prime Minister Abalkin, who oversees the economic reforms, told journalists last week. “The problems are our problems, and the United States cannot help directly. As we say in Russian, ‘The drowning must save themselves.’ â€
A senior U.S. diplomat here said: “They are not asking for assistance, and we are not considering it. A ‘Marshall Plan’ is unrealistic economically and simply impossible financially.
“But some people have got it into their heads that Gorbachev needs our help to succeed with perestroika , that we will be the difference between success and failure. This is nonsense.
“Even if aid were politically feasible--and it is not--we could not provide it on a scale that would make a difference,†the diplomat said. “We could ship $40 billion or $60 billion worth of consumer goods and food, and six months later nothing would be left--except for the original problems.â€
What is possible, however, is the general improvement of conditions for trade and economic cooperation, training help for Soviet managers, technical assistance in modernizing some industries and consultations such as one last month between Federal Reserve Board Chairman Alan Greenspan and Soviet officials.
The Bush Administration has said that once the Soviet Union enacts legislation permitting free emigration, it will waive the 1974 Jackson-Vanik Amendment restricting trade. The Soviet legislation has been introduced, and passage may come in the next week.
Emigration is now running at 15,000 people a month. Once the legislation is enacted, the numbers are expected to escalate far beyond what the United States and West Germany, now the principal destinations for emigres, are prepared to receive.
Waiver of the Jackson-Vanik Amendment would make the Soviet Union eligible for most-favored-nation trading status, reducing customs duties on its goods sold to the United States.
“A waiver would be highly symbolic,†the U.S. diplomat said. “We would be signaling our hope that perestroika succeeds and our readiness to cooperate where we can. Our attitude is important because we have been their principal adversary--and their benchmark--for a long time.â€
Soviet trade officials say they would like to see other changes as well, including:
-- Fewer restrictions on the sale of high-tech products to the Soviet Union by the United States and its allies. These products could include computers, electronic instrumentation, precision machine tools and other items controlled for strategic reasons.
-- An investment-protection agreement to encourage more U.S. companies to consider joint ventures.
-- Repeal of the limit of $300 million over four years on U.S. government-guaranteed loans and credits. Soviet officials said this action would, in turn, help them get credits from other Western countries.
-- Soviet access to the U.S. capital market, particularly the bond market. Bankers in Moscow say Citibank has agreed to lead the underwriting of a $250-million Soviet bond issue. However, Moscow has yet to settle debts incurred with the U.S. government before the Bolshevik Revolution of 1917.
-- U.S. support for Soviet admission to the General Agreement on Tariffs and Trade (GATT), a move that Moscow sees as a decisive break with its past economic isolation and a spur to development of its foreign trade.
U.S. officials in Moscow say most of these items would come up during negotiation of a broad trade agreement, which both countries see as a priority. They add that Bush and Gorbachev might agree on such talks during their talks, perhaps with the aim of concluding the agreement by their expected meeting next spring or early summer in Washington.
Robert D. Hormats, a former U.S. aide now with the firm of Goldman, Sachs & Co., believes Moscow would profit from the technical expertise of GATT, the World Bank and the International Monetary Fund as the Soviets prepare to establish stock markets.
An area that interests many Soviet officials and enterprise directors is the training of Soviet managers in the United States.
“Even if we succeed in restructuring our economy as we hope, we will be faced with the task of ensuring that we have sufficient trained personnel to manage it,†Abel Aganbegyan, a leading Soviet economist, said last month, urging the establishment of programs for the master of business administration degree in the Soviet Union.
“In the long run, U.S. aid and support for perestroika will come largely from our role as a model for an evolving Soviet Union,†the senior U.S. diplomat said.
Parks reported from Moscow, Toth from Washington. Also contributing to this story was Times staff writer Doyle McManus, in Washington.
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