The Political Interest

By Michael Kramer

IT'S A STRETCH TO SAY "AS RUSSIA GOES, SO GOES THE UNITED STATES," but not by much. "If Boris Yeltsin . . . is replaced by aggressive, hard-line nationalists," Richard Nixon wrote recently, "this will have a far greater impact on the American economy than all the Clinton domestic programs combined. Aid to . . . Russia is an investment in peace." As economics has become the 1990s equivalent of arms control, so the President's informal campaign slogan -- "It's the economy, stupid" -- may now refer as much to Russia's as to America's.

What's not so apparent is how exactly the West should aid Russia. (Leave aside President Clinton's ability to sell the idea when he is already asking Americans to sacrifice for the sake of their own economy, a task made harder since 58% of respondents in this week's TIME/CNN poll oppose substantially increasing aid to Russia.) The menu of possible assistance programs is lengthy, and Clinton is determined that Yeltsin not leave empty-handed when the two meet in Canada on April 3, assuming they still do. Much of what is being proposed is warmed-over Bush Administration stuff, including an innovative $2 billion fund the Export-Import Bank would target at Russia's sizable oil industry, a plan that acknowledges the money needed to remake the country is in the ground. But the benefits of aiding Russia's energy sector won't be realized overnight, and Senator Bill Bradley's estimable technical- assistance and exchange-program ideas will similarly require years to produce results.

Russia's immediate problem is its currency. The ruble is play money, testimony to John Maynard Keynes' observation that "the surest way" to destroy a government is to "debauch its currency." Thanks to an unrestrained government printing press run by Moscow's central bank (whose chairman is appointed by the parliament Yeltsin doesn't control), the ruble supply has tripled since last July. Now, with the inflation rate approaching 50% a month, no Westerner in his right mind would invest in Russia. For Yeltsin, says Michael Mandelbaum, the Johns Hopkins University professor who wrote the Clinton transition team's Russia memo, "it's a chicken and egg thing. He'll never be in firm control politically until the economy improves, and the economy won't improve until he takes the the tough economic measures he's been constrained from taking because he's weak politically." The trick is to get cash to Moscow, not loans and credits, which create a debt Russia can't service. All the industrialized nations would have to ante up (the U.S. share could be as little as $2 billion), and most of the money would go for a safety net that would provide unemployment insurance and similar assistance for those thrown out of work as the economy righted itself. Strict conditions would apply, but they would phase in as monetary reform is accomplished, not afterward, a crucial change from current practice.

Many stabilization programs have failed in the past, but unless some attempt is made to cure its hyperinflation, Russia could go the way of Weimar Germany following World War I. At that time, when the West refused to help rebuild Germany's economy, the stage was set for Hitler's rise. Conjuring a Russian Hitler may be farfetched, but a Russian dictator with nukes surely would distract Clinton from his single-minded focus on rebuilding America.