lagged behind inflation, making such goods unaffordable for many
consumers. Falling real wages forced most Russians to spend a larger share
of their income on food and to alter their eating habits. Indeed, many
Russians reduced their consumption of higher priced meat, fish, milk,
vegetables, and fruit, in favor of more bread and potatoes. As a result of
higher spending on food, consumers reduced their consumption of nonfood
goods and services. Despite a slow start and some rough going, the Russian
government by the end of 1992 scored some successes in its campaign to break
the state's stranglehold on property and improve the environment for private
businesses. More peasant farms were created than expected; the number of
consumers purchasing goods from private traders rose sharply; the portion of
the population working in the private sector increased to nearly one-fifth;
and the nine-month-long slump in the privatization of small businesses was
ended in the fall. Although the output of weapons fell sharply in 1992, most
defense enterprises continued to encounter numerous difficulties developing
and marketing consumer products, establishing new supply links, and securing
resources for retooling. Indeed, total civil production by the defense
sector fell in 1992 because of shortages of inputs and lower consumer demand
caused by higher prices. Ruptured ties with former trading partners, output
declines, and sometimes erratic efforts to move to world prices and
decentralize trade - foreign and interstate - took a heavy toll on Russia's
commercial relations with other countries. For the second year in a row,
foreign trade was down sharply, with exports falling by as much as 25% and
imports by 21%. The drop in imports would have been much greater if foreign
aid - worth an estimated $8 billion - had not allowed the continued inflow
of essential products. Trade with the other former Soviet republics
continued to decline, and support for the ruble as a common currency eroded
in the face of Moscow's loose monetary policies and rapidly rising prices
throughout the region. At the same time, Russia paid only a fraction of the
$20 billion due on the former USSR's roughly $80 billion debt; debt
rescheduling remained hung up because of a dispute between Russia and
Ukraine over division of the former USSR's assets. Capital flight also
remained a serious problem in 1992. Russia's