“Naivet in ‘Engaging’ Russia Carries a High price Tag”

By George Melloan,
The Wall Street Journal, 18 May 1999

Boris Yeltsin survived a series of impeachment votes in the lower house of the Russian
parliament
Saturday, but one feature of the debate was more interesting than the outcome. At no time did the
passionate and often crude vilification of the president ever give way to glimmers of wisdom
about the sources of Russia’s economic malaise, which happens to have more importance to the
lives of the Russian people than all the other issues raised. The intellectual level of the debate was
roughly on a par with the yelps of jackals trying to bring down a sick and wounded bear.

It is tempting to say that the Russian people deserve better leadership than was on display in
the
Duma. But then, it was the Russian people who elected the jackals, either with their votes or
widespread non-votes. Maybe they deserve what they are getting.

The result of the voter defection has been the comeback of a Communist Party that kept
Russia in
thrall for 72 years, preserving its Third World living standards while the Western democracies
were getting rich. It should come as no surprise that these Neanderthals have no ideas for solving
Russia’s economic problems. Their dreams of power and fortune rest not on true reform but on
either preserving today’s chaotic status quo or turning back the clock. They remain good at what
they do, politics, but only for their own benefit. They run a disciplined political organization and
exploit the nationalistic emotions of that still-large part of the Russian population that remains
ill-informed and unsophisticated.

It is true that President Yeltsin is no longer an effective leader. He is ill and maybe
disoriented. He
should have resigned long ago and groomed a fresh young reformer to take his place. But that is
not his nature. His tactic for beating back the jackals was not any more useful to the Russian
people than the arguments his enemies used against him. Just before the impeachment debate, he
fired his prime minister, ex-KGB spook Yevgeny M. Primakov, and replaced him with another
security-service heavy, Interior Minister Sergei V. Stepashin. Since the Interior Ministry runs the
nation’s police forces this was largely an exercise in replacing one muscle man with another.

Primakov’s main credential was his acceptability to Duma Communists, not a reputation for
wise
policymaking. Mr. Yeltsin no doubt hopes Mr. Stepashin’s dominant trait will be an ability to
instill fear. He may be right. Of the 442 active Duma members, 100 failed to show up for the
votes on the five counts of impeachment, having either been scared away or bought off.
Otherwise, one count blaming the president for an “illegal” war against Chechnya might have
passed.

But neither the Chechnya rap, nor charges of destroying the Soviet Union and the army and
staging a coup against the parliament in 1993, address the issue of national bankruptcy. The
closest the Communists came was a fifth charge that Mr. Yeltsin had committed “genocide”
because of deaths caused by economic mismanagement. The Communist who introduced this
count was hard-pressed to define economic mismanagement, perhaps for lack of a standard for
measuring economic performance, good or bad.

But then a serious discussion of the Russian economy would not serve Communist purposes.
The
fundamental cause of the country’s bankruptcy is not that the economic reforms of the last eight
years have gone too far, as the Communists claim, but that they have not gone far enough. Most
of the economy remains in the hands of former Communist apparatchiks who control assets either
directly as managers or bankers, or indirectly, through the nearly dictatorial power some exercise
over regional governments. These modern economic royalists are not interested in a market
economy, because that would mean competition. They prefer monopolies. That is one reason
foreign investment in Russia is minimal. The powers that be don’t want competition, even though
they will gladly accept money if there are no strings attached.

Neither do they want a genuine rule of law. That, too, would hamper their exercise of
arbitrary
power. And many of those who control regional duchies are not especially interested in whether
Russia has an effective central government. One reason the central government went broke was
its difficulty in prying tax revenues out of regional corporations. They preferred to cut tax deals
with their local governors, who wield power more directly and effectively over what they do.

It may take a generation or two to break the power of these economic feudalists. It will only
happen when today’s young Russians begin challenging that power, either in politics or in
business. Russia has young entrepreneurs who will some day build businesses that will represent
competition for vested interests. But no one is making it easy for them. The regulatory apparatus
controlled by the entrenched powers is primarily designed to protect existing enterprises against
upstart competitors. If that sounds familiar, it is because the same tactic is not unknown elsewhere
in the world, including the U.S. In Russia, any reformer who tries to dismantle this protective
thicket is likely to have his head handed to him by the Duma, which serves not the Russian people
but the feudal lords.

This is the Russia that the Clinton administration has been trying to “engage” with these last
six
years, most recently for aid in negotiating a deal with Slobodan Milosevic on Kosovo. President
Clinton’s primary tool for engagement is to send the Russians money, mainly through the
International Monetary Fund. The IMF currently is trying to find a government in Moscow, so it
can offer whoever heads it new financing to prevent default on existing credits.

Past IMF tranches derived mainly from the savings of Americans and Europeans have melted
away soon after being credited to a Russian account, some of it probably coming back quickly to
private Russian Swiss bank accounts. All this generosity hasn’t bought Russian good will, as some
of Mr. Clinton’s underlings like to claim, because Russia is more an abstraction than an entity.
Abstractions don’t have feelings and what you see is not necessarily what you get. Boris Yeltsin
levitates himself above this chimera but doesn’t really control it.

The alternative to giving the Russians money is to not give them money. Bill Clinton
continues to
make the wrong choice. The Russian leadership class responds by playing power games with the
presidency, appropriating everything they can get their hands on and clamoring for more. Boris
Yeltsin survived on Saturday but then so did a political system that is, in essence, going nowhere.

George Melloan is a Columnist for the Wall Street Journal.