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The Russian devaluation, coming as it does in spite of the announcement of an IMF package to that country last month, is an indication of how serious the crisis is. For several years now, Russia has been paying the price for the "big bang" liberalisation unleashed on that hapless country by Western advisers and the international financing institutions, supported, of course, by the very Communist nomenklatura who once ruled the country, and who continue to rule it under the fig-leaf of a capitalist system. The conditions attached to the IMF package have been the usual ones of cutting expenditure and raising taxes, conditions which the Russian parliament has rejected. This is hardly surprising, given that in an economy where most companies have been unable to pay wages, shrinking the economy by cutting expenditure will only fuel social unrest. The Russian government has been cutting expenditure by refusing to pay wages, but apparently, it hasn't gone far enough in that direction for international investors to The Russian devaluation, coming as it does in spite of the announcement of an IMF package to that country last month, is an indication of how serious the crisis is. For several years now, Russia has been paying the price for the "big bang" liberalisation unleashed on that hapless country by Western advisers and the international financing institutions, supported, of course, by the very Communist nomenklatura who once ruled the country, and who continue to rule it under the fig-leaf of a capitalist system. The conditions attached to the IMF package have been the usual ones of cutting expenditure and raising taxes, conditions which the Russian parliament has rejected. This is hardly surprising, given that in an economy where most companies have been unable to pay wages, shrinking the economy by cutting expenditure will only fuel social unrest. The Russian government has been cutting expenditure by refusing to pay wages, but apparently, it hasn't gone far enough in that direction for international investors tobe satisfied.
To be sure, government finances are in a mess. Only last month, in a deal hailed as a landmark one by investors, a huge amount of rouble-denominated treasury bills were converted into foreign-currency bonds, thus giving the Russian government a month's breathing space, but significantly raising the country's foreign debt. The state has been unable to collect taxes from the country's powerful companies, who say that if they pay taxes, they cannot afford to pay wages. Russia's bosses, the ex-nomenklatura, who have amassed riches beyond their wildest dreams, are mostly above the law. It is ironical that, although communism has died in Russia, it is the old nomenklatura who continue to occupy all important positions led, of course, by the former Communist party boss of Sverdlovsk, Boris Yeltsin. If the devaluation gets out of hand, it may well fuel spiralling inflation, social unrest, and the collapse of Russian industry---conditions ideal for extremists to exploit.
Copyright © 1998 Indian Express Newspapers (Bombay) Ltd.
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