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. Last Updated: 07/27/2016

EDITORIAL: Prices Pact Is A Step Back To Soviet Era




First Deputy Prime Minister Nikolai Aksyonenko has lived up to the assessment given him by several liberal economists when he took office.


Yegor Gaidar and others said then that he was a good manager but dangerously ill-informed about basic economics.


The price-control pact signed by 53 major companies that he unveiled Wednesday is a step back toward Soviet methods. As well as signaling an even firmer intention to intervene in the market than that displayed by the previous government, it also represents a disturbing alliance between the government and the nation's industrial magnates.


The pact will be extremely difficult to enforce, as it contains no control mechanisms.


It is also unlikely to have any significant impact on the overall inflation rate. Freezing industrial prices will not necessarily keep the lid on consumer prices. Those are still f for now f driven by market factors such as supply and demand.


With Russians' purchasing power devastated by ruble devaluation and a contracting economy, there is little demand to fuel inflation.


But, of course, the pact's real aim is to convince the State Duma to pass the bill imposing an imputed tax on gasoline outlets, a measure that Prime Minister Sergei Stepashin has been hyping as Russia's salvation. The pact would soothe the Duma leftists' worries about higher consumer prices stemming from tax increases.


Nevertheless, the Duma still looks unlikely to pass the draft law even with the pact.


What is also highly likely is that the companies that signed the pact will be able to extract the kind of quid pro quo that Gazprom has been benefitting from for years. By keeping domestic gas prices low, the company has been able to avoid such unpleasant burdens as paying taxes on time and in cash.


Incredibly enough, International Monetary Fund chief Michel Camdessus came out Wednesday in fulsome support of Stepashin and his government's economic course.


Painting a picture of Russia's economic performance much rosier than even most government ministers would dare to paint, he then said, astonishingly, that Stepashin should be congratulated for these results. As anyone with even the vaguest grasp of economics knows, government economic policy needs months to take effect f and Stepashin has been in office for barely one month.


But the tenor of Camdessus' remarks made it obvious that political considerations were guiding his words.


The only alternative explanation for the IMF head's words Wednesday would be that he is as economically illiterate as Aksyonenko.