Common sense versus mistakes of the reformers// MOSCOW NEWS No. 8, February 18, 1993

…First, money has again begun to work, thanks to liberalization of prices (либерализация цен) even if ineffectively, in a country which all but returned to the "stone age", an age of total natural exchange.

…Third, and probably most import­ant, is the fact that human mentality has begun to change drastically; peo­ple's attitude is changing at all levels. In particular, the socially most active and influential part of our society, the managers of major enterprises (керуючі провідних підприємств), seem to have been acquiring a taste for market, for independence.

…I am convinced that it is such, in­compatible with common sense mista­kes of the "perestroika" times as the anti-alcohol campaign, the struggle against what was known as unearned income, the sharp reduction of consu­mer and not investment import (гостре зниження споживання і не інвестується імпорт) after the drop of world oil prices (падіння світових цін на нафту) in 1986, the impermissible delay in withdrawing from the war in Afghanistan and, lastly, the limitless inflation (необмежена інфляція) financing of all thinkable and unthinkable bud­getary requirements (бюджетні вимоги) by abusing the printing press, which began after 1987, that caused the collapse of the Soviet economy, disintegration of the Soviet Union, and, as a consequence, the countless troubles and suffering of our people.

…It is sad to realize that the new gene­ration of reformers have also been un­able tc discard our traditional mental­ity. Yes, liberalization of prices is cer­tainly necessary, as was also necessary the elimination of a vast heap of "empty", unsupported money (незабезпечена грошова маса) which both the population and enterprises had accumulated.

…This money des­troyed every semblance of a normal market, of normal commodity turno­ver (товарооборот). But people have not forgotten and will not forget that, before prices were liberated, they were promised com­pensation of their savings (компенсація заощаджень)which had lost more than 95 percent of their value in less then a year.

…But they were not granted any compensation of their sa­vings, while their earnings remained Unchanged for many months, or was artificially postponed (мистецтво відстрочені), or even was not paid.

…The consequences of the cardinal mistakes of the reformers team will tell for a long time both on the general climate of market reforms in the country and on our investment possibilities (інвестиційні можливості), on the development of our banking and fi­nancial system and on incentives to work and to accumulation.

…Another cardinal mistake of the re­formers' team, testifying to the inva­lidity of purely theoretical constructs in our conditions are naive notions about the probable behaviour of our manufacturers (виробничники, підприємці), more precisely, ma­nagers of enterprises in conditions of free prices (в умовах вільних цін). Yes, according to text­books on economics they should have hiked up to the skies prices of their goods arid then run into limited solv­ent demand, then promptly cut down prices, while reorganizing their pro­duction.

…Only the threat of real bankruptcy (банкротство) can make managers believe at last that times have changed irreversibly.

…Managers did hoist prices, thus tak­ing one another by the throat, the re­sult being a total non-payment crisis. The state finally bought everything they had produced, including things useful and useless, and refunded their mutual non-payments

(невыплаты, неплатежи). Our reformers are guilty of and suf­fer from not sensing in time this, prob­ably the greatest threat to reforms. But they could have sensed this befo­rehand and taken necessary measures by consulting not theories but plain common sense (простий здоровий глузд).

…Another cardinal mistake was ig­noring the possibilities of the private sector (приватний сектор), of private enterprise (приватне підприємство, підприємництво).

…It is obvious, incidentally that the position of our entrepreneurs, espe­cially those engaged not only in trade and mediation but also in serious in­vestment projects (проекти), is today even worse than a year and a "half ago, "under the old regime".

…The stubborn total dominance of a permissive, not registration principle of organizing a new business, the closely connected scope of both state and ordinary cri­minal racket, the prohibitive level of taxation (рівень оподаткування) and the absence of any seri­ous encouraging benefits (прибуток, дохід), the impos­sibility of obtaining credit anywhere, all this paralizes genuine enterprising forces, pushing out the most active and enterprising part of the popula­tion to petty trade (дрібна торгівля), or, still worse, into various kinds of criminal business.

…The level of taxation of new pro­duction investments has become the talk of the town what with the almost complete paralysis of investment activity (параліч інвестиційної активності) in the country.

…How can one explain why we are today practically the only one of the world's 170 countries which purposely pursues a policy of not encouraging and boosting its export (above all highly processed and manufactured goods) but on the contrary, of smo­thering it? Or take high import tariffs (тарифи на імпорт) on any commodity regardless of whether the country needs it or not.

…Nor should we forget the currently in­credibly low exchange rate (низький обмінний курс) of the rou­ble.

…And what about the arrest of practi­cally all of our holders of foreign cur­rency (утримувачі іноземної валюти)? But the government complains and threatens that it will prosecute those who do not believe it and prefer to keep their money abroad.

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