TIME: Almanac 1995

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<text id=89TT0951> <title> Apr. 10, 1989: On The Front Line </title> <history> TIME--The Weekly Newsmagazine--1989 Apr. 10, 1989 The New USSR </history> <article> <source>Time Magazine</source> <hdr> BUSINESS, Page 81 ON THE FRONT LINE </hdr> <body> The co-op movement is thriving, but has run into resistance from bureaucrats and resentment among consumers 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. </body> </article> </text>