WORLD

Capitalist capers

Private business blooms on Moscow streets

MALCOLM GRAY November 30 1992
WORLD

Capitalist capers

Private business blooms on Moscow streets

MALCOLM GRAY November 30 1992

Capitalist capers

WORLD

RUSSIA

Private business blooms on Moscow streets

For Muscovites with disposable income this winter, a pair of tickets for seats in the upper reaches of the Bolshoi Theatre are available from scalpers for the equivalent of $100. The practice is not a new phenomenon in the Russian capital: touts peddling tickets also operated, though with somewhat more discretion, under the old Communist regime. But members of the first post-Soviet generation of ticket scalpers now have to jostle for position on the sidewalks outside the theatre, with an eclectic mix of private vendors.

Within sight of the columned Bolshoi, a spendthrift consumer can also buy an imitation Rolex watch for 8,000 rubles ($21.60), or pick up 100 grams of caviar for $5. And he has to keep his head up while doing so: at any moment, he runs the risk of being knocked down by a horse—one of the many rented out for rides through the busy, downtown market by their owners.

Such is the bazaar-like atmosphere of Moscow’s expanding street commerce. On a recent Saturday afternoon, the entrepreneurs hawking horseback rides rubbed shoulders with decorated war veterans selling off family silverware to augment their inflation-ravaged pensions. But at the top of the rough, new hierarchy of Russian retailing are the small variety stores known as palatki (tents): kiosks, which teem with imported goods. The kiosks’ rapid spread through Moscow is one of the few signs of Russia’s halting progress towards a market system. But with them have come other byproducts of Western capitalism. Robberies are common, which, in turn, have spawned a growing protection racket. Said palatki owner Sergei Bulanov: “We put aside as much as 50,000 rubles ($135) each month for mafia guys.”

It is Moscow’s kiosk owners who are most likely to invoke the mantras of the marketplace. “To quote an American friend, a kiosk’s profitability depends on three things: location, location and location,” said Bulanov. With that in mind, the 33-year-old entrepreneur has strategically placed his kiosks within Moscow’s Inner Ring Road, a busy thoroughfare two kilometres from the Kremlin. That prized spot generates monthly revenue from a single store exceeding four million rubles ($10,000), making Bulanov part of Russia’s growing class of ruble millionaires.

But the operating expenses in Moscow’s buccaneering business climate are also high. Store owners pay a crushing array of Sovietstyle taxes, including a 32-per-cent slice of net profits and a 22-per-cent tax on the wholesale price. The city government also charges high rents for kiosk locations—as much as 840,000

rubles ($2,268) a year for outlets located within the Ring Road area. That is a staggering sum in a city where the average industrial wage is about $20 each month. And, as Bulanov candidly admits, kiosk owners must pay protection money to criminals to keep them from wrecking the property.

But paying off neighborhood toughs, who are known as “roofs” in local slang in reference to the protection they offer, does not completely keep criminals at bay. Thieves are attracted by the kiosks array of imported goods, from cigarettes and alcohol to canned goods, clothes and candies. The threat leads many vendors to keep weapons within easy reach. And at some kiosks, armaments are

now part of the inventory. A water pistol hanging in the window is a sign of guns for sale, and many stores swiftly placed tear gas pistols on display when Russian President Boris Yeltsin recently allowed the sale of those devices for self-protection.

In another sign of the city’s growing lawlessness, local police have been powerless to prevent some brazen thieves from making off with not only the goods but with the kiosks themselves. Police officially estimate kiosk thefts at about 150 during the past eight months, but the actual number may be higher.

Indeed despite the tax-gathering and operating regulations, Moscow authorities do not know exactly how many thousands of kiosks now crowd the broad sidewalks of the Russian capital. They are even less sure who owns the units, or how jars of caviar—a delicacy that is still produced by a state monopoly—end up in palatki windows. But most evidence suggests that black marketeers, corrupt officials and other criminal elements that Russians simply refer to as “the mafia” are involved in Moscow’s street trade. Criminal organizations, in fact, have had decades of experience bribing officials and diverting items plucked from state distribution systems.

The kiosks do sell some imported goods under agreements with foreign companies. But those goods are most susceptible to frequent price increases because of the worsening exchange rate of the ruble. One example: a red-and-white package of 20 Marlboro cigarettes, a coveted status symbol in a city of ^ smokers, now costs a hefty— by Russian standards—250 5 rubles (70 cents, five times I the price just a year ago). But o in a country where state re§ tail clerks still brusquely eject ^ customers and close the store 5 for a one-hour lunch break each day, kiosks with such names as “Just For You” and “Unique” offer a modest preview of a society more attuned to the needs of consumers.

Outside one kiosk last week, economist Grigori Marchenko endorsed the need for private enterprise in Russia, even as he acknowledged that he could not afford to buy Christmas presents from among the goods on display. “The kiosks offer a new kind of hope,” he said. “If people work harder, they might earn enough money to buy the things they see here.” That sign of confidence is rare in a country profoundly shaken by the pain and humiliation of an apparently bottomless economic decline.

MALCOLM GRAY in Moscow