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. Last Updated: 07/27/2016

Grocery Program Seeks A Friendlier Capitalism

After decades of stifling state control and several years of wild capitalism, Mayor Yury Luzhkov is seeking to turn the capital's corner groceries into friendly, profitable cooperatives.


Under the "People's Shop" program expected to be finalized next week, the city government is hoping to entice Muscovites to invest their savings in neighborhood stores, earning dividends and discounts in return.


"The shops are meant to play some kind of social role in the neighborhood," said Lyudmila Ushakova, deputy head of the consumer department of the Moscow city government, adding that the concept could allow city residents to spend less of their budgets on food.


City spokesman Andrei Varchenya said the system, which would initially cover primarily food stores, is intended to "alleviate the financial situation of traders" by providing an extra source of cash for investment from customers. He described the scheme as similar to cooperatives in the West that give shopping privileges to their members.


Perestroika-era cooperatives, the first form of private enterprise in post-war Russia, pooled owners' capital, but did not involve customers through discount programs.


Whether the "People's Shop" program will take off, however, seems dubious.


"Who would want to become a shareholder for beets and carrots?" said Nina, manager of a medium-sized grocery on Malaya Bronnaya Ulitsa near Triumfalnaya Ploshchad.


Nina, who did not give her last name, said a cooperative system could be "good for the shop because we would have a stable clientele," but she doubted that individuals -- many of who have been burned in other investment schemes -- would want to put their money in food stores.


Experts said the city plan is targeted to solve a real problem for small retailers. "I know a lot of people in the trading industry who can't get enough working capital ... that is due to the fact that almost all of their suppliers work on a pre-paid basis," said Andrei Sterlin, head of Business Analytic Europe Limited.


But from a consumer point of view, Sterlin said Muscovites would invest in such ventures only if given adequate guarantees by either a bank or the Moscow city government. He said he would be "surprised if [the city] worked out a reliable structure to guarantee the rights of shareholders."


City officials did not provide further details about the concept. Anatoly Porokhovsky, deputy head of the USA/Canada Institute in Moscow, cast doubt on another aspect of the plan.


"Russians don't believe in discounts," he said.