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January 19, 1999


What The Economic Crisis Has Meant for Russians.

by Julia Urakcheeva

Russian economists are the authors of the now-popular phrase: "The financial crisis destroyed Russian middle class". They say prosperous people became poor, and poor people became beggars. But one can probably disagree here.

First, at least those who invested their money in real estate and bought things they wanted to buy kept their money in dollars at home. They are more ready to deal with any economic troubles because they can rely on their previous savings. One can live pretty well exchanging dollars for rubles from time to time. Now that $1 exchanges for 21 rubles (before crisis, $1 = 6.5 rubles), it's even more profitable because prices are rising but not that much.

Second, there is definitely a great number of prosperous people who didn't suffer from the financial turmoil at all. Third, people's income differs sufficiently in every Russian city. The highest salaries are in Moscow, the lowest in Arkhangelsk and Tomsk (Siberia). Meanwhile, prices are practically equal (for some reason, red caviar costs in Moscow as much as in the Far East and may soon become cheaper than sausage).

But the fact is that most of the banks went bankrupt and bank deposits were frozen soon after August 17. Now the depositors can get their money, but only in rubles at a very low rate. That's why the economists say there is no more middle class as far as the banking crisis is concerned.

The basic problem for the average Russian is clear: prices rise, earnings don't. Now, everybody waits for some changes to come. At first, we all supposed that only imported goods would become more expensive. But, since all businesses are now economically connected, Russian products became more expensive too. The sum that was enough to buy everything for the New Year party last year is now enough to buy either meat or fruit. Butter is now three times more expensive!

At the beginning of September, when the crisis was in full swing, there was a tremendous rush in the supermarkets. People expected shortages would come, and they bought up everything that could be stored. The pensioners feared much - they recalled empty shelves, the dearth of food, food cards, and long queues. In three days even the last buck of wheat was sold off.

Russian chelnoks - those whose business is shopping in Italy, Greece, Turkey and China and selling things at the market -- had to quit shop-tours. The fact is that the middle and upper middle classes prefer buying clothes at the market, as there is a great choice and reasonable price and quality. Now, chelnoks sell off old stuff at new prices.

And now - the caveat: Everything I've told you is a theory; it is what SHOULD BE the result of the financial turmoil. In practice, there is much that deviates from theory (not everything, of course). I look at my city: No one looks more unhappy than usual. Plenty of people buy what they need in the stores and at the markets. Nobody begrudges about giving New Year presents. Luxury bars are full of people. Besides, right after the "ruble trouble" a number of new respectable shops opened in Rostov - Steilmann, a couple of jeans stores, Baskin Robbins' new subsidiary (not very popular, though). As for the old stores - no one went bankrupt. At the end of August some businessmen quit their business, and on the closed doors hung signs like "Sorry, we have a current account" or "Under construction." Now, their businesses go on again.

The "crisis" did not last long enough and is not a crisis any more. It's just a new condition. While it's true that we can't afford certain things now, the word "crisis" is heard less and less in talks but more and more in jokes.

Editor's note: Julia Urakcheeva is a second-year university student in Rostov-on-Don, Mobile's sister city in Russia. She will be filing regular stories about live in Russia.

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