UK: Hard buck in the USSR.

UK: Hard buck in the USSR. - Dr Abel Aganbegyan, who until two years ago was President Gorbachev's chief economic adviser, arrived in London in a blood red tie and Belgian beret, looking every bit the crumbling Atlas. The venerable academic, considered b

Last Updated: 31 Aug 2010

Dr Abel Aganbegyan, who until two years ago was President Gorbachev's chief economic adviser, arrived in London in a blood red tie and Belgian beret, looking every bit the crumbling Atlas. The venerable academic, considered by many to be the architect of perestroika, has in six months seen his "radical" economic views slowly shredded by the Soviet machine, as it forces Gorbachev to retreat into the conservatives' corner.

In London, Aganbegyan's role is that of a private trade emissary - his Soviet consulting firm, Link (owned by the Academy of National Economy and a Moscow bank), has formed a joint venture with international management consultancy Bain. Already Bain Link has helped several western companies to set up in the Soviet Union. But on the domestic front Aganbegyan is the embattled political economist, officially head of the Soviet Economic Reform Task Force and, more importantly, one of the leading voices calling for a quick shift to a market economy.

The big Georgian's logic is elegantly, if deceptively, simple. Prices must be totally free, he argues, not just gradually increased by the state, as the conservatives wish. "A market needs market prices - prices are the key." Aganbegyan notes that, as things stand now, Soviet citizens have money in their pockets, of which less than 3% goes on rent and some 70% on ordinary goods. The remaining money is searching for an outlet, but the people cannot buy land, nor can they invest it, and only rarely can they buy luxury goods.

However, with free floating prices, investment would be attracted to set up new businesses. "And if we link the money with ways to spend it then the prices will not rise so much. Prices will go up, but more goods will also appear. Only the radical approach will be less painful for the people," Aganbegyan claims.

That the transition is possible has been proved by Poland. But that a quick sharp thrust will inflict fewer casualties - or, to speak more realistically, fewer politically painful casualties - is a point which Aganbegyan is pushed to prove. The powerful military-industrial complex and the official trade unions, which together are casting a heavy shadow on Gorbachev, are obviously not convinced.

As the heat rises at home, Aganbegyan is beginning to hop on the coals. He continues to encourage western businesses to explore this largest remaining unexploited market, and one that is "practically without competition", he laughs painfully (it is the only time that he laughs). But he also admits that the political wrangles are choking off inward investment. "A lot of foreign investors are waiting. A lot, in principle, are ready to invest."

Those firms brave enough to sniff around are witnessing the turmoil of a country where the administration is fast collapsing, and disputes over regional or union control of the distribution systems are bringing goods to a standstill. Who owns and controls the distribution systems, however, is a matter of contention. "We are discussing about this distribution; there is no agreement yet," says Aganbegyan. "But it is a temporary problem and I hope over the next months we will solve it."

What scenario foreigners will face, if and when the turmoil subsides, Aganbegyan finds difficult to predict - but he claims that even if his radical supporters of the 500-day reform plan lose the battle "a few of the ideas will be used". Unfortunately, these days Prime Minister Valentin Pavlov talks of long-term leases, rather than private property, and of a switch of emphasis back to heavy industry rather than consumer goods. But the struggle, says Aganbegyan, is not in vain. "Even if we have not the 500-day plan, it made the Government less conservative. It was useful," he concludes wanly. Note that the good doctor speaks English too well for his use of the past tense to have been a mistake.

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