RUSSIA: Editorial - In aid of self-interest.

RUSSIA: Editorial - In aid of self-interest. - Inflation at 700%, industrial output down by 13% in the first quarter of 1992, a budget deficit at 20% of GNP and external debt approaching $80 billion with virtually no foreign exchange reserves - welcome t

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Last Updated: 31 Aug 2010

Inflation at 700%, industrial output down by 13% in the first quarter of 1992, a budget deficit at 20% of GNP and external debt approaching $80 billion with virtually no foreign exchange reserves - welcome to Russia 1992. Add in the ethnic unrest warming up into bloody battles as a result of the unfreezing of 70 years of communist rule, the difficulties of co-ordinating 15 previously centralised states, and the complete lack of any enterprise culture - and the first reaction would be to head back to the airport for the next flight out.

But should the West simply let Russia go hang and devote itself to the Third World, where there is plenty to tax its energy and finances? The answer must be a resounding "no". As one US commentator bluntly warned of the old Russia: "It's like Africa with nuclear weapons." Nothing has changed. The existence of 28,000 nuclear warheads with associated know-how, and the still formidable conventional war machine makes ignoring Russia a folly the West cannot afford. In such a militarised society, another "successful" August coup can not be ruled out unless the West firmly ties the new Russia into its own camp.

This is where an insurance policy happily blends into enlightened self-interest. The West must push through its $24 billion aid package as a prelude to a fully-convertible rouble. Only then will conditions be ripe for the flourishing free trade links which make coups almost impossible.

In an imagined telephone "conversation" with Keynes in The Financial Times just before the election, Lord Skidelsky, his biographer, "reported" the great man as urging such an aid package as an absolute priority - a 1990s Marshall Plan, tied to capital investment projects in areas such as transport and telecommunications. The amount of aid donated by each power would be matched by orders from Russia for capital projects, stimulating production in the recession-ravaged West.

Better still, in contrast to the hype at the recent Rio summit, the West should actually emulate the American Clean Air Act on an international, or at least a European scale. Under the US system, companies can meet pollution targets by cutting their own emissions or by buying pollution targets from others who can clean up their acts much more cheaply. A Euro-wide scheme would lead to an upsurge in anti-pollution work in eastern Europe and could also give the Russian defence industry a new market to chase.

But western cynics could well argue that money going to Russia would simply be good money going after bad, given the endemic levels of corruption. Let the Italians, French, Germans, Americans and Finns get on with it - they are welcome to it. Certainly they are there in force and can clearly see a market opportunity, so why can't we?

After all, the Russians are, per capita, one of the best educated peoples in the world and have been responsible for scores of scientific breakthroughs. Even their supposed lack of entrepreneurial drive may be rather overdone. To survive in the face of numbing bureaucratic indifference, terror, war and famine must have required a patience and ingenuity that would have driven a Wall Street hot-shot to suicide. Perhaps BP chairman Bob Horton has the Russian babushka in mind, striving to keep her family intact and fed against all the odds, when he warns western chairman that managing in the '90s and beyond will involve working in a highly turbulent world of constant change.

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