Online NewsHour: Russia's Economy -- October 27, 1998



	COLLAPSING ECONOMY

October 27, 1998

Russia's economic meltdown has taken an extraordinary toll on the lives of most Russians. Special Correspondent Jennifer Griffin reports from Southern Siberia on how ordinary Russians are coping with the crisis.

Sept. 2, 1998:
President Clinton visits Moscow.

Aug. 31, 1998:
A look at how Russians view the crisis.

Aug. 24, 1998:
President Yeltsin sacks his government.

July 13, 1998:
International lenders agreed to loan Russia over $22 billion

April 24, 1998:
Sergei Kiriyenko is confirmed as Russia's prime minister

March 23, 1998:
President Yelstin sacks his cabinet

The Russian Foreign Ministry

The Russian Embassy in Washinginton, DC

JENNIFER GRIFFIN, Gorno-Altaisk, Russia: Yelena Efimova, like most Russians, hasn't received her salary since April. She teaches Russian in the Siberian town of Gorno-Altaisk. Now inside classrooms like Efimova's, an experiment born out of economic desperation is taking place. The local government has started paying its wage arrears through barter. It now lets teachers go to local stores choose the products they need and deduct them from their salaries. Store owners keep track of what the teachers buy, checking their names off lists given by the school. Under the new system little money ever changes hands, but the teachers get what they need - flower, pasta, and, of course, vodka. In the state-owned dormitories where the teachers live, Alexei Zorkin pulls from his cupboard the goods he bartered for this month. Many teachers traded their salaries for vodka, which Zorkin says has long been an alternative currency.
Zorkin ALEXEI ZORKIN, Teacher: (speaking through interpreter) During the Soviet Union vodka was highly valued. When someone came to fix your electricity, you offered to pay them in vodka, which seemed more decent than offering money.

Return of the barter system.

JENNIFER GRIFFIN: Now, everyone gets something out of the barter system. Stores that owe taxes can deduct the value of the goods chosen by the teachers from what the shops owe the government. Rather than wait for the tax police to confiscate their goods, the shopkeepers happily comply. In a land where bills are still figured on an abacus, it's not that strange to return to such an old way of doing business. Efimova and her colleagues say it isn't a perfect solution; it is a desperate measure.

YELENA EFIMOVA: (speaking through interpreter) We didn't have money before, and we don't have money now. The prices have grown, but what do we care whether something is thirty or forty-five rubles? We don't have either.

jennifer griffin JENNIFER GRIFFIN: So Efimova is preparing for what is always a long winter in Siberia, storing food she grows in her garden and pickling anything fresh so that she and her daughter have something to eat. In kitchens across Russia, a similar ritual is taking place, because people don't know how long food supplies will last. Nearly half of all consumer goods Russians buy are imported. With hard currency reserves dwindling, those imports are slowly disappearing. In remote parts of Russia, like here in the Republic of Altai near Russia's Mongolian border, it's not necessary to rely on imports. People from here have always lived off the land. Rich in natural resources like lumber, the republic has stopped depending on Moscow to subsidize its local industries. Now, it trades its lumber for coal and other necessities from neighboring republics. What strikes people most about the Russians is their patience, especially under difficult circumstances. In this Siberian town most of the winter it is 30 degrees below zero. When asked how they deal with such brutal winters, the people of Altai said, "You get used to it." But the government is worried not everyone will remain patient. One man grew so desperate about not being paid that he fell to his death as he tried to hang himself from the Lenin statue in downtown Gorno-Altaisk. Local officials say more suicides or violence could result if the national government in Moscow doesn't find a quick solution to the economic crisis, which grew dramatically worse in August, when the government defaulted on its debt.

As Karl Marx said....

YURI ANTARADONOV, Governor, Altai Republic Russia: (speaking through interpreter) Barter will continue, but it can't go on forever. A person needs more than just food to exist. He should also educate his children, be well dressed, and pursue a cultural life. In Das Kapital, Karl Marx wrote that barter worked under feudalism until the peasant exchanged their wheat for axes.

JENNIFER GRIFFIN: Among those ready to trade their wheat, their axes are these mothers, who are demanding child support from the government. They are unemployed and have nothing to barter.

NADEZHDA SURKASHEVA, Unemployed Teacher: (speaking through interpreter) We are not getting any help from the federal government. Our people are on the verge of extinction we have nothing to feed our children. They can't go to school because they don't have clothes or boots to wear. There is a high suicide rate among our youth. Kids don't just want to live. In the villages it's even worse. That is why we are here protesting.

JENNIFER GRIFFIN: But many don't have the energy to protest and, instead, show up at work each day, hoping that someday the crisis will ease. At the town's children's hospital workers haven't seen wages in five months, and now that winter has arrived, there is no heat.

LUDMILA PONOMAREVA, Nurse: (speaking through interpreter) We have no drugs or medicine and no bandages. Our clinic is technically closed. We only take kids in critical condition.

Sick Children JENNIFER GRIFFIN: Even the children who are admitted are crowded into wards like this, waiting to get well. Their mothers share their beds and bring them food from home because the hospital can't afford to feed them. There are no quick remedies to these children's ailments, nor for the Russian economy. And so all across Russia people are doing what they always have done to scrape buy. Thousands of miles from Siberia in this potato field near the town of Korolyov outside Moscow, potatoes are like gold and people fight over what they find. Soldiers who haven't been paid either search the government's collective fields looking for potatoes in exchange for their wages. When they finish, they let pensioners like Galina Varvarcheva scrounge for leftovers.

GALINA VARVARCHEVA: (speaking through interpreter) This is a sick one. This one is sick too. But this year we'll even eat the sick ones.

JENNIFER GRIFFIN: Mikhail Maxov says he and his mother found enough potatoes to survive the winter.

MIKHAIL MAXOV, Security Guard: (speaking through interpreter) I have a small salary, so my only hope was in these potatoes. I don't know what will happen further down the line with my work. They could fire me, so I have to put my faith in the harvest this year.

Blood money

JENNIFER GRIFFIN: Elsewhere, in towns like Yaroslavl, about 150 miles East of Moscow, the situation is even more desperate. People line up each day to sell their blood to the government. They are paid $3 a pint. Most donors say they wish they could come more often, but the blood bank officials limit them to once a month.

DR. ANATOLY VERONIN, Director, Yaroslavl Blood Bank: (speaking through interpreter) So many people are showing up here and not only in Yaroslavl but across Russia I am hearing connected, of course, with the financial crisis, unpaid wages, unpaid pensions, a general delay in all payments. Due to this, people are desperate for any way to make money. Here they can make a bit of money that will at least get through another week.

JENNIFER GRIFFIN: But in Siberia, unlike Yaroslavl, things aren't that bad. People like Yelena Efimova still have food in their gardens, and Alexei Zorkin is rationing his bartered salary to make it through the winter - a winter in which many fear the worst. At least for some of the people living in towns like Gorno-Altaisk, they have something to barter and to eat.