World Reforms are still too slow for USSR FROM On the ground floor of the building where I live is a large “‘gastronome” — a typical Moscow grocery store — through which I always pass on my way in and out. It is practically the antechamber of my home and it is also, absolutely, the sharpest and most instructive classroom of Soviet economic life that I have found. Thanks to an unprecedented flow of sta- tistics and economic debates in the press, the swirling dynamics of the gastronome have become more understandable this winter, and its lessons clearer. Here, amid milling, pressing crowds of consumers, separate departments vend fruits and vegetables, meat, liquor, dry goods, dairy products and bread. Staples are always cheap and available, but other things are catch-as-catch-can, and there is no avoiding the eternal queues — unless you are a war veteran or Hero of the Soviet Union. Nowadays, as shoppers proceed in the daily grind from line-up to line-up, from cashier to counter, the most crucial battle of perestroika is visibly hanging in the balance. This is where people’s daily life is most affected by change, or the lack of it. This winter, the consensus of shoppers in this gastronome appears to be that after three or four years of reform, there have been no improvements. Indeed, many stubbornly maintain that things have actually been getting steadily worse. Ten years ago there was lots of sausage, and different kinds of it too,” says one woman. “You could always get coffee or laundry powder,” says another. “Now try to find them.” Many officials and economists counter that consumption has been steadily growing — production of consumer goods was up five per cent last year alone — and that the supply picture is actually better than ever. Everyone admits there are certain shortages and disruptions in distribution, they say, but there are no grounds for the alarmist views expressed by some. So, the street wisdom says things are get- ting worse; expert opinion says that percep- tion is mostly psychological. Can these judgments be reconciled? They can, it seems, when you take into account a phe- nomenon that Soviets are only just begin- ning to learn about: inflation. The textbook definition of inflation is “too much money chasing too few goods.” That fits Soviet conditions perfectly, although the ways in which it manifests itself would not be recognizable to Canadi- ans. During the past couple of decades in the USSR, the money supply has grown and incomes have risen more quickly than pro- ductivity. This was in part due to govern- ment deficit-financing, but more a by- product of the general irrationality of the command and administer economic sys- tem. Wages were raised by plan, and 10 « Pacific Tribune, March 13, 1989 Street vendor doles out oranges on Moscow’s Arbat ... frustrating line-ups and an urgent demand for more goods. bonuses given, which tended to make the Statistical picture look good and constantly improving, but was out of touch with real- ity. Goods produced simply to meet planned quotas were often shoddy, unne- cessary or unsalable, but the money paid out in increased salaries was always spen- dable. Thus, writes the economist E. Figurnov in Ekonomicheskaya Gazeta, “during the period 1970-1987,” actual national wealth “increased by 2.07 times, in comparison with the wage fund, which went up 2.19 times. Pensions and other allowances rose 3.24 times .... Remarkably, during the 1986-87 period alone, budgetary spending increased by 44.4 billion roubles, though the national income expressed in actual prices went up by a mere 21.1 billion roubles.” The impact of such inflationary pressures in a free market economy would quickly be felt on prices, which should rise to realign themselves with the actual value of money. Social effects are also quite predictable. Money in a pocket or bank account is liquid expectation. Such expectations have been building up for a couple of decades now. Soviets have the highest per capita bank savings in the world — almost 300 billion roubles’ worth, distributed in 200 million bank accounts. Now, perestroika has put consumer aspirations front and cen- tre, and created an atmosphere of political urgency around them. Is it any wonder, then, that people who might actually have been satisfied with less five or 10 years ago are distinctly displeased today? Or that they perceive this as a wor- sening of conditions? Writes Figurnov: “Shortages are growing from a purely eco- nomic into a social and political problem.” Mikhail Gorbachev hammered at the same theme during his January address to the Moscow city CPSU conference. © “We keep seeing sporadic supplies even of products that are produced in sufficient quantities,” he said. “For instance, there is a serious problem with detergent, even Soviets have the highest per capita bank savings in the world — almost 300 billion rubles’ worth, distributed in 200 million bank accounts. Now, perestroika has put consumer aspirations front and centre, and created an atmosphere of political urgency around them. When we strip away the surface layers of capitalist mythology, rationing and shortages — though they are never called by these names — are lurking just beneath. The mechanism of high prices simply keeps those who can’t afford out of the shops. However, in my local gastronome, in downtown Moscow, the prices have been more or less stable for years. Increased quantities of money, therefore, turn up in .. the form of greater pressure on goods, par- ticularly those in short supply. One day last week I was queuing for lemons. Priced at 3.50 roubles per kilo, they are something of a luxury item, but not out of reach. Everyone ahead of me was buying not one, but two, or three, or four kilos; before I reached the counter they were all - gone. Those of us still in line were angry and frustrated. This is the paradox that com- monly afflicts the Soviet consumer: he or she can afford to buy a great deal, but the search for what to buy is long, arduous, and often fruitless. though the overall sales of it have lately tripled .... “The consumer market is badly organ- ized, The money now in circulation is vastly greater than commodity supplies. Every customer buys ‘for a rainy day’ more than he or she needs, and the market is in a fever. Dishonest people do business on the com- modity shortages.” There it is. The problem is not at all abstract. It shows up every day, persistently, in the gastronome in the form of endless line-ups, empty shelves, sullen faces and, sometimes, outspokenly negative attitudes toward perestroika and its prospects. Specific solutions are not all that clear. Here different opinions are as thick as snowflakes in a blizzard. Some, not so shyly, are advocating at least a piecemeal return to command and administer eco- nomic policies. Economists offer diverse options, from more shareholding industries or large-scale private housing to soak up excess money, to radical slashing of the mil- itary budget. There are a few of what can only be described as harebrained notions, such as political economist Nikolai Sme- | lyov’s suggestion, made during a recent TV interview, that the USSR should liquidate its gold reserves and use the hard currency thereby gained to buy floods of consumer goods on the international market .... Others are clearly pushing for wholesale adoption of free-market approaches, which at least has the merit that it would show quick and decisive results. Permitting all prices to rise immediately to supply-and- — demand levels would create the appearance — with the stress on ‘appearance’ — of prosperity almost overnight. The shops would be full of goods, and there would be no line-ups. Those who could afford would | buy, those who could not might starve jn the streets — just as they do even in some of the world’s richest countries. The latter approach has been firmly — rejected by the country’s political leader- ship, and it seems by most of the Soviet mainstream as well. However, it is clear that the problem of inflation is deep, with multi- dimensional social repercussions, and that it won’t go away quickly or easily. A period of relative austerity may be in store. Said Gorbachev to the Moscow party conference: “Money has to be honestly earned. We all have to realize this. You may say that the government ought to realize jt too, since it is our blunders in the course of implementing the reform effort which have aggravated the growth of the money supply regardless of the end product of labour .. . “Let’s work together to improve our economy at every level, from top to bottom, — The main thing is to boost production and pay for what has actually been done, “Things are tough at present ... But we shall not dodge or deceive ourselves that perestroika has already changed everything. For the past two or three years we were trying to understand where we stood and what is happening around us. It took time to fully elaborate the policy of perestroika. Now we are unfolding this policy in a genuine way.” That program — the continuous subject- matter of this column — is indeed vast and ambitious. And despite the various voices tugging in diverse directions, it is also realis- tic and within the socialist framework of — principles. In fact, a great deal has already been accomplished in reforming the political sys- tem, the legal structure and the moral atmosphere of society. But a crucial test looms larger and larger with each passing day: can perestroika change the picture in my local gastronome?