Newspaper article THE JOURNAL RECORD

Changes in Russia May Not Mean Prosperity for West

Newspaper article THE JOURNAL RECORD

Changes in Russia May Not Mean Prosperity for West

Article excerpt

``If a nation could not prosper without the enjoyment of perfect liberty and perfect justice, there is not in the world a nation which could ever have prospered.''

- Adam Smith

Nobel laureate Franco Modigliani agrees Mikhail Gorbachev's historic effort to reform Russia's economic and political system while reducing military spending and international tensions has very favorable implications for the West.

But Modigliani, institute professor emeritus at the Massachussetts Institute of Technology at Cambridge, Mass., doesn't share the belief of some observers that the changes in Russia mean the West will enjoy an unparalleled period of prosperity in the years ahead.

Economist Pierre Rinfret, for one, believes that primarily because of the changes occurring in Russia, the decade of the 1990s will prove to be the most prosperous period of the post-World War II era. Peace is bullish for the West, concludes Rinfret, an authority on the Soviet Union.

Modigliani, who left his native Italy in 1940 to escape the Mussolini regime, allows he'd be satisfied with something less than an unprecedented period of prosperity.

``It would be wonderful if we could do just as well in the future as we have in the post-war period,'' said the soft-spoken, 71-year-old economist.

``But if Mr. Gorbachev fails and the country is taken over by the bureaucrats, then there could be a return to the cold war that existed between Russia and the West.

``I would say Mr. Gorbachev has about a 50-50 chance of succeeding. He has lots of problems and opposition to his programs. His path is full of mines.

``Russia won't embrace pure capitalism, but it is hoped the Russian system can evolve into a form of capitalism characterized by a mixed economy in which private as well as public enterprises can function together successfully, like in Italy and Spain.''

How much time does the Soviet Union need to reform its economy and political system and become, as Gorbachev has espoused, a full-fledged partner of the West?

``I think with luck, it will take Russia at least 10 years to mesh her system with that of the West,'' said Modigliani.

The economist said his view of the economic future of the West is guarded because many economic problems remain to be solved, especially by the United States.

With U.S. oil imports growing every year, for example, energy is a ``time bomb'' that could eventually explode, he said.

Modigliani added he is particularly concerned over the big U.S. budget deficit, which he said must be essentially eliminated to solve the country's trade imbalance.

``I would favor reduction of the budget deficit by a combination of a cut in government spending and an increase in taxes,'' he said. ``To resist raising taxes because it would hurt the economy, as some argue, is sheer foolishness. …

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