Private Business Profits Irk Soviet Lawmakers : Deputies Charge Price-Gouging and Speculation by Cooperatives, Want Them Closed or Curtailed

The Soviet Union’s small private businesses, launched to provide the products, services and economic dynamism that state enterprises could not, came under fierce attack Tuesday for price-gouging, profiteering and speculation as lawmakers debated their future.

When Leonid I. Abalkin, the deputy prime minister for economic policy, urged members of the Supreme Soviet, the national legislature, to expand the rights of cooperative businesses and leave their regulation to local governments, dozens of deputies rose to demand that they be closed down or sharply curtailed.

“A cooperative businessman sits in his restaurant and spits in the face of the worker,” a Ukrainian deputy declared. “The cooperative movement, as we have it today, is very, very bad.”

Outraged Over High Prices

Lawmakers from across the country rose one after another to say that their constituents are outraged by the high prices charged by cooperatives for goods and services that once were available from state enterprises at fixed prices.

The complaints were heartfelt and bitter, reflecting all the resentment that only a few people seem to be benefiting from perestroika , President Mikhail S. Gorbachev’s program of restructuring Soviet society and its economy.

Veniamin Yarin, a deputy from the Urals, said the proposed legislation would “only legalize the plunder of the working man.” In drawing up the laws, he said, the government’s economists had ignored the views of the trade unions.

Even Gorbachev, long a supporter of the cooperatives, joined the angry outcry, asking why some cooperatives charged the equivalent of $9 for a box of detergent, now in seriously short supply in state stores, that should sell for no more than 62 cents.

“We have to take into account the mood of the people,” Gorbachev told the lawmakers.

Alluding to the many complaints he has received about cooperatives, Gorbachev said he still backs cooperatives but wants to see their prices brought into line with those of state enterprises, as well as stricter enforcement of laws against economic speculation and corruption.

Another factor, unspoken but evident in the popular complaints, is plain envy, long acknowledged as a Russian social trait. Cooperative employees typically are paid twice as much as their counterparts in the state-owned sector of the economy, and some of the most successful of the new Soviet businessmen are already “ruble millionaires.”

In one of Gorbachev’s most important economic reforms, individuals were allowed starting in 1987 to set up small businesses--alone, with relatives or with friends--to provide goods and services that the state-run economy could not. Some are true cooperatives owned by their workers; others are simply privately run businesses.

The cooperative movement has grown geometrically in the past two years. There are now 2.9 million people working in more than 100,000 cooperatives, more than twice the number of employees than at the beginning of the year. The cooperatives’ turnover in the first half of 1989 totaled $19.8 billion, more than twice that for all of 1988 and already more than twice the peak forecast for 1990.

More Competition Sought

Abalkin, promoting legislation that would permit the cooperatives to compete on an even footing with state enterprises, argued strongly that they are now starting to play a significant role in some sectors of the economy. He said this is an important move away from the centrally managed, state-owned Soviet economy toward market socialism.

The profiteering and black marketeering reflect deficiencies in the whole Soviet economy, he said, and not just in the cooperatives. He blamed the state’s own economic mismanagement for any black marketeering and excessive wages in the cooperatives.

He said the solution lies in curbing the cooperatives’ excesses, preferably through tougher law enforcement by local authorities, while continuing to benefit from their dynamic market orientation. Heavier taxes would be levied on excessive profits.

“The development of cooperatives has brought forth many businesslike, entrepreneurial people . . . giving the economy flexibility and dynamism,” Abalkin said. “They have taken the first serious, practical steps toward the formation of the socialist market about which we have been talking for so long.”

Eventually, Abalkin persuaded the deputies to vote, 370 to 69, to send the proposed legislation to a committee for hearings before it is considered again.

The bill was the first regular legislation, other than the budget and next year’s economic development plan, to come before the Supreme Soviet, which reconvened Monday for a two-month session.

The debate continued for so long that the introduction of another bill, which would grant amnesty to Soviet soldiers who were captured or defected to the enemy while in Afghanistan, was postponed.