COVER

THE NEW RUSSIANS

THE FREE MARKET HELPS SOME RUSSIANS CHANGE THE FACE OF THEIR COUNTRY

MALCOLM GRAY February 15 1993
COVER

THE NEW RUSSIANS

THE FREE MARKET HELPS SOME RUSSIANS CHANGE THE FACE OF THEIR COUNTRY

MALCOLM GRAY February 15 1993

THE NEW RUSSIANS

COVER

THE FREE MARKET HELPS SOME RUSSIANS CHANGE THE FACE OF THEIR COUNTRY

More than 600 fans crowded into the ballroom of Moscow’s Slavyanskaya Hotel to watch the Dallas Cowboys defeat the Buffalo Bills 52-17 last week, thanks to a satellite television linkup that worked flawlessly throughout the four-hour Super Bowl broadcast from Pasadena, Calif. As Russia shakes off its Communist past, Moscow and other cities increasingly are forging links with the global electronic village. Still, Moscow remains half a world away from California. Most of the fans who paid $18 each to stay up until dawn Moscow time to see the game live were English-speaking expatriates—Americans mainly, with some Canadians and a sprinkling of curious Australians and Britons. But the scene in the hotel ballroom, where

American beer was selling for $3.75 a can, illustrated another aspect of life in Moscow: the growing array of foreign goods and services that are available to anyone with U.S. dollars or some other stable foreign currency to spend. Meanwhile, not far from the luxury hotel, groups of homeless beggars reflected the hardship that faces many Russians as they struggle to revitalize a ravaged economy, and build a new society from the wreckage of the Communist past.

Indeed, the new Russia is characterized by striking contrasts and fierce conflicts. As President Boris Yeltsin battles his political opponents over his attempts to restart the crumbling economy, inflation is threatening to rampage out of control. And while Russians remain divided over Yeltsin’s attempts to remodel the economy along free enterprise lines, hustling Russian businessmen, many of them operating almost exclusively in U.S. dollars and other hard currencies, have begun to revitalize some aspects of Russian life. With Western money comes Western tastes: fast cars, casinos and strip clubs proliferate in Moscow and St. Petersburg. Game shows, including a Russian version of Wheel of Fortune, draw huge audiences on television, and billboards around the capital advertise Coca-Cola,

Eternity perfume and Snickers chocolate bars.

But at the same time, for many Russians the end of Communism has simply meant a steep decline in their standard of living.

Russia is a society in which the latest in Western technology and consumer goods co-exists with shoddy local goods and the still-functioning remnants of the Soviet system. Typically, some fans going home from the Slavyanskaya Hotel took advantage of one of the few bargains still remaining to Russians: a state-subsidized ride on the city’s Metro, or subway system, that costs just three rubles (less than one cent). Despite economic chaos and political turmoil aboveground, the subway system, which boasts nine separate lines and 122 stations, continues to carry eight million passengers a day. Subway officials claim that trains run every 80 seconds during rush hour. But many Muscovites counter that the service is worsening, with slower and fewer trains, overcrowded and dirtier cars and—in another development with Western overtones—more crime.

Static: To be sure, muggings—rare in the Communist era—do occur in the subway, and officials now warn riders to watch out for pickpockets. But Dimitri Gayev, the system’s assistant director, maintained that the service had remained remarkably consistent despite Russia’s current difficulties.

Gayev blamed the rising chorus of complaints on increased expectations. “Nobody used to mind waiting two or three minutes for a train,” he said, “but now they complain about everything.”

Outside the entrance to Moscow’s Kiev subway station, an untidy flea market is an example of capitalism catering to Muscovites of modest means. Right across the street, the Slavyanskaya Hotel, with its uniformed doorman, operates at a more exclusive level. Inside, another economy operates for those lucky enough to possess hard currency. But even there, visitors collide with the harsh realities and maddening inconsistencies of Russian life. In January, an underground flood knocked out the cable that connects the Slavyanskaya to Moscow’s central telephone exchange. A hotel that relies heavily on efficient communications to attract businessmen, the Slavyanskaya was without telephone service for five days. The bottom line is, it is still Russia.

Meanwhile, other Moscow residents put up with the heavy static and crossed lines of the chronically underfunded city telephone system that still uses cables installed before the 1917 Bolshevik Revolution. Some residents of the outer districts of Moscow have been waiting years to

have telephones installed. Indeed, most Russians would regard a five-day telephone disruption as a minor inconvenience.

In general, Muscovites complain about “Absurdistan,” as they often call the new Russia in exasperated conversation. A case in point is the confusion over exit visas. In theory, as of Jan. 1 Russians are free to travel abroad without the exit visas that they required during the Soviet era. But new Russian passports are not yet available and border guards are turning back travellers who do not have the proper exit visas in their still-valid Soviet passports. According to Interior Minister Viktor Yerin, one reason for the delay in issuing new passports is that Russian legislators cannot decide on a national seal for the document’s front cover. Some deputies in the Supreme Soviet favor the traditional double-headed eagle, a symbol dating from the pre-revolutionary Czarist era. Others want to retain some version of the Sovietera hammer and sickle. Such deadlocks, reminiscent of the bureaucratic fiascoes of the Soviet regime, can still appeal to Russians’ love for chorny, or black humor. Costly: But Russians see nothing funny about inflation as they battle price increases that average 30 per cent a month for most consumer goods. Typically, high-quality meat sausage currently costs about 1,350 rubles a pound, up from about 50 rubles a year ago. A package of American cigarettes has risen to 300 rubles, from just 17 rubles two years ago. Even the cost of dying has shot up. A simple funeral now costs 1,500 rubles, compared to 390 rubles in 1991. Certainly, Russia’s political leaders have done little to lighten the mood. Yegor Gaidar, who until December was acting prime minister and the chief advocate of a tight money policy, said last week that massive government subsidies to unproductive but politically influential state industries—including some that occurred while he was in power—threatened to push Russia into hyperinflation. Economists define hyperinflation as general price increases of more than 50 per cent a month.

In a speech to cabinet last week, Yeltsin was just as gloomy, blaming unco-ordinated and often contradictory financial policies for the collapse of the national economy. Said Yeltsin: “Industries and businesses received 3.5 trillion rubles [$7 billion] in subsidies during the last few months, without anyone knowing where the money went or how it was used.”

In fact, large and inefficient state enterprises left over from the Communist era constitute one of the most serious obstacles to Yeltsin’s economic reforms. During the past year, by official count, the Russian government has sold 46,000 former state enterprises, including restaurants, stores and other small businesses, to exemployees and other private buyers eager to play a part in the new economy. The sell-off prompted Viktor Chernomyrdin, who replaced Gaidar as prime minister, to observe that Russia is becoming a nation of shopkeepers. But privatization has barely begun to affect the larger enterprises that still claim costly state subsidies. Later this year, some 5,000 large firms, each with assets of more than $100,000, will finally be auctioned off. The companies include Moscow’s famed GUM department store on Red Square and the Felix Dzerzhinsky Tractor Factory in Volgograd. The sell-off will end the need for government subsidies. But it is likely to create another problem: rising unemployment as the inefficient firms cut surplus staff or sink into bankruptcy.

Given Russia’s severe economic problems, it is hardly surprising that ^ there is growing impatience with the current climate. A recent poll by I Moscow’s U.S.-operated Times-Mirror Centre for the People and the S Press found that only 10 per cent of 1,000 Russians interviewed wanted I to return to Communism. But 51 per cent said that they were growing weary of the country’s flirtation with democracy. Many respondents said that they would prefer the traditional Russian solution to disordered times—a strong leader. Such findings do not surprise Gennady Burbulis, a former Marxist theoretician and one of Yeltsin’s chief aides and advisers. Said Burbulis: “The task is awesome. No one has ever managed to move directly from a totalitarian system to fully fledged democracy.’’ Burbulis added that he could envisage Russia coming to resemble certain Latin American societies, in which a dominant upper class allied to a political regime rules over a politically powerless middle class, while workers struggle to survive.

Wealthy: Presented with such a vision, a 37-year-old electrical engineer, Sergei Andreyanov, scoffs, “Nuka!” (“Come off it!”) He, like many Russians, insists that the country has always been like that. Andreyanov divides his time between working at a job at a Moscow-area automobile plant and setting up a new business to renovate apartments for sale on the private market. But he has not yet seen the kinds of returns that would rank him among the city’s new wealthy. He and his wife, Galina, 31, an office bookkeeper, have two sons, Dimitri,

10, and Ilya, 7. Their joint family income of 26,000 rubles (about $52) a month is above average. But with food costs rapidly rising, the Andreyanovs have eating habits that hark back to the Soviet era. For a brief period last year, before inflation took away their buying power, they were able to sample some imported foods. Now, however, the Andreyanovs rely on the relatively cheap mainstays of pasta and potatoes, which they buy in bulk and store on the balcony of their two-bedroom apartment. “We are eating lots of potatoes again,” said Andreyanov with a shrug. “Well, Russians have always eaten potatoes.”

They are also eating pickles and preserved vegetables that they grew last summer on a shared plot near a friend’s dacha, or country house,

outside Moscow. Many other Russians are doing the same, said the sandy-haired engineer. It is not necessarily a bad thing to have to look out for yourself, he added, and better than endlessly complaining about how bad life is. His dark-haired wife promptly contradicted her large, boisterous husband. “I get tired of going around the stores all the time and buying things just because I know they are going to be more expensive tomorrow,” she said. “I would rather buy something I do not need right away than hold on to this ‘wooden money.’ ”

Although the Andreyanovs live within walking distance of the Russian legislature, and they sometimes stroll past the building, they talk about their children, or making ends meet, and not about politics. And while the two Russians are aware of the scheduled April 11 referendum on a new Russian constitution, they expressed doubt that it would resolve a struggle for supremacy between Yeltsin and a parliament dominated by conservatives who want to slow down his market-oriented reforms. The referendum is supposed to divide power between the president and the legislature, said Andreyanov, but each side wants to be in charge.

Sometimes, too, the Andreyanovs go to the Kiev Metro station to catch a train. But Andreyanov and his wife have never been inside the nearby Slavyanskaya Hotel. “They would stop me at the door with shoes like these,” the fledgling entrepreneur said, pointing to his thick-soled grey plastic loafers. He spoke without resentment. Andreyanov, like most Russians, does not want to return to a time when the best consumer goods were a hidden privilege of the ruling class. He simply wants to be able to afford such items as a can of imported beer occasionally—without worrying about the rapidly diminishing value of the money in his pocket.

MALCOLM GRAY in Moscow