That remarkable photo of Boris Yeltsin-his shirt-sleeved arms around the shoulders of George and Barbara Bush on the White House lawn, Millie the dog at their feet, on the occasion of declaring that the U.S. and Russia would be cutting their nuclear arsenals by two-thirds. What a metaphor for the end of the Cold War!
No one who remembers the rambunctious journey of Nikita Khruschev to the U.S. in 1959, not long after he pronounced, ”History is on our side; we will bury you,” could fail to stop and stare for a moment.
One of the difficulties of our life with newspapers is maintaining perspective on events. It is necessary occasionally to fix your eye on the horizon, even though the horizon may be long ago or far away.
For instance, much has been made over the years of Dwight Eisenhower`s farewell address, in which Ike warned about the dangers of the military-industrial complex.
What about Harry Truman`s farewell in 1953, toward the end of the Korean War? As quoted in the new biography by David McCullough, Truman said: ”As the Free World grows stronger, more united, more attractive to men on both sides of the Iron Curtain-and as Soviet hopes for easy expansion are blocked-then there will come a time of change in the Soviet world. . . . Whether the communist rulers shift their policies of their own free will-or whether the change comes about in some other way-I have not a doubt in the world that a change will occur.”
Truman`s remark shows how important it is what baseline you choose to set your frame of reference.
It is in this sense that, when thinking about the years that lie ahead for the former Soviet Union, it is worth looking at Russia before it was interrupted by revolution.
That is exactly what Massachusetts Institute of Technology professor Stanley Fischer did last spring in a paper prepared for a marathon conference of the National Bureau of Economic Research. The former chief economist of the World Bank, now a frequent visitor to Moscow, Fischer concluded that Russia on the eve of World War I was a populous and fast-developing country, its national income about on par with England`s, slightly behind Germany`s.
Certainly Russia had a long way to travel. The serfs had been freed in 1861, but a cumbersome system of communal landownership prevented peasants from selling out and moving to cities.
Even so, Russia had industrialized quickly in the last two decades of the 19th Century. Its agriculture didn`t do badly, either: The country produced more wheat and far more potatoes than the U.S. in 1913.
Despite Russia`s well-remembered political turbulence, in other words, development was proceeding fairly smoothly, with the benefit of plenty of foreign capital.
Then the events of World War I, the revolution and the civil war knocked the Russian economy flat. Between 1919 and 1921, there occurred a phenomenal collapse; by the end of that period, the economy was about a third the size of what it had been eight years earlier.
In response to this free fall, Lenin and the Bolsheviks hatched the New Economic Plan early in 1921, and under this retreat in the direction of a market economy, Russia promptly took off again.
The desperate idea was to get food moving again from the country to the city. So the Bolsheviks privatized, rolling back the extensive
nationalizations of the early years of the revolution, settling for a mixed economy instead of a revolutionary regime.
A progressive income tax on farmers replaced state requisitions of their harvests; private trade was legalized; most nationalized companies were permitted to operate commercially; foreign capital was invited in. To be sure, not much came, but even so, the budget was balanced, the ruble was rendered stable against the dollar and the economy began growing again.
But the New Economic Plan didn`t suit the vision of the revolution, and the Bolsheviks backed off it as quickly as it began to work, partly because they disliked middlemen, and partly because they couldn`t squeeze the farmers hard enough.
The brutal collectivization of agriculture began in the summer of 1929. Private-sector output, which had been 54 percent of the economy in 1925, dropped to barely 9 percent by 1932.
There is an ongoing argument about just how well the Soviet economy did after its turn to the left. The dominant view had long been that from 1928 to 1970, the Soviet Union actually grew faster than the U.S., even after the braggadocio was factored out. Now there is some reason to think it didn`t do nearly as well as that.
True, the command economy worked fairly well in the 1930s. Unemployment had all but disappeared by 1932-a pretty good showing in a world wracked by the Great Depression. And tight centralization was especially well suited to World War II.
Even afterward, in the 1950s, the Soviets did well, growing 6 percent a year. By 1960, the country had regained the standard of living it had enjoyed in 1913.
But then, for one reason or another, the Soviet economy slowed, stagnated, stopped and eventually collapsed. Whether it was the oil shocks of the 1970s, the growing complexity of manufacturing processes, the failure of a service sector to take root and grow or the widespread inability to stimulate innovation and risk-taking, the Soviet economy slowed to a crawl.
Then, under Mikhail Gorbachev, decline turned to crash.
History does not repeat itself, Fischer notes. But there are striking similarities between the New Economic Plan and the present-day attempts at privatization, price liberalization and macroeconomic stabilization.
Output hasn`t fallen as much, Fischer says, there was no war, very little bloodshed and very little hostility from around the world, and there was significant international aid, instead.
Whether this new New Economic Plan will stick isn`t clear. Certainly there are some ominous signs, among them the rise of Arkadii Volsky to prominence as one of the five or six most important men in Russia.
Economic consultant Marvin Zonis points out that Volsky represents much of the military-industrial complex as chief of the Union of Industrialists and Entrepreneurs; this Russian equivalent of the National Association of Manufacturers has won tax concessions, soft credits and regulatory
architecture that threaten to cripple Yeltsin`s reforms.
Indeed, if incentives to senior managers to privatize aren`t strong enough, the Russians could fall back a step or two, after their great leap forward.
But Fischer`s perspective suggests that backwardness and envy are no more immutable characteristics of the Russian people than a supposed pervasive preference for manana was an unchanging characteristic of the now-booming Mexican economy.
