Rise in prices: Russian realities

2024 Author: Henry Conors | [email protected]. Last modified: 2024-02-12 02:40

Unfortunately, price increases have become an integral part of the realities of the Russian economy over the past three decades. The older generation periodically nostalgic for the Soviet era, when everything was quite stable, and it was possible to plan their personal expenses almost a year in advance. At that time, the size of wages was well known, and there was absolutely no increase in the prices of goods.

Pricing in a planned state economy

For almost the entire Soviet period (with the exception of a short time period of the NEP), the state intervened in the economy with a fairly tough hand. Almost everything was subject to planning and accounting: the production of tanks, and the tailoring of children's overalls, and baking bread. All enterprises belonged to the state, therefore, they did not differ much in terms of the principle of management from budgetary institutions.

Production chains have been strictly built and stable. The calculation of the cost of goods was carried out quite simple, almostmathematical methods, since it was expected that the supplier of raw materials would sell it at the same, fixed cost. The increase in prices for any product was carried out exclusively in a planned manner on the basis of decisions of the state. And for the basis of all calculations, indicators of the statistics service were taken. Recall only the famous Ryazan "Office Romance" with L. Gurchenko and A. Myagkov. Do you remember Lyudmila Prokofievna's phrase about low-quality calculations that will lead to a shortage of a particular product? This concerned just the statistical authorities.

Rising prices in the nineties

The first tangible signs of the arrival of a market economy in the framework of ongoing economic reforms were precisely the fluctuations in prices in stores. This was especially true for products produced by cooperatives in the late 1980s.

The increase in prices in Russia was especially acute in the nineties against the backdrop of massive delays and non-payment of wages. The result was calculations in hundreds of thousands and millions. The meager student scholarship did not fit in a lady's purse. It was possible to return to almost familiar figures (in terms of capacity, not purchasing power) only after the denomination.

The economic collapse of 1998, expectedly leading to default, spurred on price increases thanks to the exchange rate difference between the ruble and the dollar.

Inflation was, of course, incomparable with inflation in Germany after the First World War (remember "Blackobelisk "Remarque, where the morning increase in salary at lunch could not even afford to buy a tie), but still very, very noticeable. Now such sharp jumps are not observed, but the rise in prices has become a constant phenomenon.

Pricing in a market economy

Most economists, answering questions about the reasons for rising prices, usually nod at the pricing mechanisms in a market economy. In most cases, the legs really grow from there. So here are some basic principles:

1. Demand creates supply. This truth is true for all times and historical periods. The greater the demand for a particular type of product, the higher the price a potential consumer is willing to pay for the right to possess the desired product. The manufacturer responds by increasing output and raising prices. Then a certain saturation of the market and balance is reached, so that the price, it would seem, should begin to fall. Theoretically, the market should regulate itself in this way. However, this is practically not observed in Russian realities.
2. Free pricing. Each manufacturer decides for himself how much profit he will receive by setting this or that selling price of his products. A certain monitoring is carried out and its costs, which depend on many external factors. A letter about a price increase of 10%, received in a month from one supplier, will lead to an increase in the cost of goods by 2-3% and, of course, an increase in the manufacturer's selling price.

Results

Price dynamicson goods and services, seasonal fluctuations in value is a global practice for countries with market economies. Where strict regulation is introduced, the risks (which simply cannot be avoided against the backdrop of world globalization) are forced to be taken by the state acting as a regulator.