A year ago, the world's seven key industrialized nations agreed to a $24 billion package of assistance for Russia and the republics of the former Soviet Union. So far, only about $1 billion has been disbursed. No wonder Russians and ex-Soviets scoff at renewed talk about Western aid as just that--talk. Today, rapid price increases portend hyperinflation, industrial production has plummeted, and interrepublic trade has ground to a halt. Meanwhile, the squabbling between Russian President Boris Yeltsin and the Russian congress has reached a feverish pitch.
It's high time for the industrialized countries to make good on their promises--and then some. To his credit, President Clinton is suggesting that the Group of Seven's meeting slated for July might be moved up. And he's apparently weighing "innovative" ideas, such as sending over more Peace Corps volunteers.
New ideas are fine. But old ideas, such as targeted technical assistance and stepped-up humanitarian aid, also deserve to be promoted agressively. And trying to stabilize macroeconomic conditions and bring down the inflation rate, now running at about 38% a month, is critical.
But nothing will get done without a powerful catalyst. It's time for the Group of Seven to form a lean, nimble superagency with a powerhouse figure at the helm, such as ex-Federal Reserve Chairman Paul A. Volcker or former Secretary of State George P. Shultz. It would be authorized by the G-7 nations to negotiate with and cajole aid recipients, judge their progress on economic reform, and coordinate the entire process.
The superagency would target assistance--introducing new loan-guarantee programs for the petroleum industry, for instance, or establishing an environmental clean-up fund. Money could be extended on the condition that at least a portion of it be spent on Western equipment, although this subject must be negotiated with care: Russians have resisted such demands with respect to modernization of the nuclear-power industry. Some aid might go directly to pay technical experts for their assistance on different projects. A superagency could also address knotty problems such as designing a good financial-payments system.
Small successes, meanwhile, should be rewarded. Against all odds, the privatization of small and medium-size businesses, facilitated by the distribution of vouchers to the populace at large, has promoted free enterprise in Russian cities such as Nizhni Novgorod, Perm, Tomsk, and Volgograd. But many more Western and Russian-speaking advisers--paid or volunteer--could help local officials and managers elsewhere prepare for privatization.
Excessive credit growth and ballooning government deficits must still be reined in, and foreign advisers should still urge that process along. Then, too, the social costs of economic reform are mounting. Money manager George Soros has suggested that the West might provide a safety net for the unemployed and aged pensioners living close to the edge.
All this costs money. Yet aid and reform are two sides of the same coin, and targeted assistance--as well as intelligently designed voluntarism--could go a long way toward making both work. But it won't happen unless the G-7 leaders seize the moment, and it won't happen unless a powerful proxy for the G-7 coordinates the process every step of the way.