ULYANOVSK–THE BUBBLE BURSTS.

The central Russian region of Ulyanovsk is famous not only because it is LeninÕs birthplace, but also because of the refusal of local leaders to implement market reforms. Prices and wages have been kept artificially low and foodstuffs distributed to the citizenry according to a system of coupons. Regional leaders proudly pointed out that meat was seven times cheaper than in Moscow and bread cost a fifth of the price charged in other parts of the country. But, like the Soviet Union before it, the system could be maintained only in a vacuum. Subsidized foodstuffs and housing were on sale only to local residents. And, as soon as the market forces ruling in the rest of Russia encroached on the region, UlyanovskÕs security blanket began to unravel. Now, Izvestiya reports, shortages are plaguing the stores and prices are creeping upward toward those in the rest of the country. The reason is that UlyanovskÕs social safety net was financed out of the profits of its auto production; unlike other goods sold in Ulyanovsk, cars were sold at market prices. Profits were sufficient to subsidize food, but not to make the new investment now needed to retool the auto plant. As a result, the quality and marketability of UlyanovskÕs cars are falling. The moral, writes Izvestiya’s Mikhail Berger, is that Òmiracles donÕt happen.Ó He says this lesson should be kept in mind now, when many members of the Duma are casting nostalgic glances back to the good old days when the whole country was run like Ulyanovsk. (4)

NATO Official Reassures Baltic Countries on Alliance Enlargement.