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- BUSINESS, Page 81ON THE FRONT LINE
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- The co-op movement is thriving, but has run into resistance from
- bureaucrats and resentment among consumers
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- When Andrei Fedorov ran a state-owned restaurant in Moscow,
- he made 190 rubles ($304) a month even if no one came to dinner.
- "I didn't care if we had customers or not," he says with a
- shrug. "I didn't care if the service was good." Two years ago,
- he started his own now popular bistro, Kropotkinskaya 36, just
- off Sadovaya Ring Road in the Soviet capital. Fedorov pays
- himself about 850 rubles ($1,360) a month, nearly four times the
- average Soviet salary. But he works twice as hard as he ever did
- as a government employee. "If I don't have customers," he says,
- "I'll go bankrupt."
-
- Fedorov is far from it. Last year his restaurant earned a
- profit of 600,000 rubles on revenues of 2 million rubles. Some
- of Fedorov's fellow Soviet citizens feel threatened by his
- success. For example, he wants to buy a farm to ensure himself
- a supply of quality produce and meat. But fighting his way
- through a bureaucratic maze to get the requisite permits is a
- thankless task. "Rather than create opportunities for real
- competition," he says, "these ministries are trying to tie our
- hands. I go to the ministry, and they say what I want to do
- isn't necessary. They say we are not part of socialism."
-
- Fedorov's experience of fortune mixed with frustration is
- typical of the thriving entrepreneurs -- capitalists without
- the name -- who exemplify a key but controversial part of
- Mikhail Gorbachev's economic-reform program, the cooperative
- movement. In 1987 Gorbachev proposed the formation of privately
- owned, profit-oriented cooperative enterprises to supplement and
- even compete with state-run projects. The primary goal of his
- proposal, which in many respects echoed Lenin's quasi-capitalist
- New Economic Policy of 1921, was to inject vitality into the
- U.S.S.R.'s laggard consumer goods and services industries. In
- addition, the new co-ops would pay taxes and presumably absorb
- some of the 15 million workers who might lose their jobs in a
- much needed pruning of the bureaucracy.
-
- Like Fedorov's restaurant, the co-op movement has taken off
- -- but it faces a bumpy ride. Although they now account for only
- about 1% of the country's economy, the 48,000 Soviet co-ops
- (there were only a handful a year ago) employ some 770,000
- workers. The services they offer read like a Yellow Pages
- directory: animal grooming, auto repairs, computer maintenance,
- hairstyling, plumbing, translating -- even operating pay
- toilets.
-
- Despite Gorbachev's strong support for the co-op movement,
- many apparatchiks remain hostile. Under prodding from the
- bureaucracy, the Soviet Council of Ministers last December
- imposed stringent new limits on co-ops in such sensitive areas
- as medicine, education and publishing. More crackdowns are
- imminent. One Moscow businessman charges that the bureaucrats
- are jealous of his success, constantly asking how much money he
- makes rather than how much in taxes he pays. This entrepreneur
- is appalled by the system's endemic shakedowns: "Say I'm in
- private publishing, which is no longer allowed under the new
- cooperative decree. So I go to a state publishing company and
- say I want to publish and will give them 50% of my profits. They
- say I can continue publishing if I hire five of their
- bureaucrats. I don't need them, and I have to pay them. But I
- can continue publishing. That's the new state racket, and it's
- corruption."
-
- Another hardship facing the co-ops is extortion by
- organized crime. Last December at least two Moscow cafes were
- vandalized, and in January thugs attacked another private
- restaurant, knifing customers and setting it afire. In response,
- some co-op owners have paid bribes to the racketeers or offered
- them phony jobs in return for protection.
-
- Some opposition to the co-ops is based on more than sloth
- or jealousy. Most Soviet citizens are dismayed by high prices
- in the private shops, which typically are at least twice the
- going rate at state stores. In February Pravda accused some
- co-ops of buying raw materials at bargain prices from state
- factories and then selling the finished goods at huge markups.
-
- Soviet citizens grumble about their economic system, but it
- is the only one that most of them know; they are understandably
- wary of experiments that allow some individuals huge profits.
- In the poll for TIME conducted by the Soviet Sociological
- Association, more than 30% of respondents expressed an interest
- in joining a cooperative, but those over 50 years of age had
- strong negative feelings about the movement. Entrepreneurs fear
- that their prosperity may be short-lived. "Co-ops are on the
- front line of perestroika," says Kropotkinskaya's Fedorov, who
- is secretary of Moscow's 6,500 co-ops. "But we don't know what
- will happen next. I keep thinking day and night that I'll be
- told, `You have to close.' There is a tug-of-war going on
- between the cooperatives and the bureaucrats -- and the
- bureaucrats are winning." Still, as long as the battle
- continues, the Soviet people will experience something truly
- rare in their socialist history: economic initiative and service
- that works.
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