Spotlight On The Shadow
issue 173 - July 1987
Spotlight on the shadow
The Soviet Union's massive 'second economy' is as legendary
as the food queues and half empty shops which cause it. What's new
is that the problem is now openly discussed. But is this 'creeping capitalism'
a bad thing for ordinary Russians? K S Karol turns up a few stones -
and discovers what wriggles underneath.
A waitress in a provincial railway station buffet declares to her lover, a long distance train ticket collector, that she doesn't love him any more. There is another man in her life, she says.
'It doesn't matter,' he replies and goes on to ask her to take care of two suitcases full of Austrian shoes he has brought with him with the intention of selling on the black market.
'But you don't understand,' she persists. 'It's all over between us. The suitcases too.'
'You must be mad!' exclaims the stunned ticket collector. 'You don't imagine that you can live on the 40 roubles of your salary, do you?'
The Moscow cinema-goers watching this sequence from Eldar Riazanov's A Station for Two broke into knowing laughter. In a society where everyone must supplement their income in whatever way they can, you have to be very noble to renounce, even for love, a comfortable, clandestine source of income.
That was when I visited the Soviet Union in 1984. Today, thanks to the glasnost - or openness - introduced by Mikhail Gorbachev the problems of the Soviet shadow economy are no longer just the subject of gentle irony in feature films. They are being tackled head-on both in the popular press and Communist Party theoretical journals. Pravda is full of letters denouncing 'profiteers', while writers in more analytical magazines like Kommunist are engaged in a troubled search for solutions. What then is this second economy which has grown so massively in the shadow of one that the state has planned and controlled for decades?
According to an old Russian joke, socialism in the Soviet Union is characterized by five paradoxes. The first is that everyone has work but no one really works. The second: no one really works but the targets are always met or even exceeded. The third: the targets are met or exceeded but one does not see the results in the shops. The fourth: the shops are half-empty but everyone finds enough to eat and clothe themselves with. The fifth: people work little, can eat and dress properly but no one is happy.
Already at the end of the Brezhnev era - in the early 1980s - Russian sociologist Tatiana Zaslavskaia was saying in a report which filtered through to the West that despite its planned and ordered appearance the Soviet economy was in fact developing in a spontaneous fashion. This was provoking strong social inequalities.
Today, as one of Gorbachev's advisers, she goes further to say that it has led to the formation of social groups with diverging interests and destroyed the rational relationship, however slight, that existed between work and money.
The state has found that the bait of higher wages in the official sector has lost its appeal as Russians can make more money by working in the shadow economy. Official studies show that 70 per cent of Soviets estimate that they are not working to their full capacity, only nine per cent aspire to posts with greater responsibility, while 13 per cent actually prefer jobs with less responsibility, even if they are less well paid. For there is always their second job and a taxing official post might take up too much time and energy.
One recent change has been among the so-called shabashniki. A Russian worker, on finishing his or her day's work will usually exclaim shabash! - 'it's done'. After this he or she might do supplementary work, at higher rates of pay, for private individuals who need their apartment painted or television repaired.
But today the practice is rapidly departing from its original definition. In many cases the shabashniki have abandoned their official jobs and are organized into independent teams who no longer do work for private individuals but work virtually as 'troubleshooters' for public concerns which have run into problems.
'Do you want to build a hangar or a silo or a workshop? Well, pay us each 1,000 roubles a month and you will get it built within the time limit you specify,' is the line these days. Meanwhile, workers in the official sector, doing the same job, will earn barely 200 roubles a month.
The legal status of the shabashniki is doubtful as in the USSR each person is supposed to have a fixed job and organizations clearly don't have the right to pay some people five times as much as others for the same work. Nevertheless, there is no question of clamping down on the private shabashniki because they provide a valuable service, especially in the construction industry, which costs the state nothing.
The lot of these workers is far from rosy, however. Ineligible for social security, they have to be entirely self-reliant. Often they have to work 12 hours a day to fulfil contracts. And despite their higher incomes, they rarely become rich because their activities are limited to the few months during the year when the climate is favourable for construction work.
It's another story when it comes to their managers. These organize the workers into teams, get the contracts, control the funds - and generally make a packet Concern about this has recently come through the pages of Izvestia - the official government newspaper.
Although clearly at odds with the 'socialist' economy, all this is chicken-feed compared with a far more serious problem - nietroudovyié dokhody - or 'unearned income' - as it is euphemistically called. This is basically the way in which state bureaucrats use - or abuse - state subsidies on essential items to line their own pockets.
Subsidies in the USSR are colossal. Just those on meat and milk - 40-50 billion roubles per year - are the equivalent of one month's salary for the entire working population of the Soviet Union. It is the same for bread, certain clothes and a whole range of other goods sold through ordinary shops. Public transport is also cheap. Through subsidies the state has established a vast 'social salary' to make life easier for workers and it takes a pride in the extensiveness of the welfare system that has developed from this.
So far, so good. What complicates things, though, is the existence within the official economy of several different kinds of shops. Besides the ordinary shops accessible to anyone - selling subsidized goods but often with bare shelves - are the 'commercial' shops only for those who can afford it. Here items in short supply are sold at inflated prices - but still generally lower than on the black market.
Most iniquitous of all are the notorious 'closed' shops where everything is sold cheaply but which can only be used by the privileged state bureaucrats. These elite customers can - and do - make fabulous profits by buying goods from 'closed' shops and selling to 'commercial' shops or even directly to the shadow economy, where the non-privileged are forced to shop because they can't find the goods they want in the ordinary shops.
Such transactions are illegal but the authorities, during the long Brezhnev era, did not concern themselves too much with this kind of illegality, allowing the ruling class to radically improve its material situation, even become rich.
Despite vigorous public criticism of the 'closed' shops, they continue to operate. Moreover, rich Soviets, whatever the origins of their fortunes, do not hide their wealth. Nor do they hesitate to make use of it to promote their offspring, generally referred to as the zolotyié diétki - or golden youth.
But with perestroika - or 'reconstruction' - Gorbachev and his team are proposing 'to make one rouble equal for all'. This would imply doing away with the 'closed' shop system. Reform will have to come in stages, though. While scrapping the subsidies would hit state bureaucrats abusing the system it would hit even harder the less privileged people who benefit from cheap prices for essential items in ordinary shops.
The fact that the shadow economy is coming into the spotlight of open publicity is encouraging. And for Gorbachev, at any rate, this is a key factor in the policy of reform.
Paris-based K S Karol is a senior editor wlth Le Nouvel Observateur and author of several books on the Soviet Union, Cuba and China.
At 10.30 every morning, Marta Quispe, age 23, opens for business. She rolls her 'office' out of a parking lot, pulls out her chair, props up an umbrella and goes to work. On the sidewalk.
Marta, who owns a cart which bursts full of chocolate bars, candy and bags of chips, is a typical ambulante or roving seller. She migrated to the big city, Lima, from the Andean town of Huancayo with her parents seven years ago.
'My father thought that the new democratic government which took over in 1980 would create more jobs in the capital. But things just got worse. Prices kept going up and my father couldn't get a job. Later el muy mierda took to heavy drinking and then he took off with another woman. My seven younger brothers and I had to go to work to help our mother'.
So in 1982, at the age of 18, Marta got into the business of selling. She started out walking along the main drag in the Miraflores commercial district, Avenue Larco, with a small case strapped to her neck, hawking cigarettes and chocolates.
Despite the competition, four years later she was able to purchase a wooden cart with small wheels. Then, after studying the place for a week, she moved into her present workplace, next to a busy parking lot.
'Of course, I'm making more money here than walking around,' she says with a broad, toothless grin. 'Now people get to know me, and I have steady customers'.
Marta used to be harassed by the police. But now she pays a monthly fee to the Miraflores municipality. The fee, called Sisa, has little value in strict legal sense but not all ambulantes have one and it helps if the cops decide to pull a raid. Another proof of her social status among the hawkers is her working spot: it is so well located that if she decides to move she could 'sell' the right to use it to another vendor.
Marta gets her stocks from a large informal market in Villa El Salvador shanty-town. Here well-dressed factory representatives show up once a week and sell their goods at 30 per cent discount to wholesalers who then sell them to people like Marta - but not before a hard haggle for the best deal.
'If one brand of chocolate doesn't allow me to earn enough, I'll just switch over to another brand,' she says. But the final price she charges the customer depends on their face. 'If you look like a gringo (a foreigner, usually blond) then it'll be a lot more expensive, because you have more money,' she says simply.