Poverty squeezes blood out of Russia

For once, Andrei Rogovoy had a good day. Since leaving the army, he has been searching for a job which would put enough food on the table for his wife and one-year-old daughter. Yesterday he found one, albeit short- lived; he sold his blood.

By Russian standards, the returns were good - just over $20 (pounds 12). And although he can only give blood once every two months, he can sell plasma once a fortnight for double the fee. By the month's end, he should have struggled above the national poverty line.

Unlike many blood donors, Mr Rogovoy, 22, is motivated by cash. He is not alone. True, some of the 150 people who queue daily in the dingy corridors of the Moscow blood transfusion centre are altruists, or merely looking for drinks money (the crowds double just before public holidays). But plenty are drawn there by need.

The donors - ranging from dismally-paid economists and accountants to soldiers whose pay packets have been delayed - all live in an economy that has yet to deliver the promised riches that rang so loudly in their ears when Russia embarked on its free market reforms.

In the last few days, the Russian government has churned out statistics providing further evidence that the downward spiral which began shortly after the collapse of the Soviet Union is proving harder to correct than many of the advocates of reform, including leading Western economists, had predicted.

In 1996, Russia's gross domestic product (GDP) plunged 6 per cent, 2 per cent more than in the previous year. Wage arrears rose to more than $8bn, money owed to tens of millions of employees, from teachers to air traffic controllers and policemen. On average, the profits of those enterprises that were making money fell by half in the first nine months of the year, dealing yet another blow to the government's tax collectors, who were already losing a battle against non-payment.

To be fair, there was a dip in the number of people below the government- defined poverty line, earning less than $68 per month. But the figure is still appallingly high - 32 million people, or one in five of the population. Unemployment is growing, hitting 9.3 per cent in December, according to official estimates - although a report released yesterday by Guy Standing of the International Labour Organisation said the true figure is far higher.

Russia's Economics Minister, Yevgeny Yasin, has been surprisingly willing to admit that his government's reforms failed last year. There was, he conceded, only one significant advance: a tenfold drop in the inflation rate of the previous year to just over 20 per cent. Frantic efforts to ensure the reelection of Boris Yeltsin by handing out promises of money across the country overrode good housekeeping. "We sacrificed 1996 to the altar of democracy," the minister said.

Now, with Mr Yeltsin back in office - albeit sick, isolated and fending off cries for his resignation - Mr Yasin's ministry is planning a counter- attack. It has presented the government with a three-year plan to turn the economy around, which he unveiled yesterday. It is an odd mixture of tough Thatcherism and social democratic paternalism. Deep cuts in social spending sit alongside a commitment to state support for high technology industries, notably aerospace and nuclear power.

The former includes sweeping aside the legacy of Soviet welfare by slashing the huge sums spent on subsidising housing and communal services. This should be replaced by targeted payments, aimed only at the genuinely needy, he said. He also wants to end cross-subsidising of domestic gas and power, and passenger transport by big industry. "Tariffs must cover the real costs," said the minister, pointing out that households pay about 10- 15 per cent of the real costs of electrical power.

The overall thrust of the plan is to cut the level of "unbearable" state spending which is the same proportion of the GDP - about 45 per cent - as the hugely more prosperous Germany. Although it would, Mr Yasin conceded, be an "extremely difficult" programme, it would set Russia on course for 2 per cent growth this year, rising to 5 per cent by 2000.

It is, of course, only a plan. There are many unpredictable factors, from the future of Mr Yeltsin to the overall climate for international investment.

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