Russia's Bear Economy Goes Bullish as Reforms Kick In

Article excerpt

AFTER years of difficult reforms, the Russian economy appears to be on the brink of actual growth for the first time in post-Soviet history.

Dynamic market-oriented companies, and the new vitality of many privatized old enterprises, are moving into a rough equilibrium with the old rusting economic behemoths of the Soviet era, whose production continues to plummet.

Since the end of official communism in 1991, Russians have seen their incomes shrink, their savings vanish, and the economy contract on a scale that Americans have not experienced since the Great Depression.

But a study released last week by the Organization for Economic Cooperation and Development is forecasting a probable growth of 2 percent in Russia's gross domestic product (GDP) next year. And it added that Russia could be nearing a boom that would mean 10 percent growth.

A Western economist in Moscow says that Russia's productivity growth is probably passing zero - that is, moving from decline into expansion - right about now, in the fourth quarter of 1995.

Industrial production, wages, and the standard of living have plunged deeply in Russia since the end of the Soviet Union. In 1994, GDP shrunk by 15 percent. In 1995, it is projected to shrink another 5 percent.

But 1996 is increasingly predicted to be the year that post-Soviet Russia begins to show overall growth as an increasingly market-based economy.

All these predictions are hung with warning signs, however. Just as Russia's economy appears ready to reap the benefits of market reforms, the political climate is leaning back toward stronger state control. Some of the least-popular politicians in the country, in fact, are those most closely linked to the reforms. Chief among them is Yegor Gaidar, whose party is having trouble finding any coalition partners in the upcoming elections.

Polls, early signature-gathering, and other signs indicate that Communists will make the strongest gains in parliamentary elections this December. In an early local election in Volgograd last week, Communists swept 22 of 24 seats.

Nonetheless, a radical change in the direction of economic policy is unlikely. Even Russia's Communists are not actually Marxists anymore. But at the same time, some Russian analysts see a leveling-off of privatization for a time as the public registers its desire for stronger state control of the economy.

Russian sentiment is not hard to understand. …