96 Interior Door

Soviets argue over Western aid

MOSCOW – By June, 1991 the economy of the Soviet Union was a shambles. Everything from refrigerators to TV antennas to cigarettes was difficult or impossible to obtain. Hard currency was just about gone. A Washington Post correspondent visited a sock factory and found brand new Italian knitting machines sitting silently, for want of needles.

“What do they expect us to do, walk around naked?” asked a disgruntled customer.

Soviet President Mikhail Gorbachev had been zigging and zagging on reform, with results that pleased no one. Some thought he had done just enough to damage the old economic system, but not enough to foster a new one.

In Cambridge, Mass., a group of American and Soviet economists came up with a plan. They called it the “Grand Bargain.” Developed by Graham Allison , of Harvard, and Grigory Yavlinsky , a reform-minded Russian policy advisor, it envisioned a commitment of tens of billions of dollars of aid from Western countries in return for thorough and rapid moves toward a free market by Moscow.

The Grand Bargain had just two problems. One was that Western governments, led by U.S. Treasury Secretary Nicholas Brady, weren’t too keen on spending that kind of money. “We’re not rolling in cash,” said President George H.W. Bush. Critics asked why the West should fork over billions to persuade the Soviets to do what was in their best interest anyway.

The other problem was in Moscow. Hardliners were livid at the idea. First of all, they didn’t like the idea of having to ask the West for help. “A great power has been reduced to the lowly status of a beggar, standing by others’ doors with outstretched hands instead of working on its problems here where they are,” said Yevgeny Kogan, leader of a conservative faction in the Supreme Soviet, the country’s legislature.

More important, they didn’t like the idea of free-market reforms. Prime Minister Valentin Pavlov, whose background was in the defense sector, which had thrived on Soviet economic planning, said he wanted the Supreme Soviet to transfer some of Gorbachev’s powers to him. In a closed-door session, Defense Minister Dmitri Yazov, Interior Minister Boris Pugo, and KGB chief Vladimir Kryuchkov said the country was on the verge of collapse because of Gorbachev’s policies. Kryuchkov said the promise of Western aid was all a plot by the CIA to subvert the Soviet economy.

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