Free Trade at Cherkizovsky Market

You can find a number of conflicting explanations in the Russian media regarding the closing of Moscow’s Cherkizovsky Market. It is enough to make your head spin. One version states that Prime Minister Vladimir Putin shut down the market, which is controlled by Telman Ismailov, as retribution for Ismailov’s inappropriately lavish opening ceremony for his new luxury hotel in Turkey — the most expensive in Europe.

Another theory holds that the closure is the opening salvo in a serious fight against corruption in the Federal Customs Service. A third version of events maintains that the federal authorities are really out to get Mayor Yury Luzhkov, who is believed to have close ties to Ismailov.

Which version should we believe? I choose the version put forward by Vedomosti. Citing an internal Industry and Trade Ministry report, the publication argues that the authorities clamped down on Cherkizovsky Market as a means for protecting Russia’s light industry. One top ministry official was quoted as saying, “Every stand in the Cherkizovsky Market puts a Russian shop out of business.”

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What makes this version credible for me? I once saw firsthand how a domestic manufacturer was sacrificed to the principles of free trade.

Back in 1989, years before any of the country’s market reforms were introduced, I was acquainted with a farmer from a village in the Kuban region named Uncle Vanya. He was about 70 years old and owned a herd of 17 cows. A state-owned milk truck stopped by twice a day to buy his milk at a price that Vanya found quite satisfactory. “I used to have more cows,” he complained, “but I’m not as strong now as I used to be.”

In 1991, his children wanted to expand the business. “We would like to own a tractor,” one of them said. A few months later, during the peak of liberal market reforms, an acquaintance of mine told me that he had found a source of credit for the tractor. But in reaction to the news, they said, “Let’s buy a truck instead of a tractor. Now, it is much more profitable to import Turkish products for resale than to produce something yourself.”

At that point, I gave up trying to reform Russian agriculture. When Uncle Vanya died shortly thereafter, his children lost no time in selling off his herd, and they started a shuttle trade business of importing goods for local resale. Perhaps they were among the people whose businesses suffered from the closing of Cherkizovsky Market.

This story shows how the Russian government could easily have helped develop the economy using protectionist policies during the transition period by protecting the country’s budding industries from the competing and clearly more effective foreign manufacturers. And now, free trade has wreaked havoc on Russian industry and agriculture.

What’s more, overall demand is far higher now than it was in the early 1990s, and an extremely powerful criminal lobby with close government ties speaks out in favor of free trade. The closing of Cherkizovsky Market has caused the loss of tens of thousands of jobs, countless personal tragedies and even a diplomatic scandal with China. As one especially expressive headline summed up the situation, “Putin Has Raised His Hand Against an Independent State.”

It seems that the closure of Cherkizovsky Market is a clear indication of where Russia’s sovereign democracy will take us.

Alexei Pankin is the editor of IFRA-GIPP Magazine for publishing business professionals.