Leading article: There's no point throwing good money at the rouble

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THE GLOBAL dominoes that began falling in South-East Asia last summer continue to go down. The "tiger economies" in the East have already tumbled, some, such as Indonesia, spectacularly; Latin America, Hong Kong and China are still under threat. But the greatest scalp of all has gone to the speculators, with the devaluation of the rouble, raising the spectre of a destructive round of world-wide beggar-my-neighbour devaluations.

The situation would be more manageable if this were indeed purely an "economic" problem, or if it involved only financial issues. There are short-term reasons for Russia's devaluation that do seem to come within the scope of such an analysis. Russian oil is now more difficult to sell with the Asian down-turn, making it harder for Russia to finance her foreign debts with money from exports. Thursday's black day on the Russian stock market was widely blamed on the intervention of a sole financier, George Soros. But Russia is, or should be, rich - especially in oil, coal, and human resources. Orthodox economic "correction" - loans to tide Russia over while she raises taxes, cuts government spending and shrinks the economy - might usually be expected to meet such challenges. Our instinct, therefore, has been to go to Russia's help.

We have been encouraged in this instinct by fear, rather than rationalism. One of our fears has been of a global crash, the threat of which is not receding. South-East Asia sinks ever deeper into recession. Prospects for the American economy, so bullish for so long, are worsening. The New York stock market seems to have come to the end of its long, strong bull run as profits and dividends fall, while the trade deficit rises. If rouble devaluation were to turn Russia into a black hole, defaulting on the huge debts it has built up with the outside world, problems might turn to crises. The West has also been fearful of bringing the right-wing populism of Lebed or Zhironovsky to power. We still fear, as Henry Kissinger's old joke has it, creating an "Upper Volta with missiles".

But acting just for the sake of it is futile. Russia's problems are uniquely acute; we cannot afford to overestimate our ability to help. What is happening in Russia is unlike anything we in the West have ever experienced: it is an economic catastrophe that could engulf us all. Russia is not a stable economy, capable of "management"; nor is it a Western-style democracy. Shock privatisation placed much of the economy in the hands of those who had ready cash at the time: the Mafia. They have extensively infiltrated the banking and credit system. Cronyism has crept all the way up the political ladder in Moscow. Furthermore, with Duma and President at loggerheads, it seems that no decisive initiative can come from central government; Russia's provincial governments appear even more corrupt.

Political malaise is intrinsically linked to Russia's economic disease. Taxes go uncollected; the Duma has repeatedly refused to pass new tax codes that might go some way to raising Russia's pitiful collection rate, and basic economic problems go even deeper. The Russian government has been jacking up interest rates to ever more astronomical levels, in order to defend its borrowings. This has failed, since Russia's economy is just not strong enough to support the government's borrowing in roubles. Russia has been relying on Western subsidies instead. This could not go on.

No amount of foreign capital - and the IMF promised pounds 13.7bn four weeks ago, with apparently no results - can make up for these structural faults. This is not a pleasant thought. Political extremism or financial melt- down may overtake Russia, with grim consequences. But throwing good money after bad is no more of a solution.