May 28, 1996
"Referendum on Russia's Economy - Election: Inflation, Production and Fears of Reform Overshadow the Race for President"
San Jose Mercury News
By Timothy Taylor
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IN RUSSIA, where no top leader has ever yet left office voluntarily, election time was bound to be a little tense. But the Russian election scheduled for June 16 resembles trying to dance a ballet during an earthquake.

The transition away from communism has shaken the Russian economy to its foundations. The size of the gross domestic product fell by 13 percent in 1991, an additional 19 percent in 1992, 12 percent more in 1993, 12 percent more in 1994, and by another 4 percent in 1995.

On a per capita basis, Russia's 150 million people are about one-sixth as well-to-do as U.S. citizens. Inflation has run wild; in 1992, Russia's inflation rate topped out at 2500 percent.

These economic shocks are reverberating throughout Russian society. Crime has doubled since 1991, and Russia's prosecutor-general is projecting that it will double again by 2000.

From 1991 to 1993, the Russian marriage rate declined by 20 percent and the birth rate fell by 12 percent, according to a UNICEF report. Another study found that life expectancy for Russian men has fallen shockingly, from 64.4 years in 1989 to 57.3 years in 1994, with coronary disease, suicide, alcoholism and murder each playing a role.

Little wonder that so many Russians are drawn to politicians who promise guaranteed employment, cheap housing, free education, free health care, and subsidies to rebuild industry. When people are drowning, they aren't likely to spend time considering whether a proffered life preserver is illogical, or even imaginary.

What is terribly ironic, even heartbreaking, is that so many in the Soviet Union, including both Boris Yeltsin and his leading competitors for the presidency, seem so ready to give up on reform just as the positive effects of change are beginning to be felt.

The level of democracy and civil liberties in Russia has more than doubled since 1989, according to various indexes of human rights compiled by Peter Murrell at the University of Maryland. The degree of economic freedom has gone from almost nothing to about two-thirds the level of a typical western European country over that time frame.

Many economists believe that Russia's economic decline is real, but overstated. After all, much of the production which has disappeared was bulking up the quotas of Soviet statisticians and planners, but it had almost zero true economic value, in the sense that the goods were produced so inefficiently and with such low quality that anyone with any choice in the matter would buy from someone else. Lower production of unwanted, unneeded goods is not much of a loss.

Annual inflation in Russia is down; earlier this year, some monthly inflation rates were at 3 percent. According to economists at the International Monetary Fund, holding inflation to this lower level has been a necessary and sufficient step for re-starting economic growth about two years later across eastern Europe and in countries that were formerly part of the Soviet Union.

Under the pressure of the forthcoming election, these gains risk coming undone. Politicians on all sides are promising to nationalize a few dozen key industries, assert Russia's prominence in the world, clamp down on those annoying western conceptions of human rights, and scatter subsidies like pigeon-food across the economy.

Russia is like a person who has been living in a cramped, uncomfortable box for decades, a box called communism. Emerging from such a box is awkward and painful. The box has deformed your growth and your potential, so when you try to walk, you stagger and fall. You may begin to believe that you were comfortable and strong in your prison, and only became vulnerable when you left it. You feel humiliated that others are watching your weakness and your difficulty, and may react with clumsy belligerency.

But the answer isn't to try squeezing back into the box. Across eastern Europe, nations have gone through transitional recessions as brutal as Russia's as they enacted market-oriented reforms, but now have laid a foundation for genuine future growth. By contrast, Russia has been slow, uncertain, and ambivalent about economic reform, and it is paying the price.

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