Antitrust for USSR

Industrial monopolies impede growth in the republics

MONOPOLY, said Lenin, is the last stage of capitalism. Today, the communist system he founded has bequeathed to its reformers the most monopolistic industrial economy in the world.This means that the people who are now trying to build nations in place of the old union are trapped by their past. Their republics industrialized in the service of the USSR, not for themselves. Because Soviet central planners favored extremely large enterprises, every republic depends on crucial goods produced by monopolies in other republics. This combination of monopoly and interdependence worked while the Soviet Union was whole and its authority was unquestioned. Now, the mechanisms of inter-republic trade have collapsed. Central planning and the ruble are both discredited, leaving factories to barter when they trade at all. The economic system of a superpower has been reduced to using prehistoric methods of exchange. The rise of ethnic nationalism from the ashes of the communist system has complicated trade still further. Azerbaijan has blocked trade out of Armenia. Armenia, Kazakhstan, Uzbekistan, the Ukraine, and other republics have banned exports. Workers in Azerbaijan oil equipment monopolies and Ukrainian coal mining equipment plants know the importance of their position, and have threatened to strike. The consequences can be minor, as when Muscovites rioted last year because cigarettes (the filter tips of which are produced only in war-plagued Armenia) were unavailable. That example is less amusing than it seems, though. The Armenia-Azerbaijan dispute has also prevented oil equipment monopolies in Azerbaijan from sending needed machinery to Siberian oil fields. If a monopoly producer is removed from trade between the republics, the consequences will ripple throughout the economy. The possibilities for such disruptions are staggering, because the number of monopoly producers is so high. A full third of the Soviet production was based on monopolists; thousands of products are made at only one site. Some telling examples: A plant in Armenia is the only source of a part that is needed in every power station in all the republics. The world's largest polyester factory, in Byelorussia, produces 90 percent of Soviet output. A plant in Moldavia makes 99 percent of die-casting machines. Single plants in Russia produce most of the automobiles (58 percent), trolleys (97 percent) polypropylene (71 percent), sewing machines (100 percent), printing ink (90 percent), combine harvesters (71 percent), oil drilling rigs (two plants produ ce 100 percent), and all of most grades of boilers and turbines needed by power plants. Factories in the Ukraine build the vast majority of coal hoists (82 percent), coking equipment (78 percent), corn harvesters (100 percent), forklifts (86 percent), and diesel locomotives (96 percent). A plant in Uzbekistan produces 75 percent of cellulose acetate, an important artificial fiber used in rayon, film, and automobiles. The Soviet Union has left conflicting legacies. Its economic infrastructure, spread across the republics, demands union; its repression of nationalisms and individual rights fuels the drive for independence. The solution must be a mix of political independence and economic union. Free trade and markets within an economic union of as many sovereign republics as possible is the best alternative, but the reality of monopolies threatens even this solution. Monopolies can charge unreasonably high prices, keeping critical goods away from other enterprises or consumers that need them. As monopolies are privatized, some will fold, some will start to produce other goods, and some will sell their products abroad. SOME Soviet economists argue that these risks make the free market impossible in their country. That is a cop-out, but some precautions are necessary. In addition to the free trade agreement, the republics should sign a compact to locate and monitor supply lines based on monopolies, and by preparing to provide credits for key goods that may disappear abruptly from the interrepublic market. In the long run, the free market will bring in new firms to compete with former state enterprises. Still, a developed market economy in the former Soviet Union is decades away. Until it exists, the republics will have to swallow the difficult lesson that sovereignty and prosperity can contradict. For a long while yet, they will owe their standing as industrial nations to monopolies and to each other.

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