ABSTRACT
The recent problems of the food economy of the former Soviet Union have mainly involved distribution and demand, not agricultural production and supply. During 1986–90, despite growing perceived consumer food shortages, average annual output of both grain and meat in the former Soviet Union was about 20 percent higher than during 1981–85. The two major causes of food distribution problems have been macroeconomic imbalance and the breakup of the Union.
From 1985 to 1991 per capita money income in the former Soviet Union rose over 150 percent, creating severe inflationary pressure. However, state prices for most consumer goods, including foods, remained controlled below market-clearing levels. The results were repressed inflation, excess consumer demand, not only for food but for most consumer goods, and a large overhang (surplus) of ruble money unspendable at existing controlled prices. Since selling for rubles became increasingly unattractive, ruble money broke down 492in its main function as an accepted means of exchange. By 1991 much of the economy had reverted to crude barter as the dominant mode of exchange, especially at the regional and republic level.
Disruption in the flow of inputs, as well as reduced incentives to work, produce, and sell for rubles, eventually affected production. In 1991 agricultural output fell by 7 percent (according to official Soviet figures; GDP is reported to have dropped 17 percent).
The dissolution of the Union in 1991 further aggravated the distribution problems. The system of central supply and distribution at the All-Union level died along with the Union. The weakness of the ruble as a means of exchange, however, hindered development of a substitute money-based market system of exchange.
The breakup of the Union and conditions that created macroeconomic imbalance combined in another way to hurt distribution, in this case specifically the inter-republic movement of foodstuffs. Price controls not only helped generate consumer “shortages,” but also subsidized consumers who purchased at the controlled prices. To reduce the outflow of “scarce” foodstuffs, as well as prevent the export of consumer food subsidies, most republics by early 1992 had established quotas, or for some products complete bans, on food exports.
The main short-run objective of the ambitious economic reform program begun by Russia in January 1992, and followed to some degree by most other republics, is to restore macroeconomic balance and thereby reestablish the ruble as effective money. The key policy adopted to this end has been price liberalization, intended to eliminate the debilitating money overhang. Prices for most foods and other consumer goods have been freed. Price liberalization will succeed in restoring macro balance, though, only if the government prevents the further growth of inflationary pressure through fairly austere fiscal and monetary policies. Russian policy was strict from January through mid-April 1992. In response to strong opposition to the reform program, however, the Russian government made budget and credit concessions in late spring that will aggravate inflation.
Price liberalization has changed the mix and magnitude of monetary versus nonmonetary costs of obtaining food and other goods for different social groups. Nonetheless, Russia has sufficient food supplies in 1992 (with anticipated imports) such that market-clearing prices should not deprive the majority of people of a minimally acceptable diet.
