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son is the state stores haven't been privatized. But there is a pri- 

 vate trade network growing up, and it is cheap and it is diri;y £ind 

 it is a rip off and it is run by the criminals, but it is also the begin- 

 nings of a market economy. Unfort;unately, if you study the origins 

 of a market economy anywhere else, that tends to be where it 

 comes from. So at that level, at least, I'm quite optimistic. 



Mr. POMEROY. I strongly favor a continued United States role in 

 agricultural exports into Russia. Is there a danger that these ex- 

 ports ease demand and, therefore, inhibit agrarian reform? 



Mr. Van Atta. Yes, sir, there is for two reasons I can think of. 

 First, the Russians, as a matter of policy about 15 years ago, began 

 to concentrate on their livestock sector, and it takes more grain to 

 produce a pound of meat in Russia than it does anjrvvhere else in 

 the world. My friends from USD A can give you various numbers 

 about it, but anjrwhere from 5 to an infinite number more pounds 

 are required. However, they've jiggered the prices so that every- 

 body produces meat, and that was very profitable, so the herds 

 went up, there was plenty of meat in the cities — at least, some- 

 thing that's generic off a cow — and now the market is beginning to 

 work, and the livestock producers are screaming bloody murder. 

 They kept those herds alive by importing U.S. grain, £md they fed 

 them U.S. wheat. This is why when Rutskoi gave his speech, every- 

 body yelled out, "USA." 



Clearly, if the Russians cut back on this incredibly unproductive 

 and wasteful system, they will need less United States grain. In 

 fact, some people argue that if they simply could end this waste, 

 they would effectively take care of the entire amount of grain that 

 they're importing from the United States. So in that sense, there 

 is that problem. 



If I may, there's one other thing. A very good Russian agricul- 

 tural economist, Vasilii Uzun, wrote an interesting story a year ago 

 about what happened to American aid. It seems that somebody 

 gave an American commodity company money to import grain as 

 emergency aid. The commodity company, not being stupid, took the 

 dollars and took some trucks and wandered around Moscow oblast 

 and made deals with farmers who had plenty of grain — big farms, 

 kolkhozy — and made deals with kolkhozy managers to buy their 

 grain for the dollars they had been given, turned that in as Amer- 

 ican aid, and kept the quite substantial difference between what 

 they had been paid to ship American grain to Russia and what 

 they could buy it for locally. 



In that sense, if you give farmers incentives, they'll produce, as 

 you gentlemen know better than I. The problem is to get the incen- 

 tives in place and then the production, which is, in principle, ade- 

 quate, if not great anyway, will follow. 



Mr. POMEROY. Dr. Wegren, I'd like your answer to the same 

 question, and I would just observe it seems to me the shortfall is 

 substantial enough so that there's room for considerable export be- 

 fore we do begin to impact their market balance. 



That's my final question, Mr. Chairman. Thank you. 



Mr. Wegren. I also think there are pros and cons. On the pro 

 side, there's a humanitarian aspect, and that is if you cease to do 

 that, you could see even a further deterioration in the per capita 

 consumption. I mean, that's within the realm of possibilities. On 



