The Challenge Facing Chernomyrdin

...Neither Chernomyrdin nor Yeltsin, though, is prepared to impose the sort of austerity program which Gaidar and Fyo-dorov have repeatedly insisted is necessary...

...These men are balanced in the Cabinet by more liberal figures, notably Economics Minister Aleksandr Shokhin and Deputy Prime Minister Anatoly Chubais...

...Sharp reductions in government spending might bring down inflation to 5 per cent or so a month, but at the cost of bankrupt factories and huge unemployment...

...Soskovets, who is responsible for industrial policy, is known as an advocate of increased state subsidies for factories, most importantly the military-industrial complex, which he rightly believes forms the core of Russia's industrial power...

...He soon distinguished himself by carefully avoiding public politics and methodically outmaneuvering the radical reformers...

...Plants devoted to turning out military hardware, in particular, were brought to the brink of bankruptcy by the almost overnight decision to convert to a market economy...

...Since the December parliamentary elections and the subsequent formation of a new government, Chernomyrdin has steadfastly voiced support for economic reform...

...Defense orders were slashed by more than 60 per cent in the first year of the reforms, and have not been restored...

...Consequently, a generation down the road Russia will face a serious shortage of healthy workers, and of medical facilities to care for a population whose life expectancy is already dropping...

...Thus the backbone of Russian productive power, built up during the Cold War years, has been broken...

...Chernomyrdin is a gray, lackluster former Soviet minister...

...Inflation, he says, has benefited a "parasitic bourgeoisie" that has "merged with our corrupt bureaucracy and political elite," and these people are responsible for the "looting of our nation-al wealth...

...He had, after all, approved the new and more conservative government of Prime Minister Viktor S. Chernomyrdin, notable for its absence of two radical reformers—former First Deputy Prime Minister Gaidar and former Finance Minister Boris G. Fyo-dorov...

...Some Russian economists equate the situation with the depressed period of the early 1920s, soon after the Communists took power, and the years in the USSR immediately following World War II...

...He once ran the huge Soviet energy industry and prides himself on being a "Red director...

...And in a clear concession to the growing conservative sentiment in Russia—not only in Parliament, but among the people at large who elected the Legislature last December?Yeltsin called for more state management of the economy, the subsidization of agriculture and industry, particularly defense plants, and increased social welfare spending...

...And like President Yeltsin, they all come from the generation in which Communist Party membership was obligatory for success in any field...

...He heads the vast privatization program to sell off Russian industrial and commercial businesses to managers, workers and individual shareholders...

...Both the President's and the Prime Minister's proposed remedies for curing Russia's economic ills are such mixed prescriptions that their components seem to cancel each other out...

...One of them is Oleg Soskovets, another "Red director...

...Gaidar and other radical reformers have argued that because privatization represents the death knell for the old Soviet industrial managerial clique, it is resisted or distorted by the manufacturing lobby...

...In 1993 he was named chairman of a Russian government commission on rural development, went into politics and was elected to Parliament...

...Prime Minister Chernomyrdin and his top trio have several characteristics in common...

...They all began as ordinary workers in Soviet factories or on farms...

...The Prime Minister and his key Cabinet deputies have been left with the task of picking up the pieces of the failed experiment...

...IN His first State of Russia message to a joint session of the newly elected Russian Parliament on February 25, President Yeltsin restated his commitment to economic change...

...It will be difficult for the Prime Minister to demonstrate in a short time that his government can simultaneously nurture a market economy in Russia and ease the pain Russians have suffered because the Yeltsin leadership has so mismanaged the transition over the last two years...

...The Yeltsin/Gaidar approach—never thought through clearly, repeatedly revised, and often misrepresented—has stripped away research and development funds, assuring that Russia will not be able to maintain the technological level it had in Soviet times...

...But he dislikes "purely monetarist" policies and is convinced that Russian industry and agriculture need to be revived, even at state cost, if there is to be any market system in Russia...

...Even Gaidar, in a recent self-critical essay in the newspaper Izvestia, concedes that the reforms have resulted in an "exhausted society...

...That still leaves millions of factory workers on short weeks or partial pay whose experience with economic reforms translates into a lower standard of living for them while organized crime groups and corrupt officials profit in the billions of rubles...

...Many have emigrated, especially to the United States, where by Russian standards they are luxuriously paid...

...The Cabinet's makeup has alarmed Western economists, governments and international financial organizations...

...Hundreds of top-level scientists here have deserted their laboratories for more profitable commercial and business employment...

...Besides slowing the pace of reforms and affording the Russian population a respite from rapid change, it has vowed to keep Russia on the road to at least a mixed economy, with the banking and financial institutions operating well enough to let a market function...

...An estimated 40 to 50 million Russians currently live below the poverty line—that is, on an income of less than 66,000 rubles (about $40) a month...

...Yarov served briefly as deputy chairman of the Soviet-elected Congress of People's Deputies...

...The most extreme Western reaction sees a full reinstitution of state economic planning, wage and price controls, and the rest of the Soviet system's elements...

...Mark Hopkins, a longtime contributor to The New Leader, is chief of Voice of America's news bureau in Moscow...

...Yet given the conservative—or, indeed, reactionary—mood now ripening in Russia, if Chernomyrdin fails, there will very likely be greater political pressures to restore stability and order at any cost—and "any cost" could well mean the collapse of Russia's economic reforms out of popular disillusionment with the government's and President Yeltsin's capacity to fulfill expectations of a fuller life...

...Estimates of monies put into foreign banks from both legal and illegal sales of oil, timber, minerals, and other raw materials arranged by enterprising former Soviet apparatchiks, the mafia and corrupt officials range from $25 billion to $50 billion...

...He scorns the confident, if not arrogant, young mac-roeconomists like Gaidar and Fyodorov, who have never gotten their hands dirty on the production lines or in the fields where Russian workers, factory managers, collective farm chairmen, and farmers toil...

...The top 10 per cent, the new rich, at present earns lO times more than the poorest 10 per cent, and the income gap continues to widen, making this a country of conspicuous haves and virtually ignored have-nots...

...Yet he could not avoid admitting that so far the human costs of the reforms, in terms of "poverty, flagrant inequality and unemployment," have been enormous...

...He was a farm tractor driver in his youth and, in the course of an undistinguished career, became the director of a regional association dealing with cattle breeding...

...It is unquestionably true that the top officials of the Chernomyrdin government are Soviet products...

...There he heads the conservative Agrarian Party, representing the powerful agricultural lobby...

...It is the classic recipe for stimulating inflation...

...Inflation, running around 20 per cent a month, eats up wage increases and savings, demoralizing Russian workers, and makes normal commerce among industrial producers and suppliers impossible to plan...

...Last year's trade figures show that $10 billion of foreign export revenues never reached Russia...

...For two tumultuous years President Boris N. Yeltsin took them through an ill-advised experiment that was supposed to destroy the old Soviet order and bring about a capitalist market system...

...The one thing both conservative and radical reformers agree on is that reducing inflation is vital to preventing the Russian economy from spinning out of control...

...It is worth remembering that public opinion surveys show a majority of Russians feel they were better off in the Soviet Communist times of Leonid I. Brezhnev...

...The second first deputy is Aleksandr Zaveryukha, 53...

...In 1992, after Yeltsin lost a battle with the old Soviet-era Parliament to have Gaidar elevated to the post of Prime Minister, Chernomyrdin was the compromise choice...

...The government already is legitimately fearful of nationwide strikes and civil disorder should coal miners and oil workers, for instance, finally demand months of back wages...

...In addition, military industries are owed the equivalent of $1.5 billion...

...They do not match the International Monetary Fund's or the American government's profiles of daring Russian reformers...

...Actually, Yeltsin could hardly have proposed any other policy...

...A skilled mediator, he caught the attention of Yeltsin, who brought him into his government...

...Now 44, he started out as a worker in a steel rolling plant, went on to manage one of the Soviet Union's biggest metallurgical complexes, and was promoted to Minister for Metallurgy in 1991, just at the time the USSR was collapsing...

...Russian industry has been crippled as well...

...Rather, they are seen, at best, as managers who moved quietly through the ranks but possess political talents...

...Overall, the headlong plunge into a free-price mode without setting up the mechanisms of a market economy has led to a 30 per cent decline in Russian industrial production over the past two years, and the real income of workers, taking inflation into account, has plummeted 43 per cent...

...A male Russian child born today can expect to live no more than 59 years, a decline of three years since the end of 1992, and below the age when he could receive a state pension...

...Unlike Yeltsin, however, none of the four is considered an innovator...

...In sending inflation soaring over the past two years, the reforms—chiefly the freeing of state-controlled prices and wages—have also devastated social services...

...The experiment, launched in January 1992 at the urging of economic adviser Yegor T. Gaidar, with strong encouragement from an International Monetary Fund that had faint knowledge of Russia's political and economic situation, has impoverished a third of the population...

...Moreover, those policies are not at all unlike the ones running through Yeltsin's 100-page message to Parliament...

...Yuri Yarov, 51, is the third first deputy...

...In fact, it has promised to pay off the coal miners and defense plant managers owed for weapons production...

...But it is arguably true, too, that they are attempting to bring policies of financial and social stability to bear on Russia's monumental problems...

...In the Cabinet Zaveryukha oversees government farm policy...

...They are all considered conservative, in the sense that they favor more rather than less state control of the economy, including government subsidies to industry and agriculture...

...They worry that Soviet-style apparatchiks have seized the heart of the Russian body politic...

...Nevertheless, they seem far more in touch with the realities of Russian life, and the pace at which this country can be reformed, economically and politically...

...For example, the government intends to revive industry and agriculture with huge subsidies—as much as the equivalent of $9 billion for farms this year alone—but that action would dump literally trillions of rubles into the economy without an immediate increase in productivity...

...After working for several years as a shop foreman in one of Leningrad's large machine-building enterprises, he switched to a Party and government career and advanced steadily in the Leningrad Party organization...

...He matches the portrait of a Soviet Communist Party apparatchik...

...His three first deputy prime ministers share those views, out of their own experiences and their understanding of what must be done to develop Russia into an economically and militarily strong power...

...The Chernomyrdin government has a few precious months to prove whether its policies are capable of achieving what it claims for them...

...Instead, it has produced a society of growing lawlessness and deepening poverty, an economy dominated by inefficient industrial monopolies, and a financial community increasingly controlled by a brutal mafia...