Bountiful 'shadow economy' entwined with Soviets' ailing system


MOSCOW -- Just inside the door to a Gorky Street art shop, a young black marketeer trolls for customers in the steady stream of shoppers. Her bait: an imported blouse and skirt, with the hefty price of 135 rubles scribbled on a scrap of paper.

Down the street, in back of the Anchor seafood restaurant, a white-aproned employee hands over to a favored customer a fat package of fish wrapped in white paper.

At the foot of Moscow's main street, in front of the Intourist Hotel, a shifting crowd of young men in windbreakers and jean jackets conduct furtive trade in dollars, liquor, cigarettes, objets d'art and prostitutes.

These are scenes from the flip side of the long lines and skimpy offerings of Gorky Street's official face. They are glimpses of the Soviet Union's other economy -- the web of illegal, semilegal and unofficial trade known here as "tenovaya ekonomika," the shadow economy.

Forget what you've read about Soviet shortages. On Moscow's thriving black market, you can buy anything from a compact disc player to a submachine gun, from a fine cut of beef to a bottle of Scotch whiskey. Service, by comparison with the official sector, is prompt and attentive. And prices are out of sight.

"The state economy is constantly characterized by shortages, and where there are shortages, the shadow economy automatically comes into play," says Tatyana I. Koryagina, an economist and member of the Russian parliament. "It's everywhere, because it's an inevitable consequence of our economic failure."

Now, as the Soviet Union enters the rocky transition to a legitimate market economy, the significance of the shadow economy is fiercely debated.

Marxist ideologues warn that black marketeers will launder their millions and use them to buy political power.

"The shadow capitalists, in alliance with the criminal world, thMafia and the corrupt apparatchiks they have bought off, throw down a challenge to the workers, to their socialist choice and their social achievements," Alexei A. Sergeyev, a prominent old-line Soviet economist, warned in an article this year.

Market-oriented economists, by contrast, see the shadow economy not as a menace but as an island of near-normality in the madhouse economy built by totalitarianism.

"I have nothing against the shadow economy," says economist Yelena V. Kotova, a key policy-maker for the radical Moscow City Council. "What the law calls 'speculation' is not speculation; it's commerce. It's illegal due to our superstitious legislation. We should combat not the speculation but the legislation."

The latest Soviet economic reform plan proposes to do just that. Under the plan, laws banning "speculation" -- the private sale of goods for more than was paid for them -- would be repealed, and those convicted would be rehabilitated.

Observers of every political stripe agree that the Soviet shadow economy is huge and growing fast.

The Soviet Ministry of Internal Affairs estimates illegal economic activity at 150 billion rubles a year -- more than the total volume of Soviet foreign trade. Many economists doubt such precise estimates, however, saying the official and unofficial economies are so entangled they cannot be separated.

"A good factory director wants his factory to operate smoothly. But he can't get parts from his official suppliers, so he has to make a deal in the shadow economy," says Ms. Koryagina.

"In that sense, the whole economy is a shadow economy."

To be impressed by the scale and professionalism of the street black market, one need only drop by the "commission store" -- where people can sell unneeded items for a 7 percent commission -- on Komsomolsky Prospect, a 10-minute metro ride from the Kremlin. The crowd milling out front is a veritable department store without walls.

"You can get anything you want here, and I mean anything, without exception," brags Viktor, 38, a professional wheeler-dealer in front of the store one recent day. "Any car, including new foreign cars. Any electronics. Any food. Any liquor. It's just that the prices are a little high. Market prices."

He's holding five packs of foreign cigarettes for display in his left hand -- 100 feet from a huge line at a state tobacco kiosk. Few leave the line to check out his smokes. At Viktor's price of 25 rubles -- up from about 15 rubles before the latest cigarette crisis -- one pack of cigarettes costs more than two days' pay for an average worker.

The hundred or so entrepreneurs at "Komsomolka," as the spot is nicknamed, hold out to passers-by the following enticements: Tuborg beer, 15 rubles a can; blank videocassette, 75 rubles; compact hand-held tape recorder, 1,800 rubles; car radio with cassette player, 2,000 rubles; French perfume, 250 rubles; pack of four AA batteries, 10 rubles.

Dealers of really expensive items display only the instruction booklets, not wanting to tempt thieves. Video recorders and stereo systems run 5,000 rubles and up. A fax machine fetches no less than 15,000. Personal computers start at about 40,000 rubles, about 10 years' wages for an average citizen.

Where do they get this stuff? The merchants of Komsomolka are not especially eager to share their secrets, particularly within earshot of the plainclothes police who routinely loiter in their midst.

But some of the professional "fartsovschiki" (Russian slang for .. street dealers) elaborate on the tricks of their trade.

*A Soviet trucker headed for West Germany buys or steals extra solyarka, a cheap diesel fuel. Over the border, he can sell a 700-liter tank, purchased for about 200 rubles, for 700 marks, which he spends on electronics or other items coveted by Soviets.

His 700 marks can buy about 10 cheap car radios, each of which can be sold for 1,500 to 2,000 rubles. He and his associates might turn their 200-ruble investment into 20,000 rubles of revenue, sufficient to live rather well even in the Soviet Union.

*A pair of 19-year-old aspiring traders buy 11 pairs of black leather women's boots, imported from Austria, from an acquaintance at a state department store. She pays the store the state price of 140 rubles a pair. The dealers pay her 190 rubles a pair, and she shares her profit with her department head and with the store director.

Over the next five days, they sell the boots for 300 to 350 rubles a pair -- nine pairs through acquaintances, two outside the very department store where they were supposed to be on sale. Their profit: about 1,500 rubles.

*A young English speaker in a Columbia University sweat shirt haunts Red Square, selling rubles to foreign tourists.

The state now offers six rubles to a dollar, but the young valyutchik (from valyuta, hard currency) beats the state price, offering 10 to 15 rubles per dollar. He then sells the dollars for 20 to 25 rubles apiece to a higher-level dealer who never risks street transactions.

That dealer, in turn, spends the dollars to import sought-after goods. The most popular item lately: Mercedes-Benz automobiles, whose appearance on Moscow streets with Soviet tags hardly raises eyebrows these days.

The street-corner trade in foreign money and goods is only the most flagrant part of a universal phenomenon.

A high proportion of Soviet citizens participate in the domestic shadow economy, exploiting whatever special access they have this shortage-plagued country.

"May you live on one salary," goes a jocular Soviet curse.

Truckers and chauffeurs peddle gasoline, ferry private passengers and transport private loads. Engineers steal materials at work to repair television sets at home. Bookstore clerks sell hot titles out the back door for several times the cover price.

Retail trade has an unsavory reputation in the Soviet Union, since many employees cannot resist the opportunity to exploit the difference between the market price of an item and its subsidized state price.

Police inspections routinely find the best goods a store has to offer not on display out front but hidden away in a back room to be sold or traded for whatever the market will bear.

The shadow economy has contributed to the bad reputation of market economics with much of the Soviet public. Like U.S. drug dealers, Soviet black marketeers benefit from the ban on their trade to earn enormous profits.

A factory worker struggling to support a family on 200 rubles a month, or a pensioner getting the minimum 70 rubles a month, naturally is outraged by the fabulous riches raked in by black marketeers.

For instance, Slava, 24, a regular at the Komsomolka site, claims to take home 20,000 to 40,000 rubles a month from his trade.

What do his parents, an engineer and a teacher living on modest salaries, think of his profession?

"At first, they were against it," he says.

"But when they saw the results, they accepted it. I have two cars and a cooperative apartment, and I'm building a house in the country.

"By Soviet standards, for somebody my age, that's doing pretty well."

Copyright © 2020, The Baltimore Sun, a Baltimore Sun Media Group publication | Place an Ad