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Albania
Prices and Wages
For many years, all prices and wages were forced by the government,
using annual economic plans. The leadership followed the Stalinist
model of conveying general productivity gains to households by
reducing retail prices rather than by raising wages, which would
have allowed consumers a modicum of leverage in the marketplace
and, if goods were unavailable or failed to attract purchasers,
would have produced inflationary pressure, forced savings, and
a black market. Between 1950 and 1969, the Albanian authorities
lowered prices thirteen times. The 1970s witnessed no price cuts,
but the government reduced some prices again in 1982 and 1983.
Enterprises that sustained losses because of the governments'
system of setting wages and prices were compensated with subsidies
from the state budget.
The economic anarchy that followed the collapse of the centrally
planned system ended the years of artificial price stability.
The August 1991 law on economic activity removed price controls
on the prices of all goods except bread, meat, dairy products,
other essential food items, other goods in short supply, and products
produced by monopoly enterprises. Also, the law required an annual
review of price ceilings. Price controls became less effective
as private food markets developed. The price freeze even failed
to halt price increases for rationed food items because they disappeared
from the shelves of state stores, where price restrictions were
enforced, and found their way onto the black market, where speculators
kept prices high. The Council of Ministers endorsed a draft law
on prices, drawn up by the Ministry of Finance, which would free
retail, wholesale, and producer prices for all but a few agricultural
commodities and monopoly controlled products. The authorities
introduced trade liberalization to stimulate supply increases
and competition, which they hoped would maintain downward pressure
on prices. The government also planned gradual elimination of
subsidies for money-losing firms in an attempt to stop hyperinflation.
Under the communist system, Albania's government had maintained
one of the world's most egalitarian wage structures. The central
authorities fixed the number of workers at an enterprise, assigned
them to particular jobs, and set the wage fund, which for the
nation as a whole translated in 1983 to a monthly pay of about
L400 for a worker and about L900 for a manager. By 1988 average
worker earnings grew to between L600 and L700 (US$89-US$104);
and pay for top officials reached L1,500 (US$223). In the early
1990s, the regime modified the wage system, creating incentives
for overfulfillment of plan targets, and allowing for a 10 percent
pay cut for management if enterprises failed to attain plan targets.
Economic liberalization spawned a private sector without wage
controls. Market-driven price hikes forced the government to raise
wages for state workers twice in mid-1991. During the economic
chaos, negotiators for Albania's newly independent trade unions
demanded that the government automatically increase wages to keep
pace with price hikes. At state factories and farms idled by disruptions
in deliveries of raw materials, workers' salaries were reduced
only 20 percent, a move strongly criticized by the country's main
opposition party as inherently inflationary. The opposition called
for fixed wages for workers at state enterprises and an absolute
limit on subsidies to money-losing enterprises, as two means of
slowing the bidding-up of wages and inflation. In the chaos, the
average monthly income for Albanian workers plummeted to the equivalent
of about US$10.
Enver Hoxha and his followers enforced frugality on Albanians
for decades. The regime made few significant attempts to turn
the product mix of the country's industrial sector away from heavy
industrial goods and toward consumer goods, especially durable
consumer goods. Instead of absorbing personal savings by producing
and selling more consumer items, the government lowered the incomes
of the few highly paid and skilled workers. People who complained
often lost their jobs and were sent to state farms. The policy
eased inflationary pressures but had dire consequences for worker
motivation and willingness to accept responsibility. The Albanian
economy's reliance on domestic monopolies made it especially susceptible
to shortages. The country's only glass factory, for example, shut
down in mid-1990. Lacking hard currency to purchase imported glass,
Albanians had to live without bottles and replacement windows.
When Italy delivered plate glass as part of relief supplies, it
was discovered that the Albanians had no glazing putty.
Domestic consumption at first slowed with the collapse of the
Stalinist economic system. In 1991 state shops were practically
empty of goods, if they were open at all. Milk, butter, eggs,
and medicines were in short supply. People had to squeeze through
metal-barred windows at bakeries just to buy loaves of bread.
Private stores and black marketeers had a relatively wide variety
of goods, including pasta, peeled tomatoes, soap, fruit juices,
and toilet paper, but with one kilogram of spaghetti costing a
tenth of the average monthly salary, these goods were far beyond
the purchasing power of the vast majority of the population. The
government introduced general rationing but, by mid-1991, widespread
fear that supplies of basic food items would run out caused crowds
to begin plundering warehouses and retail outlets. Hopes for increased
supplies and broader choices in the marketplace grew with the
emergence of the private sector, which almost immediately began
bringing in products that previously were unavailable, and often
banned.
Data as of April 1992
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