{"id":35619,"date":"2025-12-17T17:06:42","date_gmt":"2025-12-17T13:06:42","guid":{"rendered":"https:\/\/cue.edu.ge\/?post_type=articles&p=35619"},"modified":"2025-12-17T17:08:33","modified_gmt":"2025-12-17T13:08:33","slug":"on-the-purchasing-power-parity-of-the-georgian-lari-and-the-soviet-ruble","status":"publish","type":"articles","link":"https:\/\/cue.edu.ge\/en\/articles\/on-the-purchasing-power-parity-of-the-georgian-lari-and-the-soviet-ruble\/","title":{"rendered":"On the Purchasing Power Parity of the Georgian Lari and the Soviet Ruble"},"content":{"rendered":"

Joseph Archvadze<\/strong><\/p>\n

Professor, Central University of Europe<\/p>\n

daswreba@yahoo.com<\/a><\/p>\n

 <\/p>\n

Abstract<\/strong><\/p>\n

The collapse of the Soviet Union in the early 1990s, followed by Georgia\u2019s independence and transition to a market economy, marked a significant turning point in the country’s economic history. This context makes it particularly relevant to compare the purchasing power of the modern Georgian lari with that of the Soviet ruble, which circulated in Georgia during the USSR era.<\/p>\n

Today\u2019s consumer basket differs substantially from that of four decades ago. Of the 305 product categories currently included in the Consumer Price Index (CPI) used by the National Statistics Office of Georgia to measure inflation, at least 15 were either absent or non-existent in the consumer market of the 1980s. Moreover, over 20 categories\u2014while retaining their historical names\u2014are now fundamentally different in terms of functionality, design, and quality (e.g., televisions, washing machines, automobiles). For nearly all other goods, delivery formats, pricing structures, product design, and adherence to environmental and consumer safety standards have significantly evolved. Additionally, it is important to consider that under the Soviet administrative-command economy, the prices of basic goods such as bread, meat, and dairy were typically set below cost, while the prices of goods like alcohol, automobiles, and jewelry were significantly above cost. Based on our analysis\u2014utilizing historical retail prices and rational consumption norms\u2014we estimate that the equivalent of 100 Soviet rubles in 1988 corresponds to 625.0 GEL in 2024. Conversely, 100 Georgian lari in 2024 is equivalent to approximately 16.00 rubles in 1988. The purchasing power of current wages exceeds the 1988 level in 19 out of 26 key consumer goods categories. However, in 7 categories (including milk and dairy products calculated on milk, eggs, chairs, gas, public transportation, water, and cinema tickets), purchasing power still lags behind the 1988 benchmark. Today, Georgia\u2019s average net salary stands at 157.4% of the 1988 level. However, the total annual wage fund is only 72.0% of its 1988 counterpart, and the wage fund per 1,000 people is 104.7%. In 1988, the annual net salary covered the cost of a consumer basket of 26 essential goods\u2014representing nearly 60% of total consumer expenditure\u2014by 126.9%. In 2024, it covers the same basket by 199.8%. Compared to Georgia, the average U.S. salary allows one to purchase significantly larger quantities of key goods: electricity \u2013 2.7 times more, gasoline \u2013 8.4 times, bread \u2013 1.6 times, poultry \u2013 5.6 times, eggs \u2013 4.6 times, milk \u2013 13.0 times, apples \u2013 2.6 times, oranges \u2013 3.5 times, bananas \u2013 8.7 times, tomatoes \u2013 3.8 times, and Big Macs \u2013 4.7 times more.<\/p>\n

During the Soviet era, income inequality was greater than inequality in actual consumption. Today, the opposite holds true: disparities in wealth, living standards, and socio-economic polarization significantly exceed differences in income and disposable resources. In light of these shifts\u2014and given the differing purchasing power associated with various monetary regimes\u2014the Soviet ruble can be metaphorically referred to as a \u201ccurrency of the poor,\u201d while the Georgian lari may be seen as a \u201ccurrency of the rich.\u201d The Soviet price system, designed on an egalitarian model, contributed to a more equal distribution of consumption, whereas the modern Georgian system has deepened social differentiation and polarization.<\/p>\n

Keywords: Georgian lari, Soviet ruble, purchasing power parity, inflation, prices.<\/p>\n

JEL<\/strong>: E31; N3; P51<\/p>\n

DOI<\/strong>: 10.52244\/c2025.21<\/p>\n

The article is in Georgian.<\/strong><\/p>\n

References<\/strong><\/p>\n

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