苏联：展望未来，使其运转

It is in the nature of revolutions that events move faster than people’s ability to comprehend them. Watching the events unfolding in the Soviet Union, we realize that something ought to be done to arrest the collapse of the Soviet economy, but we are at a loss for a policy. The situation is chaotic, and there is a natural inclination to wait until it is clarified. This temptation must be resisted. International assistance is the only way to help bring order out of chaos.

A few cardinal principles can help us formulate policy. The first is that there can be no market economy without money. The ruble did not fulfill the traditional functions of money even when the Soviet economy was intact: It served neither as a medium of exchange nor as a store of value. Now that the system has broken down, the economy runs on inertia, barter and pilfering. The introduction of real money could arrest economic collapse, allowing individual market participants to function even while the relationship between the center and the republics is clarified and the framework of a market economy is established.

The creation of a new order will take time; but without a reliable medium of exchange, the economy will disintegrate and there will be no time to sort out relationships. Conversely, the introduction of a monetary system worthy of the name could have surprisingly positive results. The distortions it would correct are mind-boggling. There is no reason the country should not be able to feed itself within a year. The problem of how to survive the coming winter would remain, but the creation of a monetary system must be the next highest priority.

International Sponsorship

The second point is that in the present environment, only an internationally sponsored and managed central bank could introduce a currency that would be generally accepted as money throughout the former Soviet Union. On Dec. 7, 1989, I argued for such an institution on this page. Subsequent events have only strengthened the argument. No domestically managed central bank would be able to resist pressure from the various republics, all of which are populist. Only an internationally controlled institution is in a position to maintain its independence and to enjoy the credibility that is the hallmark of a functioning central bank.

The third point is that the ruble can no longer serve as the currency for the entire Soviet Union. The Ukraine, Moldavia and other republics are determined to have their own currencies. To deny them this emblem of sovereignty would inflame nationalist passions and destroy nascent democracy.

Even at the height of nationalist emotions it is generally recognized that the various republics are inextricably interwoven. The Soviet economy has been constructed as a monolithic structure without any redundancies and duplications. As much as 30% of industrial production is single-source, with one factory supplying the whole country with a product. A break down of trade between the republics would be devastating.

The republics cannot accept the ruble as a common currency, but I believe they would all welcome an internationally managed hard currency—call it the Soviet ecu. This would mean the creation of a multi-currency system. At its center would be the Soviet ecu, independently managed and out of reach of any government.

It would compete with the ruble and other national currencies. The exchange rate between them would be determined by market forces. The ruble would inflate away, but some of the new national currencies might be pegged to the Soviet ecu from inception.

A period of hyperinflation is probably unavoidable because the ruble has already been inflated—the effect on prices has been artificially suppressed by price controls. A quantum jump in prices is necessary not only to bring the overall price level in line with the supply of money but also to adjust relative prices.

Since the political will to control the money supply is absent, the process would deteriorate into hyperinflation even in the absence of a hard currency. The introduction of a Soviet ecu would accelerate the process but at the same time protect the economy from its ravages: There would be a reliable medium of exchange that would allow commerce to be carried on while the republics indulge in their nationalist passions and the governments learn the need for monetary discipline. Eventually, the national currencies could be stabilized and their exchange rates pegged to the Soviet ecu. At that point, the system could evolve toward something akin to the Federal Reserve System.

Interestingly, there is a precedent for a dual currency in Soviet history. The chernovyetz, used in the 1920s, awakens pleasant memories. There are also precedents of internationally controlled central banks in the successor countries of the Austro-Hungarian Empire after World War I.

Nor is the introduction of a hard currency as unprecedented as it appears at first sight. The “dollarization” of economies suffering hyperinflation is a well-known phenomenon. What would be different in this case is the institutionalization of the process: the creation of a central bank to administer the hard currency. Dollarization would disrupt the economy; by contrast, an internationally controlled central bank would bring the benefits of a functioning monetary system even while the adjustment of absolute and relative prices unfolds.

The financing and functioning of an internationally managed central bank may take a variety of forms. I shall outline my own favored version, but I hope it will not divert attention from the three main points I have tried to establish.

Normally, a new currency is introduced by allowing a certain amount of old currency to be converted. In this case, it would be introduced like a food coupon: a small amount, say $10 to $15 worth, for every member of the population every month. (For reference, the average monthly salary now is worth only $7 at the black market rate.)

While some of the population would be paid by local authorities, employees of enterprises and their families would be paid by the enterprises. The funds would be advanced to the entities as a lump-sum loan to provide working capital. They would have to find their own sources of income within a year; otherwise, they would run out of money.

Enterprises would be required to sell their products, and local authorities to impose taxes, in Soviet ecus. Since the taxes would also largely fall on enterprises—particularly on agricultural producers, who would be able to sell their products at much higher prices than now—this arrangement would impose a hard budgetary constraint on enterprises and local authorities long before property rights can be sorted out.

Many enterprises would be forced to discharge their workers, creating a pool of unemployed. The unemployed would be sustained by the social safety net and look for other work to supplement their incomes. This is much better than keeping uneconomic enterprises alive. It should be recognized that the products of many Soviet enterprises are worth less than the raw materials that go into their manufacture.

The U.S. Role

The cost of the plan would be in the region of $40 billion to $60 billion in the first year, with substantially smaller amounts in subsequent years, to provide relief to the unemployed. The new central bank would be capitalized at, say, $60 billion—half from Soviet gold reserves, half from an international consortium.

These figures are likely to arouse immediate opposition, particularly in the U.S. But most of the capital would not be spent: only the part used to finance imports. Indeed, the new central bank might have sufficient resources to guarantee the interest, but not the principal, on an outstanding debt of about $60 billion. In any case, the U.S. need not put up more than the 10% it contributed to the European Bank for Reconstruction and Development. This is a puny sum in view of the stakes: The plan outlined here could make the difference between the collapse of the Soviet economy and the beginning of its transition to the market mechanism.

Whether the U.S. should lake a larger proportionate stake in an emerging Soviet common market at the expense of its military budget is a more profound question.