Soviet entrepreneurs fight regulations, taxes, jealousy

September 18, 1990|By David Rosenthaland Kim Clark | David Rosenthaland Kim Clark,Sun Staff Correspondents

MOSCOW -- As Yuri Tumentsev heads down Gorky Street toward the gritty industrial suburbs, his white Lada never leaves the fast lane -- fitting for the new breed of young, ambitious Soviet entrepreneurs.

He's dressed casually, but with a European flair unusual for the Soviet Union: black pants and a black shirt splashed with red, green and gold. He takes a drag on a Marlboro, the coolest cigarette in this nicotine-mad country. "I think I am a Soviet yuppie," he says, smiling.

In Zelenograd, Mr. Tumentsev stops at a large state-owned laundry, where his young retail and manufacturing company, ABV, leases two small rooms to make socks. He bounds away from the car -- but not before removing the windshield wiper blades and locking them inside.

This is the Soviet Union, remember, where chronic shortages make even thin blades of rubber a target for thieves.

Once inside, he weaves his way to a remote corner of the plant, where a dozen clattering machines pull thread from foot-high spools, weaving it into white socks.

Amid the clamor, Mr. Tumentsev, ABV's president, describes this cog in his grand plan: A pair of socks costs 4 rubles (about 67 cents) to manufacture, and he hopes to sell them abroad for $2. He'll use the dollars to build a lipstick factory, figuring he can make a bundle of rubles for each dollar invested. Then, he'll swap the rubles for dollars, the preferred currency for buying scarce materials and equipment.

Sound confusing? Sure. But as the nation lurches toward a free-market economy, a curious blend of chaos and creativity has become a hallmark of Soviet entrepreneurs. Like a balloon blown up and set loose, they're apt to careen from one business venture to another, in a frantic outpouring of energy.

The number of small businesses has grown rapidly since the Soviet government loosened the reins on the economy about two years ago. One sign of the times: At the House of Political Books, the most popular author is Dale Carnegie, not Lenin. The store recently sold 11,000 copies of his "How to Win Friends and Influence People" -- at one to a customer -- in 7 hours.

Still, small businesses make up less than 10 percent of Soviet economy. At midyear, an estimated 5 million Soviets were working at least part time in privately owned small businesses, which produce about 40 billion rubles in goods and services annually. (By comparison, about 39 percent of the U.S. gross national product is generated by small businesses, which employ more than 45 million Americans.)

"What is Soviet entrepreneurship? It is a baby in a cradle. It has a desperate fight for survival," says economist Mikhail Grachev.

Soviet entrepreneurs must battle a government bureaucracy that promises a free market but cracks them over the head with harsh taxes and regulations. They must develop businesses amid supply shortages.

And they must face the sniping from Soviets deeply suspicious of prosperity. A joke heard on Moscow streets describes the prayer of a Soviet farmer, who is jealous of his neighbor. "My neighbor has six cows and I have none," the farmer prays. God answers, "What would you like me to do?" The farmer replies, "Kill all his cows."

To run a business in the Soviet Union today, says economist Ludmila Lebedeva, "You must have a very hard head to push everything and everywhere."

But such small businesses are crucial to revitalizing the nation's economy, she says. Young entrepreneurs are likely to be much more creative than the plodding Moscow bureaucrats who have led the economy into stagnation. Meanwhile, the spread of such businesses will trigger diversification and competition.

The strength of the Soviet economy will come from small-and medium-sized businesses, not the industrial giants that have dominated the nation's production for decades, Ms. Lebedeva adds. "We can't build another 10 Kamazes," she says, referring to the huge, state-owned truck manufacturer.

Soviet President Mikhail S. Gorbachev has recognized as much. His recent endorsement of a radical, 500-day economic reform package included a call to transfer half the state-run shops and ++ restaurants to private ownership by early next year. He also called for the creation of a modern commercial banking system and a stock market.

But until such proposed reforms materialize, entrepreneurs will continue to battle bureaucratic and cultural demons.

Mr. Tumentsev, former manager of a state-run shop for foreigners, started small. His first business was an art gallery designed to operate on a barter system, trading paintings by Soviet artists for precious Western goods such as computers.

When that business ran aground, he and three friends -- including ABV Chairman Vladimir Ivlev -- started ABV by chipping in 1,000 rubles (about two months' salary) apiece.

Today, the headquarters of the burgeoning ABV empire is a shop at 57A Gorky St.

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