Date: 29 Jul 94 21:26:39 From: wpc-AT-clyder.gn.apc.org (Paul Cockshott) Subject: An example of concrete analysis by Kagarlitsky I repost this from Russian labour radio list. A good example of concrete marxist analysis and an antidote to what we read on the news. Path: clyder!gn!cdp!glas!radiolabour From: radiolabour-AT-glas.apc.org () Newsgroups: reg.ussr Distribution: world Subject: From Crisis to Catastrophe Message-ID: <122500050-AT-glas> Date: 26 Jul 94 23:07 BST Lines: 1040 From: radiolabour (Labour Chronicle Russian Radio Show) RUSSIA: FROM CRISIS TO CATASTROPHE By Boris Kagarlitsky When the Soviet Union collapsed, the Russian authorities promised that rapid modernization and by the integration of the country into the "civilized world" would soon follow. The governments of other former Soviet republics promised the same, adding that with the Russians finally sent packing, all obstacles to prosperity were removed and Western living standards were within reach. Then came the reforms. The strategy mapped out by Western advisers and Russian leaders was based on three very simple principles: liberalisation of prices, minimisation of government intervention (including the destruction both of central planning and of the institutions of the welfare state) and total privatisation of the economy. Though liberalisation of prices was the first and most painful step, it was privatisation that was seen as the core of the reform. Privatisation in Russia had little in common with the programs in Britain and France, since no domestic bourgeoisie existed that could buy the assets being sold off, and property was impossible to sell at market prices. Enterprises were supposed to be simply taken over by "interested groups and individuals". Meanwhile, the privatisation that was undertaken was just as extreme as earlier nationalisations. Its purpose was not merely to sell off particular state assets, but to liquidate the very institution of state enterprise, even in sectors which in most capitalist countries remain publicly owned. To limit the zeal of the privatisers, the regime passed special decrees stating that air and water could not be privatised. The reformers were correct in seeing privatisation as the key element in their program. While the Russian economy inherited many problems from Soviet times, and price liberalisation made the situation much worse, it was the privatisation program which turned the crisis into the worst peacetime economic catastrophe in world history. In social terms, two years of reform in Russia have driven the country back by decades, wiping out almost all the achievements of the post-Stalin period. The catastrophic fall in production and lowering of living standards during this period has brought Russia greater reverses than four years of ruinous war with Nazi Germany. In the course of a year, inflation wiped out savings that people had accumulated over a lifetime. In the winter of 1993, the funds were often lacking to heat residential buildings. Huge factories stopped work. Locally-produced goods disappeared from the shops. Most Russian citizens lacked the money to buy much more than food and clothing. Nevertheless, city streets turned into an endless flea-market where everything could be bought. People earned money by re-selling goods they had bought and by selling off personal possessions, hoping somehow to stay afloat. As a result of a steep fall in the birth rate, accompanied by an increase in the number of deaths, Russia's population has declined by some two millions. Diseases once regarded as conquered have reappeared -- diphtheria, and in some regions, cholera. Every day, there are fewer buses on the streets. In place of public telephones, empty booths gape at would-be callers. The buying power of most wages has fallen to the level of the 1950s. Apart from the devastation during the Second World War, Russians have not experienced such shocks since Stalin's "reconstruction" in the 1930s. At that time, however, the economy was developing and growing despite the huge sacrifices. Now the situation is completely different; not only has more than half of the volume of industrial output been lost, but the technological level of Russian industry has fallen sharply. What kind of modernisation can one talk about in such circumstances? In the world as a whole, the implantation of capitalism has normally been accompanied by the weakening or destruction of precapitalist structures. It was at the expense of these structures that the primitive accumulation of capital took place. A predatory, "savage" capitalism was a natural phase of development, a normal pattern of behavior for a young bourgeoisie. But however tragic the costs, in Europe and North America between the sixteenth and nineteenth centuries there was unquestionable progress. As technologically backward forms of production collapsed, they yielded their place to modern industry. The capitalist reforms in Russia and in other countries of the former communist bloc are unique in that for the first time the structures being destroyed are on a far higher technological level than those that are replacing them. Capitalism in Russia and the countries of Eastern Europe is only in its very early stages, and is incapable of serious investment projects. The maturing of capitalist entrepreneurship cannot be speeded up, since complex processes which involve millions of people, and which include transforming a culture and imposing new social relationships, cannot be carried out in a mechanical manner from above. For all its weaknesses, the state sector in "communist societies" was generally recognised as having had a high level of technological development, which in some fields at least allowed it to compete successfully with the West. This modern productive capacity is now being destroyed in order to create favourable conditions for the development of private street stalls and of commercial banks which so far have scarcely risen above the level of the European entrepreneurship of the sixteenth century. If the "communist" state sector created hired workers with thoroughly modern habits and skills, the young capitalism is creating barbarian entrepreneurs whose intellectual, cultural, ethical and professional level is a whole epoch behind that of the people whom they aim to exploit. As a result, the implanting of capitalism inevitably involves regression in the social, cultural and technological spheres. The superficial elements of modernization which accompany the activity of the "new commercial structures" do not change the situation essentially. The computers and fax machines with which these offices are filled, like the fashionable ties and radiotelephones of the entrepreneurs, represent no more than the kind of imitation of "European luxury" that was to be observed in the courts of barbarian chieftains from the fall of the Roman Empire to early colonial times. Privatisation, which the representatives of the International Monetary Fund and the Russian authorities touted as a miraculous remedy for any and all problems, has finished up creating a total economic collapse. Not only has it failed to help create a competitive market, but it has given birth to a system of rigid and uncontrolled monopolies exploiting the consumer and to a significant degree controlling the government. The performance of enterprises has deteriorated. The productivity of labour in the privatised sector has declined. Losses have increased, the competitiveness of production has fallen, and foreign markets have been lost. Measures intended to "encourage privatisation" have become one of the main sources of a colossal budget deficit, which in turn has contributed to rapid inflation. The "new private sector" has sucked huge subsidies and preferential credits out of the government, at the same time as the economy has fallen into an "investment hole", and private capital investment in production has been practically non-existent. With public investment abandoned and private investment lacking, both privatised and public enterprises have produced less and less. While the private firms have enjoyed subsidies and cheap credits, the state-owned factories which remain the only efficient element in the economy have also had to slow down production. They have deliberately been strangled by government officials, who say openly that everything that cannot be privatised must be eliminated. An analogous picture is to be observed in almost all the countries of Eastern Europe, despite the various models of privatisation and the differing scale of the process. In Poland by January 1993 the state sector, no longer dominant in the economy, was in practice providing the government with its sole tax base. In Hungary and eastern Germany the privatisation of enterprises has been accompanied by their widespread closure and by the transfer of production to other countries. Even Western journalists who have scoured the countries of Eastern Europe in search of privatisation success stories have been able to present almost nothing to the public. Growing external indebtedness has become the curse of all the former communist countries, but nowhere has it led to such a clear and open dictatorship by the International Monetary Fund as in Russia. The foreign trade of the Russian Federation has taken on all the features of colonial subjugation. The country exports fewer and fewer industrial products and more and more raw materials. Meanwhile, it imports low-quality mass consumption goods, obsolete and hence cheap technology, luxury items and radioactive waste. In a new division of labour, the Baltic states are increasingly seeking to play the role of intermediaries between East and West, colonial trading stations on the frontiers of the barbarian world. During 1992 and 1993 the Baltic countries were transformed into large-scale suppliers of non-ferrous metals to the world market, even though none of these metals is produced in the states concerned. All these materials are imported legally or illegally from Russia, Ukraine and Belarus, and then resold to the West. For such an economy, it is more important to have a strong convertible currency than to have its own production. It is thus no accident that the governments of Estonia and Latvia have been unwilling to grant citizenship rights to the "barbarian" Russian residents in these countries. This has led in effect to the rebirth of apartheid in Europe at the same time as it is being dismantled in South Africa. The refusal of citizenship rights to Russians has a dual purpose. On the one hand, the majority of the working class and of trade union members are excluded from participating in elections, since industrial production in these countries developed mainly on the basis of migrants from the "old" republics of the USSR. On the other hand, the national bourgeoisie in each of the Baltic countries is strengthening its monopoly on the new colonial trade. It is also significant that Poland and Hungary, despite suffering a serious decline in production, have nevertheless remained capable of exporting industrial and agricultural produce, while Russia has been transformed into a supplier of raw materials. In Russia, dependent capitalism is developing according to an African scenario, while in Eastern Europe the pattern is more akin to that in Latin America. As a result, the political system in the Eastern European countries is generally both more stable and more democratic than in the republics that have arisen on the territory of the former USSR. At the same time, throughout Eastern Europe one can observe what might be called "Kuwaitisation". Unable and unwilling to fully assimilate the entire "eastern expanse", transnational capital is trying to establish its "strong points" in the East, raising certain areas to the level of the "civilized world". This coincides with the ambitions of the local elites. If the large countries are doomed to the role of the periphery of the West, certain regions may rise to the level of the semi-periphery, with some prospects of eventual inclusion in the Western "community of the wealthy". In order to create suitable conditions for this, the countries concerned need to separate themselves off from their less well-favoured neighbours using state borders, customs duties, and their own currencies. At the same time, they need to thwart all efforts to redistribute funds to the advantage of less developed regions. It is this, and not mythical "outbursts of nationalism", that is the reason for the disintegration of all of the Eastern European federations. The collapse of the USSR created favorable conditions for the Kuwaitisation of the Baltic republics. In Yugoslavia it was Slovenia that became "Kuwaitised", and after the disintegration of Czechoslovakia the Czech Republic managed to separate itself off from impoverished Slovakia. The possible disintegration of Russia could lead to resource-rich regions such as Yakutia becoming new Kuwaits. Naturally, the process of disintegration has its own dynamic. This is the more so because the hopes which local elites associate with independence are not always borne out. Croatia and Ukraine serve as classic examples. In Croatia, the collapse of the federation led to a prolonged war which undermined the economy, at the same time as the more prosperous Slovenia gathered in the fruits of independence. In Ukraine, the precipitous collapse of industry after the disintegration of the USSR brought such an obvious and visible economic crash that all hopes of German investment were dashed. In Ukraine, Russia, Romania and other countries, the African scenario is giving rise to changes in the state structures themselves. If the state was earlier capable of carrying out bureaucratic modernisation, it is now losing its sense of mission and becoming more and more parasitic; its dominant internal characteristics are chaos and unpredictability. This is a new situation, even if we take into account the centuries-old traditions of bureaucratic arbitrariness and inefficiency in these countries. Bureaucratism in the "new Russia" has reached heights never seen in the Soviet period. In Moscow, where all the central ministries and departments remained after the collapse of the USSR, there is a shortage of government buildings. Corruption has become a part of everyday life, and crime is growing at a catastrophic rate. This is not surprising in a country where the bacchanalia-like plunder of state property and the collapse of the constitutional order have together undermined all respect for the law. The new owners have come largely from the mafia and from the old party and state bureaucracy, together with a certain number of successful Russian "yuppies". Whatever their origins, these people have in common a lack of roots, a total disrespect for rules and laws of any kind, and a lack of even minimal moral constraints. In this sense Russian capitalism totally lacks anything like the "protestant spirit" of early Western capitalism or the "Confucian ethics" of Japan and Korea. It is not surprising that the people who have seized property, breaking all the rules in order to do so, are by no means confident of their abilty to hang onto it. This is why they cling so assiduously to political power, allowing no possibility of normal changes under conditions of democracy. This is also the key reason why Yeltsin fought so ruthlessly for the adoption of his constitution, which not only concentrates unheard-of powers in the hands of the president, but also virtually rules out any new attempts at political reform and any democratisation of state rule. It is not beside the point to note that the Soviet dissident movement in its time demanded that the provisions of the constitution of the USSR should be put into practice, while Academician Sakharov fought for the Congress of People's Deputies to be able to exercise its full powers. After the principles of democratic choice had been trampled on, coercion remained the only argument. Yeltsin's constitution was specially designed to prevent any peaceful change and to guarantee the status quo. Nevertheless, everyone is perfectly aware that no constitutional provisions will save the people who have already lost the support of the population. Instead of the promised creation of a "middle class", supposed to serve as the basis for development and prosperity, we have seen a catastrophic polarisation of society. Against a background of growing poverty, the luxury enjoyed by a tiny minority who have grown rich through speculating in privatised property and exporting mineral resources presents an outrageous spectacle. In 1993 sales of the most expensive and prestigious models of Western cars in Moscow alone exceeded all the sales in Western Europe. Convinced that their capital is not safe in Russia, the new rich prefer to deposit it in Western banks. Press reports speak of $20 billion exported from the country every year "by legal means". But this is only the tip of the iceberg. The bulk of the funds that leave the country do so illegally, while Western financial aid often accumulates in the accounts of foreign firms or private individuals, never even reaching Russia. One can speak as much as one likes about mistakes in the providing of aid, and about aid falling into the wrong hands or being sent through inappropriate channels, but this cannot alter the fact that the present reformist project has been a total failure. It is not just individual crooked functionaries and entrepreneurs who have been infected by corruption, but the entire political system of the new Russia, and the country's whole ruling elite. Russians are well known for their patience and submissiveness. But it is one thing to make sacrifices in order to strengthen the country's economy, and quite another to go without in order to promote the well-being of BMW owners. Not surprisingly, the great majority of the population regard the present regime in Russia with unconcealed hatred. Among ordinary people, the phrases "economic reform" and "market economy" have the force of obscenities. If the decades of the Cold War created in the Soviet population an enduring sympathy for and enthusiastic interest in all things Western, three years of Western support for the Russian reforms have seen anti-Western and anti-American moods appear in the most diverse circles of society, especially among the less well-off members of the intelligentsia. The disappointment with the West is not just the result of hostility toward a pro-Western government, but is also a sort of psychological compensation. The yearning for Western standards of consumption played a decisive role in securing the triumph of neo-liberalism in the East. In late communist societies, social bonds between people were extremely weak, but citizens enjoyed considerable freedom in the sphere of personal life and consumption; therefore, consumption acted as an important unifying factor. The relative success of the Soviet system in competition with the West created numerous illusions, especially among the middle layers. The modernisation that had been promised by the neo-liberals was perceived by the majority of the population as the modernisation of consumption. The same happened as in the well-known story of the man who dreams of receiving 100,000 dollars, and whose wish is granted -- at the cost of the death of his beloved son. The Western model of consumption finally triumphed, at least in the main cities. But for the majority of people, the price was that even the former Soviet way of life became an unattainable dream. The anger of the population at the authorities and the new rich is not the only reason for the chronic instability of society. However paradoxical it might seem, another source of this instability is the new elite itself. The ruling circles in Russia and in most "new developing states" (this, for all its shortcomings, is the most accurate way of describing the post-communist world) are becoming more and more openly divided into two groups. On the one hand we see the formation of a bureaucratic bourgeoisie, only weakly linked to the West and without entrepreneurial dynamism, but striving for a degree of stability. These people are conservatives and traditionalists. However, this is no longer conservatism in the old Soviet sense of being a supporter of the Stalinist system, but in the Western sense; these conservatives seek a social order which will guarantee them the control and use of property. Counterposed to these people is a group of bankers and speculators who are seizing and parasitically "eating their way through" the country's resources. For this group, factories are no more than piles of scrap metal which can be sold off abroad at a profit. For these entrepreneurs, real estate is worth more than infrastructure, the price of the dollar is more important than indices of production, and exporting oil is much more profitable than refining it. This is a comprador bourgeoisie with a lumpen-criminal psychology. Since the West is officially declared to be the bearer of all values and the source of all progress, social layers such as this are not only free from any pangs of conscience in delivering up their own country to be enslaved and exploited by foreigners, but even take a certain pride in doing so. The two groups are united by corruption and by efforts to use the authority of the state to ensure their control over resources and property. But they are divided by a fundamentally different approach to the use of this property. All the Eastern European reforms were based on one or another formula for compromise between these two groups. But it was only in Russia following the collapse of the Soviet Union that the lumpencomprador group achieved an absolute triumph. This created the preconditions for the "African scenario" which followed. Meanwhile, the reforms developed according to the "bicycle principle"; if you're not moving forward, you're falling over. For the new rich, stabilisation meant collapse, since the lumpen-capitalist structures could not reproduce themselves on the basis of their own resources without continually seizing new property and resources from outside. The bureaucratic capitalism defended by the moderate section of the government and by the "constructive opposition" could not solve the country's problems, but it at least required a certain nourishment in the form of relatively stable production. Here was the source of the irreconcilable struggle by the "reformers" against the opposition within their own camp. This gave rise first to conflict with the parliament, culminating in the two-day civil war of October 1993. Then, after the population unequivocally rejected the neoliberal course in the December 12 elections, the conflict came to be played out within the government. The events of October 3 and 4, and the election results, represented only the first warning. Public opinion surveys showed that many of the people who supported the reformers in December 1993 had turned against them by the spring of 1994. The groups that were going on strike by this time included not only doctors and teachers, unable to survive on their miserable salaries of $50-70 a month, but also miners and workers in the oil and gas industries -- that is, people who not long before had represented privileged layers. The patience of the citizens of Russia has been remarkable, but it is coming to an end. The most important result of the global triumph of neoliberalism between 1989 and 1993 was to synchronise the social and economic processes unfolding in the world. In this sense, events occurring today in Moscow, New York and Mexico City are much more closely interlinked even than at the end of the 1980s. International communications systems have made Russia part of the global information system, and have made backward, barbaric Russian business a part of world capitalism. The question is whether the world system will be stronger or weaker as a result. The combination of extreme backwardness with the outward signs of modernisation and with dependence on a new "big brother" is creating a paradoxical situation in which Moscow residents find it easier to make a telephone call to a small town in northern Texas than to St Petersburg. Nevertheless, the Western firms that are penetrating the expanses of the former communist world are hostages of the conditions and culture that exist there. They are not only forced to confront the growing backwardness of technology and organisation, but are themselves subject to "barbarisation". American businessmen in Moscow constantly complain that since the collapse of the USSR doing business has become harder, but the West is quite unable to change this situation, since neither the funds nor interested investors exist for the large-scale modernisation of the infrastructure. This task could be carried out only by an "indigenous" state, which both the world and national bourgeoisie would seek to weaken by any means possible. Foreign capitalists would do this from fear of a dangerous potential competitor, and local ones because they have not reached the stage of being able to create their own state system (a social task corresponding not even to the seventeenth century, but to the sixteenth). As confrontation between the two basic elements of the ruling bloc has increased, these elements have become more and more isolated within society as a whole. It was the bloc between these two groups that made following the neo-liberal course possible. The rupture between them testifies to the impending collapse of the entire project. Irrespective of how events turn out in the long run, it is already possible in the spring of 1994 to state that capitalist modernisation has once again failed in Russia. The offensive by the neo-liberal ideologues became possible thanks to an exceptional combination of circumstances: the crisis and decomposition of the communist bureaucracy; the consumer expectations of the majority of the Soviet population; and the habit of most people in Soviet society of following after the state authorities, wherever the authorities might lead them. However, the reform process has served to annull most of these factors. Hostility to communist and socialist ideology is receding into the past, as people increasingly begin to live not in the past but in the present. This is the reason for the generally acknowledged renaissance of post-communist parties and for the growth of new left movements, especially in countries proceeding along the Latin American path. Meanwhile, the split within the ruling bloc has created a new relationship of forces, making it impossible to "take the reforms forward" according to the original scenario. The ideologues of neo-liberalism expected their opponents in Russia to find their main social base among pensioners, unskilled workers and the less-educated -- that is, people who would be unable to prosper in the conditions of the market. In fact, the reforms found significant support within these very layers. The factors responsible included heightened consumer expectations, which are especially typical of these groups, and also the habitual submissiveness to authority of members of these strata. No less important was the fact that these social layers were among the least dependent for their well-being on productive investments. In many cases, the collapse of production did not prevent these people from finding new means of support through petty trade, participation in the informal economy, crime, and sops from the local authorities. Where the state social security system did not disintegrate entirely, these groups benefited from the indexation of pensions and other welfare payments. At times, they continued to receive clientelistic hand-outs from local political leaders. Meanwhile, the collapse of production has meant that highly skilled workers have lost not only their incomes, but also their social status. While the people who make up the "the lower depths" of society are severely deprived, it is above all the skilled working class that is totally frustrated and alienated from the regime. The neo-liberal ideologues and politicians placed special hopes on the youth and the intelligentsia. Both these groups gave real and enthusiastic support to the reforms, until they found themselves among the prime victims of the reform process. There were no prospects for them in the shrunken, barbarised economy. In 1991, children cleaning cars on the streets were seen as symbolic of the new entrepreneurship, but this activity soon came to be recognised as a sign of the inability of a collapsing society to offer the new generation any other work. Young people began joining a broad range of opposition movements, from moderate left to extremist. The dissatisfied elements also included small entrepreneurs. As the inhabitants of Eastern Europe grew more accustomed to the market, they were not more inclined to accept the values and principles of neo-liberalism. On the contrary, having learnt to orient themselves in the new conditions, they recognised their interests and began to mount increasingly active resistance. The capitalist project has thus come under dual pressure. On the one hand, it encounters continuing resistance from forces oriented toward the old, pre-capitalist way of life, and on the other hand, the contradictions of capitalist development are giving birth to a new opposition among people who have assimilated the rules of the game but are dissatisfied with the results. The truth is that in the conditions of Russian capitalism any worker, even the most prosperous one, has at least as much cause for dissatisfaction as his or her counterparts in Britain, France or Italy. By the end of 1993, this growing pressure had effectively paralysed the neo-liberal project in the East. Capitalist modernization had collapsed. Although its initiators had been far from setting out to bring Western "affluence" to the peoples of the former communist world, they had at least hoped to create in the East a sizable, stable minority capable of guaranteeing further capitalist development. This was achieved only to an insignificant degree in the "Latin Americanized" countries -- Slovenia, Poland, Croatia, the Czech Republic and Hungary. In Russia, it was not achieved at all. What happened in Russia was similar to what occurred in Mexico. While journalists told the public success stories about structural reforms in Mexico, in the state of Chiapas a peasant revolt was brewing. When thousands of desperate people took up arms, the wellmeaning American public were incapable of understanding why these people were dissatisfied. Russia will neither be part of the Western world, nor a banana republic. The reasons are not to be sought in the mysterious "Russian soul", but in the fact that the social and economic problems of this vast country cannot be solved through the recipes of the International Monetary Fund and on the basis of free entrepreneurship. Democratic development is possible only on the basis of respect for personal interests and through taking into account established social and economic structures, accumulated experience, and the existing culture. Ultimately, citizens of Russia have reason to take pride in their past, including the Soviet past. But any attempt to force Russia into the framework of the global Western project will sooner or later rebound on those in the West who have fed such illusions. -------------------------------------------------------------------- Paul Cockshott , Phone: 041 637 2927 wpc-AT-clyder.gn.apc.org wpc-AT-cs.strath.ac.uk ------------------
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