Prices Take a Hike in Soviet Capital
But shoppers find empty shelves, dashing hopes that more goods will appear after reforms
MOSCOW — AT Detsky Mir, the massive children's department store in the heart of the capital, shoppers were more disappointed than angry with price rises that took effect April 2. "I came here to buy a toy for my son," said shopper Lyudmila Yermolova. "But even though they have raised the prices, there is still nothing to buy."
It was a relatively serene scene April 2 at Detsky Mir, compared with the weekend, when rationing was in effect and crowds anxiously gathered around entrances.
"On Saturday, it was a madhouse. Everyone was trying to buy things before the prices went up," said sales clerk Tatyana Dmitrova. "But the people seem prepared psychologically for higher prices. In the capital, we've been used to paying 'agreed' [free-market] prices for some time."
The people weren't prepared for empty shelves, however. Since it had been known for months that prices would go up, stores had no incentive to sell goods. There were high hopes that bulging warehouses would be emptied when the prices rose, but such expectations were not met.
The reforms were designed to cut massive government subsidies and stimulate production. The people's disappointment likely will make it more difficult for the government to turn the sinking economy around.
Soviet Prime Minister Valentin Pavlov says the reform is part of a move to a market economy, but many Muscovites say they long ago stopped trusting government promises.
Shopper seeks reform
"Reform should be carried out immediately and totally," said Svetlana Samolova, a clerk at a vegetable store. "But the government chooses instead to drag it out. It won't work this way."
Last December, inflation was rising at 14 percent. With the price increases, inflation is expected to jump to about 60 percent. However, some food items, such as meat and bread, tripled in price.
Soviet officials admit reform was long overdue, adding that 80 percent of all goods produced in the nation were unprofitable. Government subsidies last year amounted to 240 billion rubles ($133 billion at the commercial exchange rate). The reforms are designed to cut subsidies by 125 billion rubles, said Deputy Prime Minister Vladimir Shcherbakov.
Some economists predicted reforms would provide only a short-term improvement in the economic situation, if production was not stimulated.
Without rapid privatization and freeing of the enterprises from state-dictated production orders, reformers predict the price changes will only lead to hyperinflation. Even after the price increases, government officials admit there will still be some 100 billion rubles in unmet consumer demand.
Advocates of a market economy say the reform does not really free prices. Indeed, controls were lifted on only 30 percent of items, mostly luxury goods - watches, leather goods, and silk. Price ceilings will be set, allowing limited fluctuation, for 15 percent of goods, such as cars and school notebooks. Fixed prices will be in effect for the remainder, including most food items. The cost of some basic items, such as fuel and vodka, will not be changed.
The reforms may not end the economic chaos created by so-called "agreed prices." Under the system factories and stores establish their own prices, bypassing the government system.
In a letter to leaders of republics and autonomous regions published April 1 in the Communist Party daily Pravda, Soviet leader Mikhail Gorbachev said the "agreed price" system must be stopped if the program is to have a chance of success.
"Local authorities and consumer societies should participate 201&gt; to end anarchy with prices and to begin to advance to a civilized market economy," the official Tass news agency said of Mr. Gorbachev's letter.
Government promises aid
The government claims it will provide up to 85 percent compensation to citizens, with parents, pensioners, and students receiving the most aid. For example, families will receive 40 rubles monthly for each child under 16. The average Soviet salary is about 270 rubles ($150) a month.
Many consumers complained the compensation will not come close to softening the impact of the crushing price hikes.
"They provide 60 rubles to pensioners, but a person can easily go through 60 rubles in a day now," Ms. Samolova said.
Compensation was to be coordinated at the republic level. But some republics seeking independence, such as Georgia, say the Kremlin is withholding funds in an effort to stall breakaway efforts, the independent Postfactum news agency reported.
Dissatisfaction with Gorbachev and the government isn't limited to the republics. It appears to be growing in Moscow, as well.
"We have to get rid of the government, but first of all we should get rid of Gorbachev," said shopper Svetlana Novikova.