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Russia: Analysis from Washington--Markets and Movements

Washington, 8 October 1997 (RFE/RL) - The introduction of free markets in post-communist countries is dislocating people geographically just as much as it has dislocated them psychologically.

The psychological impact of the introduction of free markets has received a great deal of attention, but the geographic consequences of these markets have attracted much less -- even though in some cases, their political impact may be even larger.

In the centrally-planned economies of the communist period, governments decided where industrial plans would be located and hence where people would live. But it seldom made these decisions on purely economic grounds.

Sometimes these governments did so to improve their control over a particular region by moving in members of a different ethnic group. That is what the Soviet government did in the Baltic states.

Sometimes they did so to limit population pressure on major cities, preferring to build new ones rather than allowing too many people to flock to the capitals. That is what virtually all communist regimes did.

And sometimes, they made these decisions as part of their planning for national defense, introducing factories and workers into regions with little or no population in order to improve their ability to defend the country.

But with the collapse of communism, this entire system started to collapse. The new governments lost many of their levers to affect these decisions, and private entrepreneurs rather than governments began to make the decisions on industrial location.

In the Russian Federation where these new trends are the most obvious because of the country's size, the government is no longer in a position to offer either sticks or carrots to get people to move where it wants.

Instead, private entrepreneurs do. And they make their decisions on economic grounds, locating enterprises on the basis of economic efficiency rather than political goals. Combined with the collapse of state power in this sphere, that has had some dramatic consequences.

Even at the end of Soviet times, the state's use of coercion had declined significantly; now, it has virtually disappeared at least on decisions of this kind.

The registration system that allowed the regime to regulate who lived in the major cities has been outlawed, although some local officials continue to try to enforce a variant of it, albeit with virtually no success.

And the massive subsidies that the regime offered workers to move to Siberia and the Russian Far East have almost completely disappeared, eliminating one of the major reasons Russians and others had been willing to relocate there.

These changes have had three major if largely unrecognized consequences for where industrial plants are located and where people live.

First, the collapse of subsidies has meant that many who moved to the north and east of the country are leaving to go back to European Russia, where most new industrial development is taking place.

As a result, the demographic mix in Siberia and the Far East is changing, with the number of Russians declining relative to that of some local nationalities. And while this process is still in its infancy, eventually it could tilt the balance of power there. Second, it has led to a flood of people coming into the major cities. In the absence of restrictions, entrepreneurs are interested in taking advantage of the savings they can achieve by building where people want to live and where infrastructure already exists.

And third, and as a result of these two developments, plants in some less popular region are now without the workforce they had at the end of the Soviet period. Moreover, these plants have little prospect of attracting workers anytime soon unless subsidies resume.

That development has exacerbated both the economic decline in the Russian Federation and has meant that much of the industrial infrastructure outside of popular regions must simply be written off as a loss.

Polls suggest that many Russians and others in post-communist countries are getting used to the market psychologically. But these larger geographic trends appear likely to be a problem for them at least for the foreseeable future.