Is Russia's Glass Half-Full - or Virtually Empty? Pessimists See a Hopeless Economy, Riddled with Corruption and Statism

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The IMF has come through again for Russia. Or has it?

The recent $11.2 billion loan, part of $22.6 billion in aid pledged by the West, is commonly referred to as a bailout. But many analysts are skeptical about what conventional wisdom has deemed the West's major contribution to saving Russia's economy.

Despite assurances to the contrary from the State Department and the White House, many Russia watchers think the aid is akin to slapping a Band-Aid over a gaping wound. They say the economy is moribund and riddled with corruption; that after years of so-called reforms, many of the worst aspects of the Soviet economic system are still alive; and that the government of President Boris Yeltsin is incapable of reversing trends that it has itself helped to entrench.

"Without real reforms in Russia and serious restructuring, this money will be wasted, and it will likely lead to the postponement of necessary reforms, as the case has been over the past six years," said Ian Vasquez, director of the Cato Institute's Project on Global Economic Liberty.

Some analysts even go so far as to claim that Russia's manufacturing sector exists in an anti-reform environment, which Russian government analysts have dubbed the "virtual economy." By pumping money into this system, they say, the International Monetary Fund is merely extending its life, contributing to an even more brutal day of reckoning when Russia's economy finally collapses.

Why is the West so anxious to pony up the big bucks?

Fear is a major motivator. It is grim to consider what could happen if Russia, a country of 150 million people with thousands of nuclear warheads and massive stockpiles of conventional weapons, were to disintegrate. "We've got to ask ourselves, are we really ready to have a social meltdown in a country where even the military and the nuclear workers aren't being paid on a regular basis," said Susan Eisenhower, chairman of the Center for Political and Strategic Studies.

Optimism is another factor.

"The IMF and the State Department have this notion that if you get the macroeconomic situation stable . . . then, to quote [IMF Deputy Managing Director] Stan Fischer, `good things will happen,' " said Cliff Gaddy, a foreign policy fellow at the Brookings Institution. "It's almost a religious belief."

But since the collapse of the Soviet Union, Russia has been borrowing billions from the IMF, with each loan heralded as critical to stabilizing an inherently unstable economy.

"We shouldn't be anxious to see that money back," Mr. Vasquez said, "especially if the current pattern continues, which is that Russia asks for ever-increasing amounts of money to pay back its previous debts."

COMPETING VIEWS

Whether people think the IMF aid is effective is directly related to how they view the state of reforms and the Russian economy.

As with so much in Russia, some analysts see the economy as a glass that is half-full, while others see it as half-empty. The Clinton administration and the State Department tend to the half-full version - that is, the Yeltsin government has made important strides toward a market economy, but its best efforts have been stymied by a neo-Communist legislature, entrenched bureaucrats, corruption and the sheer complexity of the task.

The half-fulls think that things generally are on the right track, and that the IMF loans will help buy precious time needed to complete the reforms.

The half-empties are less optimistic.

Grigory Yavlinsky, an economist and prominent pro-reform lawmaker in the Russian Duma, or parliament, has said Russia is standing at a crossroads.

While there has been some movement toward Western-style capitalism, Mr. Yavlinsky has written that the economy also shows strong tendencies toward a "corporatist, criminal-style capitalism."

"Far from creating an open market, Russia has consolidated a semi-criminal oligarchy that was already largely in place under the old Soviet system," he wrote in a Foreign Affairs article titled "Russia's Phony Capitalism. …