The Multinational Monitor



Soviet Sovereignty

Time is running out for the Soviet Union. Not for a shift to a free market economy, but to prevent foreign dominance of the economy, severe inequality and mass poverty.

Freeing itself from the shackles of its Stalinist past, the country has had a tremendous opportunity to recast its economy. Organized around the principles of self-reliance, decentralization and respect for the environment, and committed to worker ownership and control of factories and farming cooperatives, the Soviet Union could become a model economy.

That opportunity, however, may quickly pass. Boris Yeltsin's "500 Days" plan, which appears to have won the approval of Mikhail Gorbachev, calls for the sale of 80 percent of state-owned enterprises by the end of the decade and the lifting of restrictions on foreign investment.

Upon learning details of the plan, Donald Marron, chairman of the Paine Webber financial services group, gleefully pronounced, "Capitalism is coming to the Soviet Union." Marron's remark came even before the announcement that the Soviet Union would be granted special "invitee" status at the annual meetings of the International Monetary Fund and the World Bank, two key institutions in the world capitalist system.

Short on capital, modern technology and, most importantly, consumer goods, Soviet economic planners hope foreign investment and the motivational effects of private enterprise will set their economy on the path to rapid growth. But foreign investment is likely to be limited mostly to the plunder of the Soviet Union's rich resources and the provision of fast food, junk food and tourist services. Where productive investment actually occurs, linkages with the rest of the economy are likely to be limited.

It is unlikely that the small infusion of capital and technology which foreign investment and access to the International Monetary Fund and World Bank may bring will be worth the enormous costs. They will erode the ability of the Soviet Union to use its resources to benefit its own people, provide the sort of social programs it desires and shape its society to reflect its concerns and values. Without the ability to control its economy, the Soviet Union will not be able to maintain its genuine self-determination.

With unrestricted foreign investment inserting the country into the international division of labor, the Soviet Union will find itself stuck in the no-win, corporate-rigged game of international competition. Workers and government officials will soon find that demands on foreign companies to provide higher wages or comply with strict environmental regulations are likely to evoke the same threats of plant shutdowns and layoffs that they do in the United States and throughout the world.

Accepting loans from the International Monetary Fund and the World Bank could have even more devastating consequences. Loans from these international banks come with strict conditions limiting the ability of countries to enact social programs or use fiscal and monetary tools to accomplish socially desirable goals.

The opening of the Soviet economy also promises to exacerbate the environmental destruction brought on by the country's bureaucratic state-planning system. The voices have been few, but some of the more far-sighted Soviet environmental groups and international organizations such as Greenpeace have called for the U.S.S.R. not to fall prey to the 20th century polluting technologies of the Western industrialized countries. Instead, they advocate a 21st century non-polluting economy. But the opportunity for experimentation will evaporate with the presence of foreign multinationals, which will probably set an unconscionably low standard for the country by utilizing technology outdated even in the West.

As the cutting edge of the Soviet economy, foreign-owned enterprises will set the tone for the rest of the country. The prospect of real worker-owned and -controlled enterprises will collapse in the face of competition from foreign-owned factories which will have far vaster resources.

That foreign operations will produce goods of better quality, will pay their workers better and may have less negative impact on the environment than existing Soviet enterprises is not a sufficient reason to invite them into the U.S.S.R. The nation is clearly abandoning its old system; the question is what will replace it.

The dilemmas facing Soviet economic planners are in some ways unique, but many are shared by developing countries throughout the world. Falling ever further behind the West and with capital in desperately short supply, there seems no way to catch up, except to rely on foreign expertise and, especially, foreign investment and foreign loans. The problem is that this reliance brings with it an ongoing dependent and subordinate relationship with foreign powers. The Soviet Union is in some ways uniquely positioned to avoid this dilemma, however.

The Soviet Union's size and resources differentiate it from Third World nations. It has a large, well-educated and well-trained population, and immense natural resource wealth. And it does not bear the burden of a large foreign debt. Not yet bound up with the industrialized West, the Soviet Union still has the opportunity to reverse its present course, limit outside economic involvement and search for its own model of a democratic, decentralized and sustainable economy.

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