American-Russian Economic Relations in the Post-Cold War Era

[Deb Palmieri on Russia Table of Contents]

The following chapter is taken from the book The New Chapter in United States-Russian Relations: Opportunities and Challenges edited by Sharyl Cross and Marina A. Oborotova and published by Praeger Publishers, Westport, CT. in 1994.

American-Russian Economic Relations in the Post-Cold War Era

Introduction

This chapter will highlight some of the major reforms implemented by Mikhail Gorbachev when he came to office in 1985 to put into place a liberalized foreign economic policy toward the West, including the United States, as a major centerpiece of his perestroika program. With the disintegration of the Soviet Union in December 1991 and Yeltsin's leadership of Russia, there was an even more intensified effort toward market reform and democratization. This chapter will address some of the major reform policies of both leaders. Finally, it will address the major problems and obstacles that stand in the path of a smooth transition to normalized economic relations between the United States and Russia and recommend several measures that should be taken to. rectify those problems.

Concluding Remarks

It is imperative that we in the West orient our thinking toward both short- and long-term solution-based responses to the awesome complexities and impediments introduced by the transformation and modernization of the Russian economy along market lines. Otherwise, we might be tempted to do, as many indeed have, as Lenin once said, "fold our empty arms over our useless breasts and go home." But the West cannot go home, because the stakes are high, and the Russians, through Yeltsin's leadership, essentially have laid their lives on the line to try and bring about the metamorphosis that Russia needs to become a modem competitive economy in the 21st century.

What measures should be taken from both the Russian and the American sides to facilitate economic cooperation and address the pressing predicaments and obstacles standing in the way of normalization of commercial relations?

On the Russian side, the uppermost priority is stabilization. Political stabilization, economic and monetary stabilization, and social and legal stabilization are required to create a fundamentally fresh business climate that is necessary for domestic progress and future foreign involvement in the Russian economy. The advancement and maturation of a viable legal system that guarantees the enforcement of contracts and property rights is essential to create confidence in a workable commercial system. Russians can work on reducing the prevailing bureaucratic chaos and on creating effective policies and procedures that enjoy longevity and legitimacy. They also can effect a psychological transformation that promotes self reliance and a can-do attitude, including an emphasis on the value of economic independence and a work ethic that promotes entrepreneurship, self-initiative, and toil for individual self-advancement. After decades of socialism, many people lost incentive under a collective system that rewarded conformism and mediocrity and provided limited material incentives to reward hard work. This is reflected in the Russian adage, "We pretend to work and they pretend to pay us." Russians can recognize that there is a general national climate (with exceptions, of course) of cynicism, despair, and depression. Such a psychological ambiance fosters pessimism, dwindling economic productivity, and flailing national self-esteem, or the opposite tendency, raging aggressive nationalism, which can lead to a resurgence of totalitarianism and dictatorship. Finally, the government should exhibit a determined spirit of intervention in the underworld of crime. Russian authorities should beef up the prevention, detection, and enforcement dimensions of controlling business crime, a difficulty that threatens to cripple the economy and render it anarchic.

On the American side, there are equally pressing and daunting challenges. Americans must be patient and realistic about the pace and degree of change that can occur in a short period of time. The transformation of Russian society and economy is a protracted process that will change and evolve over decades and throughout the next century. Americans are generally unrealistic and overoptimistic when gauging the anticipated pace and rate of reform. We expect change to happen overnight on the basis of a few simple formulas and along the path of a smooth trajectory. Prevailing American sentiment is "do it quickly and let's get it over with." Unfortunately, even under the best of circumstances, with the brightest minds at work, genuine and meaningful societal change involves a painful, wrenching effort, one that tears away and dislocates the foundation of society as people once knew it. Even though simultaneously, new institutions, norms, and values are slowly put in place, people are displaced, and social crisis is the norm, rather than the exception.

Americans should be willing to take a more aggressive gamble on the success of the reform movement through means of increased private and government project financing, business and academic exchanges, and improved levels of support from the International Finance Corporation, the Overseas Private Investment Corporation, and the Exim Bank. Such concrete financial support should buttress our desire to implant the ideals of market reform and democracy in Russia. However, massive infusions of outright aid money will not solve Russia's problems. Change in Russia must come from within and is impossible through reliance on foreign economic intervention. Money will help, but it will not solve Russia's dilemmas. One simple thing that Americans can do is to buy Russian commodities on the world market. The best form of aid we can provide now is to increase our Russian imports, thereby generating for them more hard currency to enable their survival on global markets. The United States should lead a more coordinated effort from the industrialized West to contribute financial, economic, and technical assistance to Russia and minimize the duplication of resources and uncoordinated policy making.

These measures and others taken by the Russian and the American sides can make important contributions to enhance the quality and quantity of the American-Russian business and economic relationship during the next several decades.

Deborah Anne Palmieri
The New Chapter in United States-Russian Relations: Opportunities and Challenges
Sharyl Cross and Marina A. Oborotova, Eds.
Westport, CT.: Praeger Publishers, 1994.