1989 Black Market Project HPE

1. Black Market

2. What are the socio-economic implications
of illegal trade of cigarettes and alcohol in
the USSR?

3. Introduction
• Soviet law prohibited some economic activities regarded as normal in
market economies, and enforced heavy penalties
• “Trade in western consumer goods such as blue jeans or cigarettes were on a par
with criminal activities such as the narcotics trade and moonshine liqueur.”
• “Virtually every citizen became a de facto criminal in the quest for a more
comfortable life.”
• The black market arose due to
• Restrictions on growing consumer society
• Economic shortages
• State-controlled prices set below demand
• Gap between artificial domestic prices and free-market world prices

4. Overview of the black
market in alcohol and
cigarettes

5. https://www.youtube.com/watch?
v=UKP6MwrcZRQ

6. Alcohol
• Anti-Alcohol Campaign “Gorbachev’s Prohibition” in 1980 introduced a price hike,
limited alcoholic product sales, and destroyed vineyards used for wine production.
• This lead to a spike in bootlegging and eroded the tax base. Previously, the Soviet Union
received 25% of its revenues derived from the state monopoly on alcohol.
• Theft of technical alcohol from industry and distributors, the use of different inputs in
illegal distillation of alcohol, purchases and price samogon and others.
• Alcohol played a unique role in the secondary economy as an instrument of
establishing trust between different parties, is used as a second currency or
commodity money supplementing or replacing the ruble.

7. Cigarettes
• Anti - tobacco policies came back in the 1970s after the health
implications were more heavily recognized
•
• The emerging pattern of cigarette use and related health
consequences in the USSR is remarkably similar to the experiences
in Western industrialized countries

8. Did the black market
undermine or support the
state?

9. 1.0 Undermined the state
• Authority and Agency
•
• Information Distortion
•
• Alcoholism
•
• Inequality
•
•
•

10. 2.0 Supported the state
• Alleviation of dissatisfaction – Alleviate consumer shortages and
bureaucratic blockages
•
• Promotes economic activity – supplement of distribution
•
•

11. Conclusion
“The economic considerations appear to have taken precedence over
the public health issues in a pattern not at all unlike what we recognize
in western capitalized countries.”