By CHAUNDRA STEWART
With the sudden devaluation of the Russian ruble and the plummeting numbers on the U.S. stock market, Western powers are panicked over the threat of Russian economic collapse.
Gary Benson, outstanding professor at the Academy for the National Economy in Russia and BYU alumnus, has been observing the changes in the Russian economy first-hand for the last decade. Benson predicts that the economic crisis is just beginning and the cascading effects may be devastating for America.
News of the ruble devaluation reached Benson while he was hosting an education exchange group of Russian students and faculty in Utah. Immediately their credit cards and ATM cards were useless. Their reaction mirrored that of their countrymen: panic.
It is estimated that half of the 1,500 banks in Russia will fail in the following month with no insurance to comfort and protect the people. Helpless masses flock to banks in hopes of retrieving their money. Many will be turned away empty-handed, Benson says.
Benson attributes the beginning of the crisis to improper distribution of foreign aid funds. The $23 billion aid package was sent through traditional channels, padding the pockets of the corrupt government officials and the Russian mafia and robbing the outstanding number of lower class citizens, Benson said.
Benson’s prescribed cure for the crisis would have been to infuse the Russian economy by distributing the funds to the foreign banks present in the country, a method that would have affected the common people.
Also antagonized by the market reforms are the government workers, including coal miners and military. Benson predicts a repeat performance of the government takeover attempt in 1994. And, he said, with the military and the people dissatisfied, this attempt may have more success. The result will be a military dictatorship and a lapse into a command economy.
Problems escalated when Yeltsin recently fired his entire cabinet and named Chernomyrdin Prime Minister. This decision has not been well supported. Several parties refuse to support Chernomyrdin, giving the current Russian government a vague organization.
Despite the difficulties, Western economic powers continue to urge for market reforms in Russia. Notable conversations have taken place between Britain, the U.S. and Germany. Germany will receive the full blow if the crisis continues, since their financial power is most widespread in Russia.
Until the issue is resolved, aid payments will cease.
Clinton is preparing for a trip to Moscow today. Talks with Yeltsin are expected to be dominated by discussions of the crisis and negotiations on new government.
Benson warns Americans to anticipate several negative results.
Trade of war technology between Russia and Iran has been underway since 1991, and as the economy fails, the U.S. can expect more formal relations between nations in the middle east and Russia. Increased trade among these powers may also result in increased terrorism and threats of war.
Benson also cautions that the stock market will continue to decline due to the similar devaluation of currency in Asia, Mexico and Canada. The U.S. can also expect a rise in interest rates to control inflation and probable recession.
Benson summarizes that “Anyone who knows anything about Russia could see this coming.”