All That Glitters...

Moscow wrote a financial fairy tale. The Soviet Council of Ministers announced last week that the ruble, which had previously been fixed as worth about 19-c-, would henceforth be worth 25-c-. The new "exchange rate" was purely imaginary. Nobody ever gets a chance to exchange any rubles into foreign currency; if one did, on a free market, a ruble would be worth more nearly a nickel than a quarter.

The ruble is almost never used in foreign trade--not even by the Russians and their satellites. Russia's foreign trade is strictly barter, reckoned (with very few exceptions) in standard commodity units, or in dollars or pounds.

Nevertheless, Moscow's worldwide public-address system blared that, while Western nations had to devalue their currencies, Russia's economy was so healthy that it could raise the value of its currency. Some U.S. commentators helped dramatize the Moscow propaganda by prattling of a "war" between the ruble and the dollar. Moscow's tinkering with the ruble would have no effect on the West; it might eventually have some effect on the Russian satellites. Dressing up the ruble as a harder currency might become a first step in a Russian drive for closer integration of the satellite economies with Russia.

More significant than the foreign-exchange ruble ruffle was the simultaneous (but unrelated) cut in Russian domestic prices. More than 200 consumer items were marked down, ranging from 10% on milk to 30% on bread and beef. The cuts undoubtedly reflected a genuine increase in Russian production, and were good news for Russians, who promptly went on a buying spree. But even after the cut (the fourth in 27 months), Russian prices remain high in terms of Russian wages. Ignoring the phony exchange rate, U.S. economists estimate that an American works 30 minutes for a pound of butter, a Russian five hours.

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