Economic chaos brings out 'profit police' in Ukraine Reeling city fights inflation, scarcity

January 28, 1993|By Will Englund | Will Englund,Staff Writer

LUGANSK, Ukraine -- Vigilant authorities here have a new worry: the fear that someone, somewhere in this rock-hard city, might be making a profit.

So local politicians, union leaders and institute directors are joining hands with the police to form voluntary committees that will crack down on those who would make money by buying and selling.

People who have the audacity to buy champagne, or tea, or cigarettes in a state store and then try to peddle them on the street at a mark-up "are depriving ordinary citizens of their rights," says Maj. Vitaly Nemtsev, chief of the economic crimes section of the Lugansk district police.

Officially, Ukraine gave up its Communist identity more than a year ago. Officially, Ukraine believes in market economics. But psychologically, the spectacle of people engaged in open "speculation" is proving too much to bear.

"We act when we receive complaints from voters," says Svetlana Berezhnaya, a City Council member who has joined one of the new anti-profiteering committees. "Of course it's serious. It's very serious."

Life is not easy in Lugansk.

A city of 630,000 on the easternmost edge of Ukraine, near the great coalfields of the Donbass and just 20 miles from the border with Russia, Lugansk has none of the possibilities of a port like Odessa, or of a capital like Kiev, much less Moscow.

The biggest attraction in town is the spanking new bus station.

The biggest employer is the locomotive works, which once built 90 percent of the engines of Soviet railroads. But the sprawling factory relied on Russian steel, which is no longer available in Ukraine, so there is no work to do. But neither is there any interest in laying off the factory's 40,000 workers. What would they do?

Lugansk is 90 percent Russian-speaking (although Ukrainian is now the official language) and it is a Communist Party stronghold. It is precisely the kind of mid-size factory town that is so ubiquitous throughout the Slavic republics of the former Soviet Union -- proud of its Red heritage and hostile toward anything that smacks of advantage or financial trickery.

It is in places like Lugansk that the market-oriented reformers face their biggest challenge. Here, to succeed, they must not only re-create a functioning economy but change fundamental attitudes as well.

So the 40,000 men and women trudge to the locomotive factory every day. There's food here, but not much. Gasoline is expensive and scarce. The hotels are empty. The restaurants are closed. The market shuts down early.

Cancer rates are above the Ukrainian average, probably from industrial pollution. Typhoid has recently made a reappearance.

People ask what the end of Communism has brought them. The answer is inflation, scarcity and a new sort of fear of the future they didn't know before.

"It's awful. There's poverty and hunger," says Anna Senitsina, who was at the Central Market trying to sell a twig broom she had made. "I haven't eaten all day. When I get home I'll have hot water, bread and onions for my supper. I want to get nice clothes, and find a husband. We're sinking. And it's the government's fault."

Ukraine, unlike Russia, has done very little in the way of economic reform. The result, in a country with rich agricultural land and abundant natural resources, has been catastrophic. Because Ukraine keeps places like the Lugansk locomotive factory running, the national budget deficit is running at 44 percent of the gross domestic product. (Russia's deficit is about 12 percent.) Ukraine last year introduced its own currency, which promptly plummeted -- against the Russian ruble of all things. People in Lugansk cherish rubles the way Muscovites cherish dollars.

In the past year Ukraine has managed to create both runaway inflation and debilitating scarcity by trying to run the system along the old Soviet lines. Only this month has the prime minister, Leonid Kuchma, reversed himself and begun advocating quick and deep reforms.

So when a hard-pressed pensioner in Lugansk sees someone on the street selling hard-to-find cigarettes at double the price in state stores, naturally she sees red.

Mr. Kuchma's belated answer has been to try to reform the system. Here in Lugansk, though, the authorities are reaching for a different answer: the profit police.

In December, local representatives of President Leonid Kravchuk called for special anti-profiteering committees to be set up.

Their job is to ensure that goods go from state warehouses to state stores, and don't end up in street stalls for resale. They are authorized to make unannounced visits to conduct inventories. Police, operating under laws unchanged since Soviet days, may arrest the offenders.

The committees are also handling a publicity effort to tell workers what stores they should shop in -- that is, the state stores.

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