WHEN THE Berlin Wall fell down and Mikhail Gorbachev handed over the entire Soviet economic system to Western capitalism, many hats were thrown in the air. It would not be long, we were assured, before the former eastern bloc would benefit from our wonderful system.

At the same time - and while the West was happy to witness the demise of the Soviet and East European dictators - it became fashionable in the United States and Europe to admire "Asian values." Dictators were fine so long as they delivered the economic goods.Indeed, some Western businesses found it positively exhilarating and rewarding to deal with dictatorships. After all, they knew how to get things done; and democracy could be such a trial.

Even if the harsh autocratic tendencies of Asian "Tigers" were deplored, many observers could not help pointing out how much lower in those countries was public spending as a proportion of gross domestic product.

Since the tigers suddenly lost their claws last autumn, there have been many reassessments - not least by those fashionable gurus who now espouse a somewhat different text to the one they preached a few years ago.

Indonesia has proved a classic case of the deficiencies of "Asian values." Dictatorship and "crony capitalism" have been a disaster. And, when the social safety net is so low that a macro-economic setback is accompanied by the kind of social neglect we see on our television screens, people begin to realize that a relatively high proportion of social welfare to GDP may not be such a bad thing after all.

The proportion used to be very high in the old Soviet Union. Unfortunately for the former USSR, it espoused all the fashionable nostrums of the Reagan-Thatcher era without heeding any of the cautionary tales about Western capitalism in practice.

Russia is now suffering from the contagion effect of the Southeast Asian crisis, with capital pouring out and interest rates rising sky high. Public spending is being cut yet again, and desperate measures are being taken to improve the efficiency of tax collection.

One of the problems with the mafia capitalism that made a successful takeover bid for the Russian economy is that it is all about deals and trade, with precious little research, development and production.

Output has fallen year after year in Russia. And, irony of ironies, the items that Western capitalists lusted after in the former Soviet Union - namely, its oil and energy resources - have been hit by a plunge in the world market prices to levels not seen since the early 1970s.

It is deeply embarrassing for all concerned that the Russian economy should be imploding at just the time that it has been accepted as a full member of the Group of Eight industrial economies.