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The Financial Crisis--From Their View
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16942 |
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Section : |
CURRENT ISSUES
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4 / 1990 |
3,229 Words |
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Andrei Anikin
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The main obstacle in the path of Mikhail Gorbachev's reforms is an inflationary crisis that is overwhelming the economic and political scene. Although rooted in pre-Gorbachev era policies, the crisis has been intensified by various current economic policies and realities.
The fundamental fact is that reforms aiming at the introduction of a market economy cannot succeed under extreme inflationary conditions. Inflation, in fact, helps to perpetuate the basic features of the old system of economic management, the so-called command and administrative economy.
The fates of perestroika and of the Gorbachev administration depend to a substantial degree on the success of economic reform, or at least on making some progress toward it. These are the political and international dimensions of the Soviet financial crisis.
One problem in trying to analyze that crisis is the scandalously poor state of Soviet statistics. Many statistics that would be quite ordinary for Western economists are still not published openly or are not consistent enough, not interpretable enough, and so on. In attempting to use them, the old saying comes to mind: There are plain lies, damned lies, and statistics. Nevertheless, the primary manifestations of the crisis are clear:
1. The budget deficit. In recent months, its real size has gradually emerged from behind the veil of secrecy. The latest figure cited by the administration is enormous - 120 billion rubles in 1989, which is 13-14 percent of GNP. Next year they hope to reduce it to 60 billion.
2. Considerable growth of the money supply in all forms: currency in circulation, current deposits in savings banks, and bank accounts of enterprises. Reliable statistics are not available, but fragmentary information suggests that the money supply is now growing at an annual rate of at least 15-18 percent.
3. Strong inflationary pressures. Again, there are no accurate figures. A spokesman for the State Statistical Committee gave the figure for the annual level as 5 percent in the first half of 1989. Most private estimates would be closer to 8 or even 10 percent. But since almost all prices are controlled and inflation is artificially suppressed, no indexes can express the inflationary atmosphere that now prevails: the flight from money; the empty shop shelves; the rationing and direct distribution of goods; the lines and waiting lists.
4. The balance-of -payments squeeze, poor export performance, and depreciation of the ruble on the black market. An enforced curtailment of imports fell heavily on consumer goods. This made the internal shortages still more pronounced. The convertible currency trade of the USSR is squeezed between a heavy dependence on the export of oil, natural gas, and gold, on the one side, and a compelling necessity to import food, on the other. The present external debt in convertible currencies (somewhat less than $50 billion) is regarded by the government as being at the maximum possible limit.
In reflecting on last year's economic discussions in Moscow on how to get out of this mess, I remember a humorous column by Art Buchwald called "Economics Made Easy," that cites a maze of
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