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One giant Cherkizovsky

(Agencies)
Updated: 2009-08-06 13:43

The situation surrounding Cherkizovsky Market in Moscow has raised many questions. Once they are answered, we can better understand the long-term trend in the country's economic policies as a whole.

First, how was Cherkizovsky allowed for many years to be filled with billions of dollars of goods that never passed through customs? Now that the authorities have seized $2 billion of purportedly contraband goods at the market, will the Federal Customs Service and other law enforcement agencies be held accountable for the obvious violations? The full scale of the problem becomes clear when considering that Cherkizovsky Market is only one of 19 such markets in Moscow - not counting the many others like it across the country - and that there is every reason to believe that few, if any, operate in full compliance with the law.

Related readings:  Cherkizovsky Market closure heralds transformation of trade  Moscow market: Chinese traders get some help  Chinese delegation in Moscow over market closure  $2b in stock stuck in Moscow's grey limbo  Delegation heads to Moscow for talks in smuggling crackdown

Second, why was Cherkizovsky closed? Was it because of complicity on behalf of the market's owners in violating trade laws or for taking business away from the country's struggling domestic light industry? If it is because of the latter, the deputy trade minister who advanced that hypothesis should provide an analysis detailing the comparative costs for producing, for example, the same shirt in China, Turkey and Russia. He should ask himself why Russia's light industry is not competitive. Perhaps it is because of the violations of Russia's customs and tax laws or from systemic economic factors such as higher wages, the cost of raw materials, rent, service fees levied by natural monopolies, taxes, or labor productivity. If, for example, all Cherkizovsky-type markets were closed down, how much would the cost of basic clothing and footwear increase for the ordinary consumer? Perhaps the fact that retail sales fell by 9 percent in Moscow's most law-abiding stores during the first quarter, while the virtually unregulated centralized markets rose by 11.2 percent, reflects much deeper social and economic problems.

Third, I have doubts whether substituting imported goods with Russian products and supporting domestic production is a panacea. Take a look at the pharmaceutical market: The price of imported medicines rose by 11 percent during the first half of this year, but the price of domestically produced medicines rose by 20 percent.

Finally, it is a big misconception that by lowering the quota for foreign workers during the crisis, Russia is saving jobs for its own citizens. If it were to shut out all foreigners, Russians would hardly rush in to sweep their own stairwells and clean up their own yards. The country's leaders are again making pronouncements about the importance of small businesses, but the government has yet to provide even a single preferential credit it promised, and has, in fact, tied the hands and feet of the people who could work most actively to pull the country out of the present crisis.

Whatever conclusions might ultimately be drawn concerning the Cherkizovsky Market closing, I would draw attention to one consideration in particular, even if today it seems to be of only secondary importance. I would suggest that the Culture Ministry become involved to raise migrants' ability to adapt to Russian society. On one hand, the country's labor market is saturated, but on the other hand the economy is suffering an acute shortage of unskilled laborers who are willing to do the jobs Russians have traditionally considered undesirable. Simple, small-scale retail jobs are among them. Wouldn't it therefore be better to help people who are willing to work these less prestigious, but absolutely essential, jobs by creating an environment that would help them adapt to Russian culture, rather than forcing them into social enclaves? These workers number approximately 500,000 individuals - about the same number as Russia's population loses to natural attrition every year.

Of course, the situation with Cherkizovsky Market will be resolved, just as the problem with work stoppages in Pikalyovo was resolved. But the solution must address the fundamental, underlying causes, and not merely the superficial symptoms. Otherwise, we will be left with the impression that the entire Russian economy is just one giant Cherkizovsky Market.