Learning to live with the conquering dollar

June 19, 1991

By Renfrey Clarke

MOSCOW — The flat was bright and spacious. The location, however, was not what I'd wanted: far from the centre of Moscow on a relatively ill-served train line. But even in this unpopular locale, the monthly rent I recalled she had quoted me was, in rouble terms, three times the pay of a senior Soviet engineer.

She poured tea, and I came straight to the point: "Now, as I recall from the phone, you said it was $50".

Her face took on an air of bewildered disappointment. "Oh no", she said faintly. "I said 500."

There was nothing for it except to pour some more tea, chat and enjoy pleasant company on a mild evening. We were both prisoners of the absurd. She was hundreds of dollars over the market price, I reflected, but if she were patient and used the services of the North American flat-finder whose number I gave her, she might well get 20 times the engineer's wage. Someone with a car, I speculated, a foreign employee of one of the new Western firms, would take the place on.

Meanwhile, after a month of flat-hunting, my last hopes of a good deal had evaporated.

What we had contemplated doing — I for $50, she for $500 — was totally illegal. Soviet law states with great explicitness that it is a crime for Soviet citizens to accept foreign currency without authorisation. But in the past few months, a hard currency rental market has arisen in Moscow, and the market has chased the law out the window.

The Soviet government wants foreign investment and know-how; that means resident foreigners. The foreigners need to be housed, and are able to pay rents in dollars or marks — "real money!", as any taxi driver will tell you with a malicious chuckle.

Until recently, the rather small number of Muscovites with flats to rent were generally cautious; rents were quoted in roubles, even if dollars were gladly accepted. But today things are different. In the advertising supplement to the newspaper Evening Moscow, every classified in the "to let" section now includes the letters "SKV" — standing for "freely convertible currency". Many foreigners face a choice of breaking the law or going home.

Spurring on the process of "dollarisation" is the fact that

the number of foreigners in Moscow is growing fast. Western corporations are getting in early, confident that the economic collapse and civil mayhem of the early 1990s will be followed by big profits in subsequent years.

Years ago, the living arrangements of the tiny foreign community in Moscow were strictly policed. But now there is no way the law-enforcement agencies — overwhelmed by the spread of gangsterism — can check on the terms of tenancies, or on whether rents are paid in dollars or roubles.

More to the point, the Soviet state has lost the will to prevent speculators from enriching themselves. Living standards in the USSR used to be low but relatively equal. Now they are even lower, on average, and equality is a fading memory.

The fortunate Russians who control assets which can be used to derive unearned income quite often lay their hands on sums which are unimaginable for those forced to live on their wages. Within a few weeks, the pleasant office worker who drank tea with me in her apartment in a Moscow suburb will probably have an income four times that of President Gorbachev.

Meanwhile, the Soviet press regularly quotes speeches by parliamentary deputies claiming that in the new USSR of private property and the market, rewards are starting to flow to those who deserve them — the enterprising and energetic.

Frustrations aside, a month of flat-hunting in Moscow has brought the economics texts alive for me. Take, for instance, the pages on the formation of the market.

In theory, buyers and sellers in the marketplace have a comprehensive knowledge of the conditions influencing supply and demand. I have been skeptical of this notion since a woman phoned, asking $3000 a month for a modest flat.

Curious, I asked how she had arrived at this figure. It emerged that her husband had been charged $100 a night in Western hotels, and that he had multiplied by 30.

On a more sombre note, anyone looking for housing in Moscow today feels the damaging effects of international capitalism moving in on a much less developed and less prosperous society. The monthly rent on a noisy, run-down apartment I checked out was still quoted in roubles — 2500 of them, the equivalent of about $90. But according to the neighbours, the owner had heard he could do better by letting it as office space to a foreign firm.

When I checked again shortly afterwards, the price was $200.

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