Share this story
Close X
Switch to Desktop Site

The Price of Going Capitalist

AS expected, Russians are disgusted with the new prices they're having to pay for everything from bread to caviar. But are they so disgusted they might turn against President Boris Yeltsin?

Mr. Yeltsin and his advisers opted for "price liberalization" after concluding there was no other way to shove the Russian economy into gear. Former President Gorbachev hadn't been willing to pay the social costs of zooming prices. But, then, he lacked Yeltsin's popularity and electoral mandate.

About these ads

Some Russian economists and foreign observers have warned that freeing prices before the establishment of privatization and other key reforms would only bring on hyperinflation, as demands for wage increases mounted and producers failed to respond to the price incentive by sending more goods to market.

That bleak scenario can't be discounted. But neither can Yeltsin's optimistic prediction of price stabilization and increased supplies within eight or nine months be ruled out. Two things are critical if the Russian president's plunge into frigid capitalism is to pay off:

* A stable currency has to be attained. Absent the perception that the ruble is worth something, peasants who can boost supplies of food aren't likely to make their potatoes available. The frantic printing of new rubles begun at the end of Mr. Gorbachev's term has to be stopped. A wild card is whether the Ukrainians, intent on having their own currency, will allow their ruble holdings to flood back into Russia.

* In line with a stable currency, Russians have to see some expansion of basic consumer goods. This would give those who produce food staples an incentive to sell in order to use their income to buy things they want. Yeltsin has to work closely with the West, and with Japan and Korea, to win trade credits that will step up imports of consumer goods - everything from detergent to clothes.

The success of the price-freeing rests most immediately on the availability of basic foodstuffs. For the majority of Russians, increased supplies of such basics as milk and potatoes will be the crucial test. Fortunately, they don't share the high consumer expectations of Eastern Europeans, who've lived in proximity to the Western world's relative opulence. Even primitive stirrings of a free market might help jump-start Russia's farming sector.

Winter is a factor, certainly. It complicates the task of getting produce to distant city markets. But it also dampens the prospects of social unrest. Food aid from abroad should also help temper discontent by putting goods on city shelves.

Such aid, along with technical advice from the West, should flow as freely as possible. But nothing on a Marshall Plan scale is in sight.

About these ads

The Russians, Ukrainians, Byelorussians, and others now freeing their prices are largely on their own in this experiment. It will test their cooperativeness and patience as well as their economic savvy.

Follow Stories Like This
Get the Monitor stories you care about delivered to your inbox.