To recover from a nearly complete and still accelerating deterioration of its economic system, the Soviet Union must make "an irreversible break with the past," according to a report commissioned by President Bush and other Western leaders at their summit in Houston last July and released yesterday.
The report also described a Soviet economy far smaller and weaker than Western intelligence agencies had estimated, with per capita output closer to a developing nation such as Costa Rica than to Western nations with which it sought to compete militarily and politically around the globe.
The report -- prepared by four multinational financial bodies, including the International Monetary Fund and the World Bank, with Moscow's cooperation -- rejected gradual reform of the Soviet economic system, calling instead for a radical and prompt move toward capitalism. It urged the establishment of the right of private ownership and junking of "the panoply of controls which currently prevent competition and discourage the efficient use of resources."
It acknowledged that, initially, such a program would cause a loss of jobs and a decline in output, but contended that delays "would lead to an even larger and longer decline."
The 51-page summary offered the most complete statistical picture ever compiled of the Soviet Union, puncturing earlier assumptions about the world's other "superpower." For example, officials, who declined to be identified, said that it showed the fallacy of a Central Intelligence Agency assessment that the Soviet economy was about one-third the size of the United States economy.
Tables in the report indicate that the Soviet gross national product -- the total value of goods and services it produced -- was only about $512 billion in 1989, or one-tenth that of $5.2 trillion in the United States. Its total GNP is roughly that of Canada, a country that has about one-tenth the population of the Soviet Union.
The Soviet economy produced $1,780 in goods and services per person, compared with $2,465 in Eastern Europe and $17,606 in the major industrial countries. Costa Rica had a 1989 per capita output of $1,659 according to the Inter American Development Bank. The Soviet figures were based on information supplied by Moscow and were calculated using official exchange rates, which economists say would tend to make the Soviet Union appear wealthier than it really is.
The thrust of the report, which also involved the Organization for Economic Cooperation and Development and the European Bank for Reconstruction and Development, was that Soviet authorities face a daunting problem in stemming what seems to be an accelerating economic collapse.
"The revolutionary opening up of public debate has cast doubts on earlier achievements, while exposing the extent of the economic deterioration and creating uncertainty," the report said.
Neither a return to its old inefficient command economy, nor a process of gradual reform, is a viable option, leaving a rapid, if painful, move to a market economy as the only course of action, the report said.
The rest of the world can help with technical and humanitarian assistance, the report said, but it firmly ruled out loans or other monetary aids until and unless a central government in the Soviet Union implements a "comprehensive program of systemic reforms."
The report called for stabilization of the economy by slashing budget deficits, and instituting "comprehensive price liberalization." It said rents and the prices of a few consumer items might have to be subsidized for a while.
Officials acknowledged that the rapidly shifting political situation in the Soviet Union may mean that a window of opportunity for assistance may have been lost.
Noting the unexpected departure of reform-minded foreign minister Eduard Shevardnadze, one official said yesterday that "the situation changes every day. The reformers believe that the degree of collapse is accelerating, and their hope is that there will be continuing chaos. Of course, that is an extremely risky game."
He noted that deteriorating economic conditions could accelerate the existing drive among many of the 15 republics to assert some degree of independence, which would tend to weaken the case for Soviet membership in the IMF and World Bank. If the Soviet Union applies for IMF membership, said one official, "they will want to know with whom they are dealing. They would want to see one central bank, using one currency."
Sources said the Bush proposal for special associate status for the Soviet Union in the IMF and World Bank seems a more realistic near-term prospect than full membership. IMF Managing Director Michel Camdessus reportedly plans to put the Bush idea quickly to a vote in the IMF executive board. If approved, as expected, the Soviet Union could be an associate member in early 1991. A similar timetable could be set at the World Bank. Both agencies would then be able to supply technical assistance, but no loans.
Meanwhile, the European Community Commission issued an equally gloomy companion report, commissioned last June, that estimated the Soviet Union would need help measured between $8 and $11 billion next year to cover its international deficits.
.....................SOVIET SOCIAL INDICATORS..................
................Soviet Union..Eastern Europe*..Major Industrial
Per Capital GNP
Life Expectancy (1987)
(Deaths per 1,000 live births)
*Data are for Bulgaria, Czechoslovakia, Hungary, the former East Germany, Poland and Romania, except for life expectancy and infant mortality figures, which exclude Hungary. The per capita GNP figures are converted to U.S. dollars at official exchange rates.
**Members of the Organization for Economic Cooperation and Development NOTE: Figure for Soviet per capita GNP is converted at rate of 1.8 rubles per U.S. dollar.
SOURCE: International Monetary Fund