It seems certain that, even if only for humanitarian reasons, the IMF will
have to give a further tranche of money to Russia -- and pretty soon, too.
However, no coherent policy has emerged from Primakov so far. If such a
policy does emerge in the next week or two, which is unlikely, it is highly
questionable whether it would be practicable and, indeed, whether the IMF
could realistically appraise it.
The two immediate dangers facing Russia are that:
(a) Primakov is unable to form a government of ministers with the economic
insight and courage to force through necessary changes;
(b) the next tranche would be as completely wasted as before.
It seems to me that the next tranche from the IMF should be based on one
simple principle:
It should be applied to the lowest possible level, in order to
short-circuit the multiple layers of corruption, administrative and private.
The only practical method of doing this is to lend it to the Regional
Governors in proportion to their populations. In the first instance this
would only be a percentage game, of course and a great deal of the money
would undoubtedly be wasted. Some would be lost completely, some would be
partially wasted, but some regional loans might find their way more
directly to the population, improve local services and, with simultaneous
regional de-regulation for small and medium business, stimulate enterprise.
I suggest that there should be only one condition for the loans. This is
that a small team of IMF observers should be based in every region in order
to record the effect of the loan on price levels and public services. This
would necessarily be a rough-and-ready estimate in the first instance, but
the benefits (or non-benefits) of a loan in any particular region would be
pretty quickly apparent. Further regional loans would then be given
according to the effectiveness of the first one -- some regions, one would
guess, not receiving any further help at all.
Of course, this strategy would be interpreted as political interference in
the internal affairs of Russia leading, as it would, to further
administrative independence of the regions. This I see as inevitable
anyway, but perhaps, as a sweetener, a proportion of the overall loan could
be applied to the central government. However, once the conditions of the
proposed loan were known to the regions, it would be politically impossible
for the central government to resist.
Such a strategy would also meet with objections from Western statesmen
because it would appear to undermine the integrity of Russian
nation-statehood -- and thus, by implication, their own amour propre -- and
also weaken the central control of Russian nuclear weapons. Both of these
are deeply serious considerations, of course, and I wouldn't wish to
downplay them. But I cannot see any possible IMF policy that would do any
good other than the one I suggest above.
The IMF has only one more opportunity to help Russia. Subsequent strategies
will not be those of statesmen, world bankers, and small cliques of
economists, as they have been hitherto, but of the electorates of the
Western world. The power of this opinion is already being expressed by
Republican Senators in Washington and it is already obvious, too, that
European countries will be disinclined to contribute much more, if at all,
to the IMF. If the next centralised loan to Russia is seen to be totally
wasted, as the last one was, public opinion will simply -- but very
powerfully -- say: "No more", and the IMF will become a political and
financial invalid. In reality, being pretty close to bankruptcy already,
the IMF will have nothing more to disperse in the coming months and years,
whether to Russia, South-East Asia or to Latin America.
Keith
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Keith Hudson,6 Upper Camden Place, Bath BA1 5HX, England
Tel:01225 312622/444881; Fax:01225 447727; E-mail:[EMAIL PROTECTED]
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