File spoon-archives/marxism.archive/marxism_1994/94-07-31.000, message 199


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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