MRS KOPSHINA'S KNICKERS
Stephen Handelman on
the Soviet black economy and its alternatives
Moscow THERE are moments when I am con- vinced the real economists in the Soviet Union are located just down the street from my south Moscow flat, at the Chery- omushkinsky market. Earlier this week, one old woman was selling the only toma- toes to be had. 'How much?' I asked, staring at the pile of diminutive, bruised and forlorn fruit on her wooden counter. Six roubles a kilo,' was the reply. `But,' I cried, `last week they were three.' I re- ceived a pitying look, similar to those bestowed on me as a matter of course by college economics professors as I struggled through the mysteries of Samuelson. `That Was last week,' she said. `Do you see any other tomatoes around?' As I dithered, an enterprising Moscow housewife bought up all the tomatoes and left without even an apologetic glance in my direction. In any other country, a 100 per cent rise a week might be cause for a clutch of anxious headlines. One would expect a run On wheelbarrows to carry around the heaps of devalued roubles. In fact, a group of Soviet economists all but handed the wheelbarrows out with a much-publicised warning this month that hyper-inflation was just around the corner, noting that even official figures showed inflation run- ning at 18 per cent and rising. But my neighbourhood market analyst seems clos- er to reality: if you have to ask the price, then you don't really need the goods.
Russians have found so many novel ways to deal with the inefficiencies of their economic system that even hyper-inflation, one feels, will be taken in their stride. The other night, over a sumptuous dinner at a Moscow co-operative restaurant, I offered an impromptu lecture to a group of visiting American businessmen about the 'four economies' currently operating in the Soviet Union. Their eyes opened wide in amazement, which may have been as much a reflection of my presumptuousness as of my economics ability. However, they paid for dinner, so I offer the theory here at least as evidence of my Moscow-honed survival talents.
The first Soviet economy, I suggested, is the one owned, operated and, one could add, exploited by the state. This is the world of cheap rents, low-cost public trans- port, free medical care, subsidised food and goods, and guaranteed employment. Needless to say, this economy, because it bears a passing resemblance to reality, has been the stuff of Soviet state utopian propaganda at home and abroad for so long that some people (at home and abroad) continue to be persuaded of its viability. Rents are indeed cheap, in foul- smelling, crowded and poorly maintained flats which as often as not must be shared with several families. Cheap fares on trans- port have led to immense operating losses and a breakdown in Moscow's `metro' system which, when first built in the 1930s, was justly acclaimed as one of the world's best.
There is (nominally) free health care, but its quality is so abysmal that the ordinary Soviet citizen is forced to bribe doctors and nurses even for a change of linen in unsanitary wards. Food and goods in state shops are embarrassingly cheap, but try to find them. President Gorbachev once complained that children were using loaves of bread as footballs, but that was before the bread shortages. The best and most instructive tale I heard recently on that score concerned an enterprising lady named Valentina Kopshina from Simfer- opol, who complained to the Ministry of Trade that she had not been able to find any brassieres or knickers in more than four years of perestroika. A few months later, a delivery man came to her door with 20 pairs of state panties, price one rouble, 55 kopecks. The story, in the humorous magazine Krokodil, may be apocryphal. However, the magazine editors insisted they talked to the woman, who acknow- ledged she was pleased at the door-to-door service but felt 'it would be simpler if goods appeared in the shops and you could just go and buy what you wanted'.
In the second economy, Mrs Kopshina can do just that, after a fashion. This is the quasi-world of private deals and barter, where many Russians live. Your local state shop may have no meat on the counter, but wait. If you walk around the back entrance here, and offer some tickets to the theatre (which you received in return for giving someone a pair of shoes you located the other day), the meat is yours for a price. This is also the world of my friendly seller at Cheryomushinsky market who offers her wares according to the laws of supply and demand. Huge amounts of farm produce from around the country — either grown on private plots or withheld legally or semi-legally from sales to the state — are funnelled this way to the consumer. Go to any Muscovite's house for dinner or a celebration, and you will find tables laden with the rich results of days of bartering outside the state system.
The third economy takes the Soviet citizen a step closer towards the modern world of free enterprise, where everyone from Mr Gorbachev down would sup- posedly like the country to live. This one, however, is fraught with danger. It is dominated by the shadowy, black-market world of the criminal and speculator who, in the absence of any real rules, have steadily flourished. Here, money is at its real value. A dollar will buy you 20 roubles, and a pound about 35 (compared to, at official rates, one rouble 60 kopecks and one rouble two kopecks). This eco- nomy, conservatively estimated by govern- ment officials to siphon off billions of roubles a year, will buy and sell everything, from used cars (instead of waiting for years at your local enterprise) to guns.
Its size is almost beyond belief. Accord- ing to one recent Soviet estimate, the `shadow economy' takes nearly 75 per cent of the gross national output and employs some 20 million people or up to 30 per cent of the national workforce. Unfortunately, this sort of free enterprise (which has existed longer than anyone would like to admit) is choking the first eager shoots of legal market economics on Soviet soil. Genuine entrepreneurs, who have opened restaurants, small service establishments and semi-private companies, exist in sur- prisingly significant numbers. But in the government's vaunted eagerness to sup- press the 'black' and 'grey' economies, high-profit-earning businessmen have be- come the targets of envy and suspicion.
Which, as it happens, is convenient for the denizens of the fourth economy. This is the world that comes closest to what Westerners would consider the good life: comfortable flats with decent furniture, Japanese-made televisions, vacations abroad, and imported food. Neither you nor I will ever see this world, simply because it is reserved for the country's managerial and political elite, the nomenk- latura. Conditions of privilege vary across the country, and political pressure has managed to end some of the more glaring inequalities. But the 'fourth economy' continues to thrive. In many Soviet repub- lics, the successful operation of the crimin- al economy is chiefly the result of the elite's willingness to turn a blind eye, in return for an appropriate reward, or to its outright collusion. This fourth economy may in fact dominate the nascent free enterprise economy. As the country moves towards decentralisation and privatisation, many of the new 'private' owners will be those who are financially and politically equipped to buy enterprises from the state: the powerful men who earned their wind- falls by running them into the ground in the first place.
I am the first to admit that my system of the 'four Soviet economies' leaves quite a lot out, and the dividing lines are neither so easy to draw nor quite as visible. One could just as well posit eight economies. But the context is needed as we begin to hear with depressing regularity the phrases `economic crisis' and 'capitalist reforms' from this part of the world. For one thing, the disintegration of the Soviet economy has been a continuous process, even in times of the system's apparent prosperity, when rolling stock and (non-military) in- frastructure were systematically allowed to run down and scarce resources were sold abroad. The vast majority of Soviet citizens continue to live in the first eco- nomy of valueless roubles and less than genteel poverty. The fact that the govern- ment moved towards devaluing the curren- cy last month, with a new 'commercial rate' for the rouble, suggests that hyper- inflation has been steadily eating away at the core of the Soviet economy for much longer than anyone in authority cares to admit.
Just as much of a continuous process, unfortunately, is the effort at economic reforms. The strange war of the 'three plans' for a market economy which preoc- cupied politicians and their Western obser- vers for the past six months was only the latest skirmish in the struggle between utopian dreams and hard realities which has marked this country's passage through the 20th century. 'Capitalism' and the `Free Market' have replaced the socialist distribution of labour and profit as the new instant cure-alls, but they are just as dimly comprehended. Refreshingly, there are some Soviet commentators who under- stand that a genuine economy (whether one calls it mixed, planned, or capitalist) must begin with the extinction of the administrative-command network of pow- er and privilege, the fourth economy if you will, and all the other insidious political barriers that have helped create the Alice- in-Wonderland world of Soviet economic life. I take my own inspiration from Alexei Kiva who, I am glad to say, is not an economist but a historian.
Writing in Izvestiya a few days before the 7 November holidays, he pointed out that anyone looking at the 20th-century history of Russia would believe, We are a nation of incorrigible idealists.' He added, `We wallow in myths . . . and the greatest myth is that it is possible to remodel society in accordance with a scientific plan drawn up in advance to create heaven in one country and on earth.' Noting that pre- revolutionary Russia had been among the world's top ten countries in terms of per capita income, Kiva counselled dropping utopian ambitions of both the socialist and capitalist variety in favour of a slow, patient normalisation of economic life. With a sufficient number of realists like Kiva and the tomato lady in my local market, the end result might be one viable economy instead of four half-operating ones.
Stephen Handelman is Moscow bureau chief of the Toronto Star `He's really quite nice once you get past the bonhomie.'
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