Market Logic - Russian Style

I'm Moscow for a few days with Vanya -- partly for work, and partly just to spend a little time in a different environment. Mind you, Moscow is far from my favorite city, but being here inspires entirely different thoughts and feelings than St. Petersburg. That in itself makes it worth the trip.

Vanya and I are staying outside of the city center in an area called Izmailovo Park. This area is best known for its complex of larger than life Soviet hotels built when the Moscow hosted the Summer Olympics in 1980. The other main attraction in this part of Moscow is the massive Izmailovo market. I spent a few exhausting hours trolling around the market place this morning, so overwhelmed that all I managed to purchase were some much needed socks and triple-A batteries.

The Russian government has recently cracked down on illegal immigrants by closing down operations by foreign merchants in the market places. So they say. I'm glad to report that Izmailovo remains a babylon of cultures, sounds and smells. To describe the market, the only thing that comes to mind is the image thousands of superballs -- the colorful, marbled ones we played with as kids -- bouncing all over the place, off of one another and out of control. My heart raced and eyes darted around trying to take in all of the sights and sounds as I made my way through the stalls, my feet falling victim to the countless carts that rolled over them in the narrow, crowded rows. The place is a frenzy of people pushing all sorts of hand trucks piled dangerously high with boxes and bags of just about everything under the sun that can be imported from China, plus Halal meats, pirated DVDs, underwear, fur coats and fake Soviet paraphernalia. I spent some time elbowing my way past carts and people through the shoe section. There, I saw the same shoes for 200 Rubles ($8) that sell in shops off of Nevsky Prospekt for 2000 Rubles ($80) sold by Chinese merchants with just enough grasp of Russian to shout "young lady" and the price of their products. Strangely enough when I wandered out of the 'Chinese shoe section' and into what appeared to be the 'Southern Caucasus shoe section', the price for the same shoes quadrupled. In the same market. I'm not why, but I saw people buying the more expensive shoes. Maybe there's a pecking order, or a 'support our former USSR brethren' sentiment driving the decision to buy shoes that just steps away cost a fraction of the price. I'll have to ask around, because like so many other things here, to my simple western mind, there is no apparent logic to how things work -- at least not to someone who once thought that Adam Smith's invisible hand guides the market.

Actually, my same bewilderment goes for the real estate market here. Vanya and I have been looking for a bigger apartment in St. Petersburg for a little more than a year. At first, we were just browsing. Unfortunately, during our browsing period, we saw housing prices more than double. Then, when we started seriously looking, I noticed that some of the same properties were just sitting on the market, not moving. These were places in good parts of town, and for the life of me, I couldn't figure out why they weren't selling. We called a few places with for sale signs in the windows, and were told that the places weren't 'really' for sale. So... why post a sign? Vanya told me it's because they aren't in a rush to sell the place. (Here's my first question - 'why not?' Property prices in St. Petersburg have finally hit a plateau. 'But', I ask, 'what about the opportunity cost of not selling your place'? Huh? Opportunity cost? Privatization has managed to give many citizens a piece of real estate who are now waiting for the miracle of a windfall of cash. Waiting... waiting. In the words of a friend who has been in the real estate business for 10 years here, forget trying to find the logic. 'Property is not sold based on its market value here, it's sold based on the most money they can get for it.' Ok, I understand that part - what seller doesn't want the highest price? But wouldn't it be wiser to have sold for a good price months ago and put that money to work instead of waiting for a price that is just a fraction higher? Ivan just shakes his head at me and says that I have so much to learn about Russian capitalism. I guess so.