Yeltsin is given free rein to restructure economy Russian leader plans to lift price controls

November 02, 1991|By Will Englund | Will Englund,Moscow Bureau of The Sun

MOSCOW -- Boris N. Yeltsin yesterday won the power he had been seeking to cast off Russia's old economic moorings in hopes that this country can somehow obtain buoyancy and ride out the coming storm.

The Russian legislature gave him a free hand to reshape the economy, and the Russian president said he already has a decree drawn up that will free prices from state control.

Mr. Yeltsin did not say when he would issue the decree, but the black market value of the ruble fell more than 50 percent yesterday in response to the news, from about 2 1/2 cents to a reported 1.1 cents. The decline diverted so many dollars out of the official system that the Soviet bank set up to deal with Western businesses ran out of dollars during the day.

An official at the bank, where accounts are kept in dollars and not rubles, said depositors would be able to withdraw up to $5,000 early next week, but she said she could make no promises beyond Tuesday.

Mr. Yeltsin's aim in freeing prices is to get the economy moving again. Precisely because the cost of many items is bound to soar, Mr. Yeltsin expects the move to stimulate production in a country where fixed prices have presented a powerful disincentive.

He hopes that inflation, paradoxically, might restore a small measure of value to the ruble, if only because it would make goods available where they are now unavailable.

The economy is woefully out of kilter. It is divided almost evenly between the state sector, where wages and prices bear no relation to value and the sense of direction has evaporated, and a freewheeling realm of deals and quick profits, conducted mostly through barter or with dollars.

The problem is that most Russians spend most of their time in the state sector. Many are happier with the devil they know -- long lines and little to buy -- than with the new devil they see more and more around them (probably driving a BMW).

The disparities, and the fears they generate for the future, were nowhere more evident this week than at the sumptuously decorated turn-of-the-century food emporium still known to Muscovites by its pre-revolutionary name, Eliseyevsky's, although for 70 years the Communists tried to call it Grocery Store No. 1.

There, beneath art nouveau chandeliers, expanses of mirrors, stone columns and forests' worth of wood filigree, the two sides of Russia were face to face.

Galina Tsvetkova was happy to be in line to buy sausage at the state price of 8 rubles a kilogram (about 12 cents a pound). In her village two hours from Moscow, meat is rationed and she can only buy two pounds a month.

"The variety of foodstuffs here is beyond comparison to what we have at home," she said as mobs of shoppers elbowed their way past her.

Eliseyevsky's, in this respect, is the apex of the state system, which can provide only occasional meat to villagers such as Ms. Tsvetkova and none at all to residents across vast stretches of Siberia.

Yet Eliseyevsky's, as part of a year-old experiment in free pricing, also is able to strike its own deals for meat and produce.

Hanging alongside the state sausage, at 8 rubles a kilo, was "contract sausage" made with Italian equipment and costing 162 rubles a kilo.

Cheese costs about 2 1/2 times as much at Eliseyevsky's as at state stores, but the state stores don't have any to sell and Eliseyevsky's does.

State stores sell gristly cuts of gray meat for a few rubles. Eliseyevsky's sells whole piglets for 180 rubles each.

State stores don't even pretend to sell delicacies such as smoked salmon, but it can be had at Eliseyevsky's for 114 rubles a kilo.

In a country where the average salary is about 100 rubles a week, those kinds of prices are cause for alarm.

"Oh, the contract prices," Ms. Tsvetkova said, gasping. "I won't buy anything at such prices. I'd be better off starving."

Pavel Bunich guesses that Ms. Tsvetkova will change her mind once the "contract" price becomes the only price. An economics adviser to President Mikhail S. Gorbachev and head of a Soviet businessmen's group, he fully supports Mr. Yeltsin's plan to "liberalize" prices.

There is a mass of money in the country but no products to spend it on, he said. It would be far better, he said, to have a mass of products and no money, "because then at least there is an incentive to work."

Ms. Tsvetkova, a glassmaker, should have little to worry about, he said, because her wages also will be free to rise as the enterprise she works for rakes in the wave of rubles Mr. Yeltsin hopes to shake loose.

Anatoly D. Tupin, the deputy chairman of Eliseyevsky's, said shoppers are shocked at sausage selling for 162 rubles and that people came in to look at it this week but few were buying. That will change, he said, because the shock always wears off.

If Russia is to have a prosperous economy, Mr. Bunich said, Russians must expect to pay world prices. The payoff should come in matching wages.

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