IMF 'Salvation' in Russia? Fund Bailout May Fan Flames of 'Great Depression,' Not Stop It

By Sanders, Bernard | The Christian Science Monitor, June 25, 1998 | Go to article overview

IMF 'Salvation' in Russia? Fund Bailout May Fan Flames of 'Great Depression,' Not Stop It


Sanders, Bernard, The Christian Science Monitor


For the seven years since the fall of communism, the IMF has been guiding the Russian economy - to disaster. Now the IMF, with President Clinton's blessing, is considering a proposed $10 billion bailout for Russia. Should they be allowed to "save" Russia again?

As in Mexico, Indonesia, Korea, and Thailand, the IMF has prescribed that Russia run its economy for the benefit of foreign investors and a few wealthy Russians at the expense of the Russian people. The results are clear: a few world-class billionaires, combined with economic collapse, soaring debt, mass unemployment, grinding poverty, and unpaid wages and pensions.

When communism fell, the IMF prescribed "shock therapy," essentially a Russian translation of the devastating "structural adjustment" the Fund imposed on Mexico, Africa, Southeast Asia, and much of the rest of the third world. It insisted that Russia cut government spending, sell off public assets, and raise interest rates to attract foreign investment. But as early as 1992 it was clear that this was a road to disaster: Even the World Bank, normally an IMF ally, warned that Russia's first priority should be to revive domestic production. The result of the IMF's shock therapy? Between 1992 and 1995, Russia's GDP fell 42 percent and industrial production fell 46 percent - far worse than the contraction of the US economy during the Great Depression. The effect on the Russian people has been devastating. According to Russian officials, real income has plummeted 40 percent since the Soviet Union collapsed in 1991. A quarter of all Russians are living below the subsistence level. Nearly one-third live below the poverty level. Three-quarters barely survive on an average income of $100 per month. The Red Cross calls conditions in Russia "a silent disaster," reporting "We saw babies who were being fed powdered animal fodder because of lack of baby food." The average life expectancy for men has declined by seven years, to 59, since 1990. One- quarter of Russia's labor force receives its wages late, in kind, or not at all. Meanwhile, privatization has concentrated wealth in a few hands. …

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