Soviets take stock of U.S. capitalist system


In yesterday's Business section, John J. Phelan Jr., chairman of the New York Stock Exchange, was misidentified in a photo caption accompanying an article on stock experts visiting Moscow.

The Sun regrets the error.

MOSCOW -- There was a red banner at the front of the hall, all right, but its inscription smacked of counterrevolution: "Stock Exchanges and Their Role in Financial Markets."

About 400 would-be Soviet capitalists sat intently taking notes yesterday at a seminar staged with considerable fanfare by the New York Stock Exchange. A score of top Wall Street operators have paid their own way to Moscow to share their secrets in a three-day crash course on stocks and bonds and how they are traded.

In a sign of the changing political climate, the seminar got more prominent and more extensive coverage on Soviet television news than the Communist Party Central Committee plenum that also opened here yesterday with a speech by President Mikhail S. Gorbachev.

At this peculiar moment in Soviet history, the country seems to be living simultaneously in different economic eras.

The economy appears to be breaking down, with state shops in many northern Soviet cities as empty as they have been at any time in the past two decades. Yet, with the country's leadership devoted to transforming the centrally planned economy into a modern market system, such sophisticated notions as a stock market suddenly are on everyone's lips.

Over the weekend, thousands of Muscovites, including some seminar participants, headed to the rural areas to try to rescue the rotting potato crop and prevent a winter famine. Yesterday, they donned gray suits and earphones and listened to whatever sense Russian interpreters could make of financial jargon not readily comprehensible even to many native speakers of English.

"Another formula is the zero-coupon bond," James L. Massey, chief executive of Salomon Brothers International Ltd., cheerfully informed his fatigued audience in a late-afternoon address.

In a soothing Southern accent, he droned on: "Lump-sum payment at maturity. . . . Taking advantage of an anomaly of the tax system . . . Less regular issuers of bonds may use a syndicate. . . ."

"We don't have Russian equivalents for these terms," acknowledged Alexei Cherkashin, who heads the team of 21 interpreters assembled for the seminar. "We did have some of this before the revolution, but the language that went with it has long since been forgotten. We didn't have time to dig up old newspapers and revive the old terminology."

As a result, Mr. Cherkashin said, a separate interpreter was assigned to each speaker, given an advance text of his lecture and permitted to clarify obscure points.

Not with 100 percent success, said some of the listeners.

"When they started talking about kaznacheiskiye noti [a literal translation of Treasury bonds], I don't think anybody got it," said Alexei A. Arefyev, 45, deputy director of Koopbank, an 18-month-old bank mainly serving the system of rural consumer cooperatives.

The visiting Wall Streeters "need to get to know their audience a little better -- what we need, what we know," Mr. Arefyev said.

Tigran Shakhparunyan, the 27-year-old chairman of the brand-new Armenian Commercial Bank, pronounced the seminar "wonderful" but seemed shell-shocked.

"I think the overwhelming majority of the people in the hall don't know these terms. 'Stock market,' 'market economy' -- until recently, all we ever heard was how bad they were," he said.

A well-developed stock exchange in the czarist capital of St. Petersburg (now Leningrad) and a network of more than 100 commodity exchanges around Russia were closed gradually after the Bolsheviks took power in 1917, though limited activity continued for more than a decade.

The latest edition of the "Great Soviet Encyclopedia" informs the curious that "financial magnates always win on a stock exchange, and small and average capitalists lose." And that "the masters of monopolies are, as a rule, members of the exchange, and the exchange committee is made up of its henchmen."

With the "strengthening of planning principles" in 1930, stock and commodity "exchanges became unnecessary, so they were closed," the encyclopedia entry concludes.

Now, though Soviet and republic leaders are struggling to choose a plan for the transition to a market economy, all accept that a stock exchange is part of the Soviet Union's future. A small commodities exchange debuted in Moscow recently, and Leningrad authorities plan to restore to its former function the old stock market building, which for several decades has been used as a naval museum.

The stocks issued to date -- notably those of the huge Kamaz truck plant -- can be purchased only from the company and sold back to the company. Free sale between individuals is not yet permitted.

Soviet Ministry of Finance officials, who have helped organize the seminar, say a functioning stock exchange probably is not possible before the end of 1991.

John J. Phelan Jr., NYSE chairman and head of the seminar delegation, listed a number of prerequisites for the creation of a full-blown Moscow competitor: large-scale privatization of the economy; a stable, convertible ruble; free pricing; and an end to most subsidies.

"This has been done in many countries. What makes the Soviet Union different is its size and the fact that it's had a totally planned economy," Mr. Phelan said.

"But it's a country that's very rich in resources and in the talent and ingenuity of its people. So I see no reason why the transition cannot be made."

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