Russian Industrialists Face Down Reformer

INDUSTRIAL managers have launched an all-out offensive against acting Prime Minister Yegor Gaidar's government, saying drastic changes are needed in Russia's economic reform program.

Given the industrialists' overwhelming force and fierce opposition to the current course, many Russian and foreign economists in Moscow now think it is only a matter of time before Mr. Gaidar resigns. But opinions differ on whether Gaidar's departure will doom the market-style reforms that he launched.

"Gaidar will be made to go," said Boris Bolotin, an economist at the Moscow Institute of World Economy and International Affairs. "He's not the type of man that fights to keep his title. He has a plan and when he realizes he can't fulfill it, he'll resign."

Gaidar's industrialist opponents used the All-Russian Conference of Manufacturers, a two-day meeting that began yesterday, to unleash their attack on the government's economic programs. Some speakers warned that the continuation of radical reform would lead to "a total collapse of industry" and "mass unemployment," while others called the government's policies "illegal" and a "violation of human rights."

Price liberalization, high taxes, and restricted access to state credits have left 85 percent of industrial enterprises bankrupt, Yuri Gekht, a parliament member and conference organizer, said in an interview published by the Sovietskaya Rossiya newspaper. "We will protect the national economy from the choking policies carried out by the government," Mr. Gekht said.

The industrialists' goal, political commentator Mikhail Berger wrote in Izvestia yesterday, "is to achieve radical change of economic policy and, if possible, the change of the Cabinet itself."

An alternative economic-reform program proposed by the industrialists would abandon "shock" therapy reform in favor the "tactics of short steps," the Interfax news agency reported.

In recent interviews Gaidar has said reforms remain on course. "I will continue to fulfill my duties as long as I'm convinced we're moving ahead," he said in an interview broadcast Sunday on the Itogi current-affairs television program.

Mr. Bolotin predicted Gaidar would not be able to hold out long against the industrialists' pressure, giving the economic supremo "maybe a month or two." Others feel Gaidar could hang on up to six months.

"He has reasons to be maintained," said one foreign economic expert in Moscow. "[Russian President] Boris Yeltsin probably doesn't want to make a change, because that's another way of admitting a mistake.

"But if Yeltsin concludes he no longer can run the country going against those who make it work," the expert continued, "then he will replace Gaidar."

Gaidar would have only himself to blame if he is forced to resign, say several leading economists. Bolotin said Gaidar was a "brilliant economic theorist," but lacked practical experience. The acting prime minister sowed the seeds of his own destruction by being too hasty in launching price liberalization, Bolotin added.

Free prices, the economist said, sent inflation out of control in Russia. That, in turn, led to the collapse of industry and the rise of the plant managers' opposition to the government.

"Gaidar would be a qualified prime minister in any market country with a stable economy, but not here," Bolotin said. "We have no market traditions."

MANY say the battle to oust Gaidar began July 28, when Russian Central Bank Chairman Viktor Gerashchenko issued a telegram instructing banks to make widespread credits available to industry. The action was needed to allow enterprises to cover mounting debts and expenses, Central Bank officials said.

Though Gaidar and Mr. Gerashchenko later agreed to amend the telegram, placing some restrictions on the Central Bank's credit policy, some economic observers said the telegram marked the end of the Gaidar era of radical economic reform.

"Over the last half year there was a struggle of nerves between the government and state industry," wrote economist Mikhail Lantsman in the Nezavisimaya Gazeta newspaper. "The industrialists have won."

"It's highly likely the next step ... will be the restoration of the erstwhile control functions of the state over industry," Mr. Lantsman said, referring to the old Communist command economic system.

Most economists, however, do not share Mr. Lantsman's grim prognosis for Russia's transition to a market economy. They say the main components of reform, especially free prices, are irreversible. They add that while the pace of the move to the market may be slowed, it will continue.

"What the industrialists want isn't ludicrous," the Western economic specialist said. "Reform is a continuing process. There may be a setback, but that doesn't mean everything is going back to the Communist ways."

Economists feel most plant managers themselves would resist any attempt to reintroduce the command system, in which the state controlled all aspects of the economy. The managers realize a market could prove greatly beneficial to them, yet they want some measure of security while they adjust to the new conditions, Bolotin said.

External factors also will help keep market reform on its general course, economists say.

"Yeltsin wants the continued help of the West, not so much from the financial-aid standpoint, but in the field of development strategy," the Western specialist said. "Yeltsin doesn't want to take the risk of angering the West, so even if he changes Gaidar, he'd take care not to appoint a new prime minister who is some kind of nationalist idiot."

The name most mentioned as a successor to Gaidar is Arkady Volsky, a leader of the industrialist-backed Civic Union political alliance. Although Mr. Volsky was a former senior Communist Party official involved in industry, it is unlikely he would seek a complete return to the old days, economists say.