Commodity Markets Reshape Distribution as the Centralized Distribution System Collapsed, New Commodities Exchanges Emerged across the Former Soviet Union. Unlike Their Counterparts in the Rest of the World, These Exchanges Deal in Retail Goods. Some Disdain Them as Outgrowths of the 'Shadow Economy,' but Others See Them as a Bridge toward a Free-Market System

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YURI SOBOLEV sits quietly in a green plastic chair, studying a thick computer printout. Young men and women bustle around checking computer screens in the center of the large hall of the former central post office. A marble bust of Lenin perched in an archway on the second floor balcony surveys the scene.

Another day of trading is about to begin at the Russian Commodities and Raw Materials Exchange, the largest and most successful birzha of the almost 500 exchanges that have sprung up across the former Soviet Union. The exchanges bear a closer resemblance to oriental bazaars than to the pit of the Chicago Mercantile Exchange, trading in goods ranging from cassette tape recorders and used Mercedes sedans to tons of Siberian crude oil.

"This is a linguistic problem," says Russian Deputy Premier Yegor Gaidar. "We lead the world in the number of commodities exchanges, although trade in retail rather than wholesale goods is not what commodities exchanges do in the rest of the world."

Today, Mr. Sobolev hopes to buy 20,000 to 30,000 pieces of winter clothing for a state trading company in the far north. Sobolev was a computer programmer at a defense plant until a year ago when a friend organized the brokerage firm AvanBrok, whose main clients are state-run defense enterprises. "They've lost their supply outlets," he says of his clients. "They have to get it for themselves." Exchange replaces state

The birzha is a unique product of the breakdown of the centralized Soviet distribution system, formerly run by Gossnab, the State Committee on Supplies. State-run enterprises received their supplies through Gossnab, and they returned most of their production to it. Alongside the official economy there emerged the "shadow economy," embracing everything from informal barter deals between factories to a black market in state goods.

In part, the birzha simply reflects the emergence of the shadow economy into the open. Some disdain birzhy as corrupt because of bribes regularly paid and deals often made outside the auction floor. But others see them as a bridge between the planned economy and the market, and as a place where young brokers are making fortunes that will be the seed capital for entrepreneurship.

The Russian Exchange was organized a year and a half ago by mathematics-professor-turned-entrepreneur Konstantin Borovoy. "It was clear economic decline was on the way," Mr. Borovoy recalls, sitting in an office decorated with pictures of himself with well known people such as the patriarch of the Russian Orthodox Church. "The ties between consumers and producers had been ruptured."

In the beginning, the exchange dealt with imports, because only they were free of state price controls. Then it expanded to include wood products, then metals. "It was like a whirlpool which sucked in everything," Borovoy says. Slowly state enterprises started dealing there, buying supplies and selling the small percentage of their production they were not forced to give up to the state. Officially about 12 percent of distribution is now conducted outside of the state system, but Borovoy estimates the number is at least twice that.

Even Gossnab created its own exchanges to act as a formal locale for state firms to carry out barter deals between themselves. Defense industries operate about 20 such exchanges.

Most of the exchanges result from the shortage economy. …


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