Thursday, April 15, 2021

Russia Drifting toward Soviet-Style Regulation of All Prices, MGIMO Expert Says

Paul Goble

            Staunton, April 12 -- The news in Russia increasingly resembles “reports from the fronts,” one foreign in which Russia and the West appear ever closer to military conflict and one domestic in which the regime is trying to block inflation by administrative measures, Avtandid Tsuladze says.

            As a result and particularly with reference to the domestic situation, the MGIMO scholar continues, “Russia is being transformed into an imitation of the USSR.” Given how that ended, this must be a cause of concern (

            The Putin regime first focused on controlling prices for two items but the list keeps growing, a reflection of the reality that “the regulation of prices for specific categories of goods inevitably creates disproportions in the marketplace which can be removed only by two means: either rejecting regulation of prices by administrative methods or regulating all of them.”

            The Soviet New Economic Policy foundered when the regime attempted to regulate some prices but not all, and then Stalin decided that it would be better to regulate all prices rather than suffer the problems arising from trying to control the prices of only a select group of consumer goods.

             Later Soviet efforts by Aleksey Kosygin and then Mikhail Gorbachev to try to control only some prices while allowing others to fluctuate failed, and after 1991, via “shock therapy,” the country went from most prices being controlled to none of them almost overnight with consequences few have forgotten.

            Now, the Putin regime is returning to the mix of regulation and non-regulation that led to disaster in the past, and it will soon be forced, Tsuladze says, to choose either to move to total regulation or total deregulation or suffer the consequences reform efforts under the Soviets experienced.

            Many Russian officials favor a return to free market price, but the Kremlin has indicated that it favors increasing controls and cites the international situation as the reason. Because it cannot control that, it must control the impact of the worsening international environment on Russian life at home.

            The mobilization regime that the Russian leadership is promoting “presupposes not only information wars and military maneuvers but the preparation of the economy for a mobilization regime, which means an intensification of state regulation,” the MGIMO expert continues. But the results aren’t going to be what it wants at least anytime soon.

            As a result of the government’s approach, “the market economy will lose its effectiveness and there still won’t be a planned economy” to take its place. As a result, Russia will be confronted again by a situation in which there is neither a market nor a plan, the worst of all possible worlds.

            “At present,” Tsuladze says, “the powers are trying to avoid such a harsh choice by imitating Soviet mobilization methods both in the economy and in foreign policy. The Harsh foreign policy rhetoric and military exercises on the Western borderlands represent a kind of information-psychological special operation” to support its domestic policies.

            To be sure, “the regulation of prices is a necessary element of the rebirth of ‘the Soviet matrix,’” he argues. “The state not only defends against foreign enemies but provides the population with everything needed for survival.” In this situation, market fluctuations became a kind of “’enemy’ which must be contained and still better defeated.”

            “However, the imitation of the grand Soviet style for a real improvement of the well-being of citizens of the country is insufficient” because of the ever-growing gap between rich and poor in Russia. Controlling food prices won’t end that; indeed, it may have the effect of making the situation even worse.

            “This is not how those who imagine the revival of the USSR with nostalgia for ‘the bright past’ expected things to turn out.”

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