One Giant Step Backward

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Suppose the monthly inflation rate in the U.S. was 20%, the output of the nation's industries had fallen 15% in a year, unemployment was rising across the country and the government was visibly inept. Suppose California and Texas had seceded, foreign communists were advising how to reconstruct the U.S. government, NATO had been disbanded, all U.S. military bases abroad had been closed and batches of the armed forces' most sophisticated weapons were being sold at bargain rates to former enemies.

That is the equivalent of what Russia is going through, and it would spell political backlash -- if not worse -- in any language. When Bill Clinton was in Moscow two weeks ago, Boris Yeltsin assured him that free-market reforms would continue in spite of the December elections that boosted extreme nationalists and old communists into parliament as the dominant opposition. But Air Force One was hardly airborne before the Russian government started stepping back from its pledges.

In another perils-of-Boris power struggle, this time between President Yeltsin and conservative Prime Minister Viktor Chernomyrdin over the makeup of the new Cabinet, Chernomyrdin effectively won. Or at least Yeltsin beat a tactical retreat. The government's famous young reform ministers were mostly dumped or demoted. In their place arrived a group of Soviet-era leftovers, production managers from the old military-industrial complex who favor salary increases and handouts to money-losing state industries. "The period of market romanticism has ended for us," Chernomyrdin crowed. "We must make our people's life easier."

The question all this raises is ominously familiar. Russia embraces reform more in theory than in practice. The nation needs a leader with the skills for the inglorious task of building institutions brick by brick, compromise by compromise. But the latest accumulation of electoral miscalculations and slide to the right makes people wonder whether Yeltsin is that man.

While the President stands aloof, the Prime Minister and his Cabinet claim they will press on with reforms, just more slowly and with "corrections." But their policies are unlikely to make either reform or ordinary Russian lives any easier. Western experts have long insisted that the most painful aspect of Russia's effort to move to a market economy has been its roaring inflation. The main cause of that has been the Russian central bank's penchant for handing out subsidies and loans to bankrupt factories and state farms by printing billions of rubles, speeding the destruction of the national currency. Frantic Russians last week rushed to buy hard currency, driving down the ruble 15%, to almost 2,000 for one dollar, before it rebounded. At the end of 1992, the exchange rate was around 500 to the dollar.

The new Cabinet is expected to increase subsidies to industry and agriculture, arguing that otherwise too many Russians would be thrown out of work. Last week the 10-member Russian Security Council, the main executive decision-making body, approved funding for a nuclear-powered submarine, a heavy-missile transporter and a new generation of Sukhoi fighter planes. The program, the Moscow press reported, "will save many defense factories from extinction."