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Financial Post, Weekly edition, Mon 24 Jun 91, page 15. Editorial.


Let in the Soviets

In its hour of peril, the Soviet Union needs help from the West. An invitation to lunch with the leaders of the world's seven richest countries next month is a polite gesture to Mikhail Gorbachev, but one swallow does not make a summit.

Gorbachev's meeting with the leaders of the G-7 in London should be the first step in a larger process of consultation with the Soviet Union in the hope of bringing it into the international economy. Beyond lunch, the G-7 should invite the Soviets to join the World Bank and the International Monetary Fund. Gorbachev is trying to reform an antiquated, creaking economy. As much as money, he needs advice and expertise.

The success of the Soviet economy is important for Canada. If its economy collapses, the country splits and Gorbachev falls from power, his successors may well reverse the movement to democracy. A return to central planning and the revival of the Cold War would be horribly regressive.

More pointedly, the establishment of a free market in the Soviet Union is in Canada's interest. Canada has vigorous trade with the Soviets and is involved in joint ventures there. If the Soviet economy grows, we grow.

Last December, President Bush proposed that the Soviet Union become ''a special associate'' of the IMF and the World Bank but cooled when Moscow crushed dissent in the Baltics. Now, Washington is again suggesting the Soviets join. The proposal is part of an effort to bail out the Soviets, including US$1.5 billion in agricultural credit guarantees.

Becoming ''a special associate'' would help the Soviets remake their economy. They would confer with the IMF, for example, in drafting a reform program. There is no shortage of advice here; last week Soviet and American economists at Harvard University unveiled a radical plan to impose price and trade liberalization, strict fiscal discipline and small-scale privatization. Gorbachev likes the plan, which has been called ''the grand bargain,'' and will raise it at the G-7 talks.

Without full membership in the IMF, however, the Soviets could not borrow money at attractive terms. Moreover, under the rules, it would take at least two years for admission.

The trouble is that the Soviets may not have two years; their economy is crumbling. All the more reason to give them associate membership immediately - it can be done in 30 days - and, at the very least, invite them to apply for full membership now. Meanwhile, the Soviets could begin developing a shadow plan that would proceed on the advice of the IMF, although without the money. At least that would reassure creditors that the Soviets are on the right path.

For economic prosperity and political stability, the West should invite the Soviet Union to join the club and catch the train to the 21st century.

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Revised: June 3, 1995

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