Wall Street Journal Joins Casey Institute on Right R_x For Russian Financial Crisis: ‘It’s the Private Sector, Stupid’

(Washington, D.C.): The lead editorial in today’s Wall Street Journal is required
reading for
those concerned about the latest Clinton Administration-brokered bail-out of a foreign financial
basket case: Russia. This brilliant essay — entitled, “Financing Capital Flight” (see href=”index.jsp?section=papers&code=98-R_130at”>the attached) — enunciates themes the Casey Institute strongly
endorses,⁽¹⁾ notably the fact that this bail-out will
squander immense Western resources without addressing the underlying causes of
Russia’s
persistent financial woes. Worse yet, such taxpayer largesse is likely actually
to compound
those problems.

As the Journal eloquently put it:

“Under central planning, when the government ran and owned everything, Russians
became adept at siphoning off and ripping off state assets for private uses, that is, for
survival. Progress since then has been awkwardly paired with huge property grabs by
men in positions of power. There’s the notoriously secretive and strange way in which
the government chose to ‘privatize’ in the hands of select cronies href=”#N_2_”>⁽²⁾ effective control of
the national gas company, Gazprom, a big hard-currency earner that claims about
one-third of the world’s known natural gas reserves. In a world that increasingly
demands and rewards market transparency, Russia remains global finance’s house of
mirrors.

“The notion that the IMF is going to fix the Russian fun house by funneling
billions into its Central Bank reserves and then by sending teams of technocrats to
dictate reforms is ludicrous. We know this because it has been tried….

“The better way to defend Russia’s ruble would be to turn to the private
markets for help …. While Russian politicians have learned they can get away
with stiffing the IMF, or the World Bank, or even the U.S. government, their turn
toward capitalism has also been driving home the lesson that it’s a lot costlier to
play fast and loose with the private marketplace — where investors react to
dumb policies by doing things like selling off stocks, not offering bigger
bailout packages.”

It is to be hoped that an additional point will be addressed in future Journal
editorials on the
subject — and by others worried that U.S. and other Western taxpayers are being victimized by
bailouts which amount to little more than international wealth redistribution schemes benefitting
primarily opportunistic Western investors and lenders and their in-country crony capitalist allies.
National security will not be served by perpetuating a politico-economic system in
Russia
that is bent on building new offensive missile threats, encouraging the proliferation of these
and other weapons and engaging in policies from Serbia to Iraq to India to North Korea
pursuant to a “Primakov Doctrine” that is highly inimical to Western interests. href=”#N_3_”>⁽³⁾

– 30 –

1. See ‘Russian Clean-Up’: Expectations of Western
Bail-Out Artificially Buoy Markets, But
Serve to Compound the Problem (No. 98-C 99, 4
June 1998) and As Expected, Russia Gets a
Bail-Out — But It Won’t Get Moscow Through Next Year, or Protect U.S. Security
Interests
(No. 98-C 128, 13 July 1998).

2. The biggest of these “cronies” by far was Vice President Gore’s
erstwhile interlocutor, ex-Prime Minister Chernomyrdin.

3. See Primakov Watch: Destroying NATO From
Within (No. 98-D 14, 22 January 1998),
Clinton Legacy Watch # 10: Administration Ineptitude, Appeasement Put Saddam,
Primakov
Back in Driver’s Seat (No. 97-D 173, 20
November 1997) and ‘Founding Act’ or ‘Final Act’
for NATO? (No. 97-D 69, 19 May 1997).