Russian Revolution Centenary: Part Two

I landed in Moscow for the first time on Sun. 7 September 1986. That was the first time in my life when I could not find any food to buy. The university canteens were shut, and not a single cafe or shop was open in the vicinity. Fortunately, my mother, worried about her son going to this strange new land, had forced me to carry some Indian food within my 20 kg weight limit. Even with its wartime-like rationing, I exhausted all of it in a week. On 14 September, it was Sunday again, and I was keen not to starve. My French flatmate Marc, who knew Moscow better, suggested we both go to the town’s centre and eat at the Prague restaurant.

“Shouldn’t be expensive”, he said looking at my anxious face. “We should go early, because it may take some time for us to enter it.”

I think we reached the famous restaurant by around 11.00. The street was full of people, all part of a disciplined serpentine queue. In fact, restaurant Prague had a large empty courtyard in front so that hundreds of people could wait in peace. Marc and I knew each other for about six days. Marc’s ancestors were from Russia. So he was more patient. We talked a lot. Once you invest 2-3 hours standing in a queue, you can’t leave it. As a matter of experience, I can confirm you can’t leave it until you get the dividend (in this case, food). We finally got in at around 6 pm, after waiting on the road for nearly seven hours. I ordered an egg omelette and bread from the rude, screaming waiter. (On a Bombay street, I could get the same in three minutes). Marc was right. Despite being a centrally located restaurant, restaurant Prague was quite cheap.

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From then on, queues became a part of my daily life for several years. I comforted myself by saying I was a foreigner who could leave Russia any time. After marrying a Russian girl, that argument sounded weak.

You queued for milk and bread in the mornings. Old babushkas, fattened by eating only bread and potatoes during the war years, literally wrestled to enter the shop or reach the counter. Places like hairdressers had queues that you couldn’t see. On entering, you asked “who is the last one?” The “last one” nodded. You then claimed your place after him. He was then free to leave the salon and queue up in other places. It was both an art and a science to judge the time needed in each queue and reappear before your turn came.

Products without queues were not worth buying. If there was no queue for it, it must be bad, Soviets knew.

The first McDonalds in Russia, the world’s biggest at that time, opened in Moscow in January 1990. For the first few years, you needed to wait for 7-8 hours before you could enter this fast food place. The Big Mac cost merely 5 kopecks.  

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Queues were not the only amusement in our daily lives. Before going to Moscow, I always used Colgate toothpaste. Moscow made me change my toothpaste. Thanks to my living in communist times, I still use two different toothpastes, one in the morning, another in the night. In the USSR, you asked for toothpaste and bought whichever was available. If the shop didn’t ration the stocks, and if the boorish woman at the counter allowed, you picked up a dozen toothpastes.

Not only toothpastes, your clothes, shoes, watches, perfumes, shampoos, buying everything was a matter of chance. Jackets and overcoats vied with each other in their dull heavy-ness. My bear-like soviet overcoat was so ugly; I preferred to use a second-hand jacket given by my Austrian flatmate. (Soviet quality: The Soviet microprocessors were the largest in the world, the watches the fastest and Zenit cameras the heaviest.)

Each purchase was a feat – a product of intelligence, luck and lots of burnt calories in a queue. In an earlier diary, I have told the story of a Russian federal minister whom I helped buy lenses and a frame separately in an Indian town. At the Soviet optician, you opted for your dioptric number with whatever frame, or for an available frame with whatever number.

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In 1986, officially, 100 US dollars fetched you 60 roubles. However, in the black market, they fetched 600 roubles, ten times more. Aeroflot tickets were not available for six months. But if you knew the right people, and inserted a few right notes inside your passport, you could procure a ticket for next week. If your mother was dying of cancer, the treatment was free, but the next appointment was available after three years. However, parting with your annual salary would allow her to get treated in her lifetime.

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How did all that change? How did the queues vanish from Moscow?

The Soviet Union’s economy was planned. All wages and prices were artificially repressed. The Gosplan (central planning committee) decided what to produce, how much and at what price. Factories were given production targets, not sales targets. Because everything produced was bound to be sold (thanks to the wisdom of the planning committee).

Gosplan, in their five-year plans, followed a method called “material balances”. This meant planning both supply and demand of raw materials and finished products in units, not costs or prices. For example, if a seven-story shoe shop covered an area with 50,000 people, Gosplan would order 100,000 pairs of shoes for that area, prices didn’t matter. When the pairs hit the shoe mall, the 50,000 people queued up. A few lucky ones got the right size, less lucky ones managed with shoes a little too tight or loose, and others continued to use their old shoes. Consumers complained of shortages. Soviet State produced the planning figures to show how people were lying.

Since the State owned everything including the people’s labour, the prices for goods and services could be anything the State wished. A Soviet economist once said they used the prices from the capitalist countries to get an idea of how to price equivalent goods. When he was asked what would happen if the whole world became communist (as originally intended), he answered: “I’m afraid we’ll need to keep at least one country capitalist, so the rest of the world could use its prices as benchmark.”

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Stalin, a believer in super-specialisation had a grand plan. He wanted the USSR to produce only steel, lots and lots of steel, enough for the needs of the entire world. (Stalin got his name from Stal=steel in Russian). Later, that steel would be bartered against all consumer products the Soviet people needed. Such fantastic ideas are the product of the command economy. Unfortunately, other nations were not made part of Stalin’s daydream. USSR produced steel in excess that nobody wanted. Soviet people, however sturdy, couldn’t eat steel for lunch. When the USSR collapsed, less than 60% of the country’s GDP came from consumer goods, and negligible from services. It had 45,000 nuclear weapons, an all-time world record, and people queuing for bread and milk.

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An illiterate lady haggling at the bazaar, or a literate man searching the internet for the cheapest air tickets know what the market economy means.

In a market economy, sellers can keep raising the price until queues vanish. If a product is not moving, prices can be dropped until consumers flock back. If the State fixes the maximum price for bananas at 5 cents per dozen, bananas will immediately be in huge shortage. If the government taxes tobacco or alcohol unreasonably high, smuggling of those products will begin immediately. Market economy is a beautiful levelling mechanism that juggles between demand and supply to find the right price point.

Market economy is also about consumer focus and competition. 

   

Consumer orientation

Years ago, my school friend Hemant, a nuclear physicist, worked in the Kolar Gold Fields. Kolar is a South Indian town where gold was mined. Hemant was posted there for three years. He regularly visited a tiny tobacconist stall to buy ‘Honeydew’, the brand he smoked. When the assignment was over, and it was time to return to Bombay, he casually mentioned his impending departure to the tobacconist.

“Oh,” the tobacconist said, “in that case I’ll stop buying Honeydew from tomorrow.”

“Why?” Hemant asked, surprised.

“You’re the only one in this town who smokes Honeydew. For the past three years, I was buying it only for you.”

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Market economy and its constituents, like this tobacconist, are focused on serving and satisfying the consumer. In 2001, as a single man I often dined at a Mexican place close to my house in Warsaw. As soon as I sat at the table, the waiter would place a ‘double grapefruit juice no ice’ on my table without my asking for it. In the Soviet Union, I never had any such experience.

Competition and super-specialisation

 Since the Soviet state owned everything, there was no competition. State planners believed in super specialisation and created giant monopolies. I remember around 1992 or 1993, the ice cream packaging factory broke down. Ice cream was produced in another factory. For the next few months, in Moscow, we went to buy ice cream with steel containers from our own houses, much as one would buy milk in our childhood.

India’s mistake

China remains a communist country. During the cold war India was under the Soviet influence. Both avoided a USSR-type collapse, because they partially allowed market economy and free enterprise.

India made the mistake of offering subsidies on food, oil and gas, electricity, transport, fertilizers and many others. Paradoxically, a poor country can’t afford to become a welfare state. India’s interfering with the market economy often resulted in mass-scale corruption, theft and black market. Many such subsidies continue, keeping the cost of living down.

Had India not followed the Soviet route of 5-year State plans and heavy subsidies, India’s population would have been less than half of what it is. High cost of living is a great contraceptive. Fortunately, 25 years after the USSR collapsed, India has finally woken up to the fact that State planning doesn’t work. The twelfth 5-year plan ended in March this year turned out to be the last one. Indian Gosplan is finally over, thank goodness. Let the markets decide.

Education and medical: Should they be free?

Since I am such a strong proponent of market economy and free market (no govt interference), I must discuss free education and free medical, the two things Soviets were proud of (until they realised some western capitalist countries also offered both).

Education was free in the USSR. Medical services were free on paper, but in practice you needed to give the doctor anything from a vodka bottle to real cash. The quality of medical services was poor. (Read how a Moscow hospital treated me for antritis in my open diary week 15: 2009).

Education at all levels is free in Germany. My brother, an Indian citizen, studied at a German university for eight years and paid zero tuition fees. (Everything else was expensive, though). The education subsidy in Germany is not as bad as the food or fuel subsidy for two reasons.

a.      Education can’t be hoarded like potatoes or diesel. Education is rarely an attractive or addictive product. Students normally go to schools or colleges with the same degree of enthusiasm as a clerk working for the State accounts department.

b.      Since education is free throughout Germany, a certain quality can be maintained. In countries where both free and paid schools exist, the quality in the free schools starts falling.

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Free medical service is another debatable topic that can’t be covered in this short article. Health insurance was meant to be a vehicle, but USA has shown how it can become a scam. In the UK, NHS is severely under pressure. Certainly, wherever medical services and products are expensive, and uninsured, people pay more attention to their health.

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If one, and only one, factor were to be chosen for the failure of the Soviet Union, I would say it was the State planning system replacing the market economy.

Soviet Communism experiment: Lesson no.2: Market economy functions, State planning doesn’t. State is never as consumer focused as the market forces. Subsidies or repression of prices give rise to corruption, black markets, rationing, queues and inferior service.

Ravi