Aid To Moscow: Reward Or Rathole?

It took some convincing. In S 1948, when the Truman administration proposed saving Western Europe by pumping some $13 billion into the economy through the Marshall Plan, the U.S. Senate was ready to say no. But reality overwhelmed politics. At next week's economic summit in Houston, the leaders of the seven major industrialized nations will consider a similar cure for the ruined post-coldwar economy of the Soviet Union. West German Chancellor Helmut Kohl, whose country last month gave $3 billion in new loans to Moscow, will propose that Western nations raise an additional $15 billion to bail out the Soviets and their beleaguered leader Mikhail Gorbachev.

Will the Kohl plan work? The Bush administration is skeptical. The original Marshall Plan had one great advantage: capitalism survived in the ruins of postwar Europe. Seed money there nurtured cornfields and factories. In the Soviet Union, Bush advisers fear, it would produce only more bureaucratic failure. "Just about everybody agrees that until the Soviet economy is radically reformed, any aid given is pouring money down the rathole," says a senior administration official. Bush also objects to giving Gorbachev aid as long as he is spending 18 percent of Soviet output on his military and providing Cuba with $5 billion a year. "We'll agree to disagree at the summit on this issue rather than join a bailout," says a top U.S. official. (Last week Gorbachev eased the political situation by promising to resume oil shipments to independence-minded Lithuania.)

If real reform would help get him aid from other countries, why doesn't Gorbachev do it? To date, the Kremlin has lacked either the will or the political power--or more likely, both--to make any meaningful change. Gorbachev this year finally appointed two advisers, Nikolai Petrakov and Stanislav Shatalin, who U.S. experts think really grasp market economics. But U.S. Treasury Secretary Nicholas, Brady says other top officials in Moscow don't comprehend capitalism. "Russia never had a commercial market economy before the Soviet Union, was formed," says Brady "Even the vocabulary problem is a very difficult one. When you say 'bank' or 'cost accounting,' it means something entirely different to them." As another American official puts it: "When you talk about free prices, most Soviet officials think that means revising your price [control] list."

Wrong people: Rather than extending loans, the West might do better to provide tangible benefits like housing for the hundreds of thousands of Soviet troops returning home from Eastern Europe. Since the Soviet Union lacks the human capital to carry out perestroika, training would help. Communist China has profited from sending thousands of students to the West. The Soviets are just beginning to seek Western technical expertise, but so far they are trying to educate the wrong people. When the United States held a conference last month on food production, the Soviets sent 40 apparatchiks-- and no farmers. Soviet central planners are flocking to Tokyo to learn how the Japanese mix government with capitalism. "At first we thought it was funny," said a Japanese ministry official. "Now we're trying to help. But how do you tell them, 'First, become Japanese'?"

Privately, even the Germans admit that any aid to the Soviets in current circumstances will be wasted economically. But they are thinking politically. They want to buy time by propping up Gorbachev long enough for West Germany to reunify with East Germany later this year. Bonn also wants to persuade Gorbachev to withdraw close to 380,000 Soviet troops from East Germany. Gorbachev needs some concessions from the West to stave off hard-liners who are beginning to demand: "Who lost Eastern Europe?" The Soviet economy may be a poor investment for the West. But keeping Gorbachev in power, the Germans figure, is not.

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