Will Continue to Grow, Trade Paper Says : $145-Billion ‘Shadow Economy’ Is a Soviet Success Story

A booming “shadow economy” that supplies everything from car repairs to funerals and earns up to $145 billion a year has created thousands of Soviet millionaires, a senior economist from a state planning body told the trade union daily Trud on Friday.

By comparison, the entire Soviet state budget for this fiscal year is about $760 billion.

Economist Tatyana I. Koryagin told the labor newspaper that the underground economy will continue to grow until rubles earned by average people become more than “paper that gives you the right to stand in line and be humiliated.”

Koryagin said home decorators, mechanics, tailors, doctors, private taxi drivers and even undertakers were among those who provided services in what she called the “shadow economy.”

The main items are overpaying workers for better housing and car repair, tailoring, and better attention at weddings and funerals, the newspaper said.

Many Soviets gladly pay more on the side for scarce goods or to have a repairman do better, faster work. They also give doctors a gift or cash to be more attentive. Extra money, in turn, gives those who earn it a chance to buy goods and services above state-set prices.

Mikhail S. Gorbachev’s moves to legalize cooperatives and some individual labor have brought some people out of the shadows and into the official economy where they pay taxes. But many more remain outside, corrupting the official system, the article said.

Services provided on the side, or na levo, in Russian, account for about $22 billion to $24 billion a year, or about one-quarter of the entire amount Soviets pay annually, it said.

The article said that 15 or 20 years ago, the value of underground services was about $4.8 billion to $8 billion. Today, together with the underground trade in food and other goods, it ranges from $110 billion to $145 billion.

The shadow economy is well known, but figures are rarely given for its size. Under Gorbachev’s policy of glasnost, or openness on selected topics, the Soviet media have been more critical of social problems.

Koryagin disagreed with some Soviets who see the underground economy as merely instituting one of the main aims of Gorbachev’s reforms, paying more to people who work better.

“Underground businessmen pull into their affairs the bureaucracy and the apparatus, which increases the growth of corruption--in order to live in the existing system it’s necessary to bribe people who don’t do anything themselves but who have the final ‘yes,’ or ‘no,”’ she was quoted as saying.

The Soviet Union has a few hundred legal millionaires, mostly writers and artists, but probably thousands more in the shadow economy, the article said.

“There are among them people who don’t have a ruble in cash. Their money is constantly turning over in order to bring them an income,” she reported.

The underground economy will continue to exist until the official economy can provide the goods and services people want, the article said.

That means the economy must in the future be managed by the laws of the market rather than bureaucrats, it said.

“That means we need directives that would return land to farmers, and factories to the workers--to make the people the all-powerful masters of the country,” Koryagin concluded.