Russia - Ten years of changes

Lutte Ouvrière's 1998 conference (published in Class Struggle #25 - Britain)
December 1998

Ten years ago, when the power struggles at the top level of the bureaucracy broadened to encompass the whole of the dominant social layer and released a horde of previously underground forces, thus causing an open political and social crisis, our tendency was confronted with the question of understanding, from the point of view of the working class, the evolution of Soviet society.

Although the leaders of the bureaucracy, both Gorbachev and above all his successor Yeltsin, did not take long to declare themselves openly in favour of the restoration of capitalism - after asserting only that they wanted to reform the bureaucratic system - we were very cautious in the characterisation of the social nature of the Soviet state. We did not wish to base our judgment solely on the pro-capitalist declarations of the Soviet leaders, or the chorus of praise which these declarations provoked in the West, nor even the laws and decrees which, also at a very early stage in the process which had been started, aimed at the restoration of the market economy and the functioning of the economy on capitalist bases.

On the contrary, we argued that, whatever the positions adopted by the leaders, Soviet society was too complex a reality to make a hasty judgment - not only had this society originated in a proletarian revolution, but its whole subsequent development had been strongly marked by these origins. We did not know either whether the counter-revolutionary process would be carried through to the end nor how quickly this process would take place. Our attitude was that there would always be time to recognise that the changes had been accomplished, when this became indisputable.

We knew that everything depended on the intervention of the Soviet working class - on the extent to which it might wish to hold onto the gains of the revolution and the means it might find to defend them.

Obviously (and this is the reason why we refused to make any prediction), we knew nothing about what was going on in the depths of the working class, about the level of its consciousness and militancy, and about how these were developing or not. Nor did we know whether or not an intervention by the working class would cause divisions between the different layers of the bureaucracy itself.

We knew, on the other hand, that the social structure of a country of the size of the Soviet Union cannot be transformed by the wave of a magic wand, even if the wand is held by the state's leaders and waved under the benevolent protection of the fairies of western capitalism. But what we saw as being essential at each point in the on-going process was to reason in accordance with the political tasks which the working class had an interest in setting for itself, without of course being able to measure the probability that it would intervene.

When, in 1989, we asked ourselves the question: "Is a social counter-revolution in the air, or has it already been accomplished?" (Class Struggle, trilingual series #27 - Nov. 1989), we asserted that "Nothing is settled yet, however. The process has not started yet. For the moment there are only statements and declarations of intent." And we made a point of saying that "in relation to the analysis we made of the Soviet Union, (i.e. based on Trotsky's analyses) to which we still hold, the intervention or non-intervention of the working class, and the side it takes, are decisive factors." And we added: "However, this is one of the areas where we have the fewest elements for judgement (...) as to what really goes on in the depths of the Soviet working class, we have no adequate information. In this area we are reduced to formulating hypotheses, or simply wishes, but there is nothing which allows us to assess the real situation, especially as this situation is probably changing." The wish was that the Soviet working class's attachment to collective property should remain strong today, for "Trotsky, who was a revolutionary and not simply well-read, attached great importance to developments in workers' consciousness, as much as to developments in property relations, for, in his opinion, the social revolution was still alive as much in the former as in the latter."

One year later, a series of measures had already been introduced. The first stock exchanges had been opened, initially for goods and then for shares. Several laws restoring private property had been enacted, and the Shatalin plan, which proposed to restore the market economy in 500 days, had been adopted. Despite the fact that there had been no reaction to these measures on the part of the working class, we formulated the hypothesis of a possible working class intervention as follows: "There can be reactions against privatisation itself: even if the revolutionary spark is gone from the consciousness of workers, attempts at privatising some state-owned companies could trigger, at least, reactions similar to those of workers in France. Above all, the economic measures resulting from privatisation (layoffs, benefit cuts, etc.) could trigger a reaction from the workers."

And we added: "All the more so, as even in economic terms alone, privatising the whole of an economy as powerful as today's Soviet economy will not be easy. (...) To privatise the whole of the Soviet economy may turn out to be a near-impossible task, even if the required capital was available, which is far from obvious. (...) For it must be kept in mind that, as a result of the state ownership of the means of production and of the planned economy, the USSR became the world's second biggest economic power. And that this took place without a bourgeoisie developing at the same time (a "capitalist" class as opposed to a "wealthy" class) whose social power would match up to the economic power of the country." (Class Struggle, trilingual series #35 - Dec. 1990).

For the benefit of those on the far left, including even some of our own comrades, who asserted, under the influence of the opinion which was predominant at that time, or through the logic of their own reasoning, that the counter-revolution had been accomplished, we recalled that: "The USSR was and remains an original phenomenon in history. Nothing can really be compared to it. In order to analyse what it represented, Trotsky had to do so without referring to models bearing at least some similarities to it. His assessment of the USSR was that of a complex society which was half-way between capitalism and socialism, and unstable at that. Yet it remained stable for decades after he died. (...) Today we are witnessing political transformations which may result in economic and social changes. We cannot pre-judge what kind of society will emerge from these changes, for it may be extremely original as well. Whatever happens, let us say again that the transformation has not been completed yet, nor is everything decided." (CS #35).

Social relations cannot be assembled and taken apart like the mechanisms of a clock. For us, following Trotsky's own reasoning, it was from the point of view of the possibilities for the working class to intervene that the pace of the changes which were taking place in the Soviet Union had a vital importance: "Were workers to allow the return of capitalism in the USSR, even partially, they would not enjoy the affluence, however relative, of the West. Rather they would experience a lower standard of living, unemployment and the end of the limited social benefits they had before. The standard of living of the population of the USSR as a whole would not go up, quite the contrary. It would go back to the level of the Third World - even if shop windows were filled with Western goods unaffordable for the overwhelming majority. The "reserved shops" would be open to all, but their customers would be just as exclusively selected." For this reason, "today we can only hope that the Soviet proletariat will oppose the takeover of companies by the richest layers of Soviet society and that it will also oppose, although it goes without saying, the land being taken over by the wealthy peasantry, which is already a genuine bourgeoisie. We can only hope that the Soviet proletariat will oppose the end of the planned economy even though it is in a bad state at the present time. (...) Such is the programme we would propose to the Soviet workers, if we could. In other words, to fight against the privatisation of companies and for the re-establishment of workers' control; to fight for keeping the plan and for reinforcing it with democratic control by workers, that is to fight against bureaucratic planning. We would argue for the plan to be adapted using real prices and a quantitative control of supply and demand, that is by the market; and also through control by the consumers as a means to fight against bureaucratic chaos and against the takings made on the national revenue by the bureaucracy. We would argue for a fight for the re-establishment of soviets which are class organs, to which representatives of urban and rural workers can be democratically elected while keeping out the bureaucrats and all the privileged. Yes, such would be our programme in the USSR. Maybe it would be formulated in more concrete terms, with additions resulting from certain aspects of the Soviet society which we do not know about. But, in this period of political crisis, it would not be much different, as to the fundamentals or to the method, from the Transitional Programme." (CS #35)

Ten years later, one can see that, on the one hand, contrary to our hopes, the Russian proletariat has not intervened in events in Russia as a force conscious of its political interests, but also that, on the other hand, in spite of this, the economic and social transformations desired by the bourgeoisie, particularly in the West, have failed to be implemented while the process has been stagnating for several years.

The official bodies of the international bourgeoisie have gone back on their initial enthusiasm. This year in particular, not only have measures in favour of the market economy been "slow and inconsistent" but also "the hard-earned gains of the first years of transition are now in danger" - according to a recent report by the EBRD, the "European Bank for Reconstruction and Development", which was set up precisely to oversee the smooth development of the private sector in the ex-Soviet Union and the former People's Democracies.

On the political level, however, the changes have been extremely fast. Hardly two years after the crucial year of 1989, the leaders of the bureaucracy did away with all their past references to communism, the 1917 revolution and the proletariat. The bureaucracy had long been prepared for this, both socially and politically: for several decades these references had ceased to be anything more than a means of deceiving the masses.

It did not take any longer for the rivalry between bureaucratic clans to cause the collapse of the state apparatus and the break- up of the Soviet Union, the death certificate of which was officially signed on December 8, 1991. The collapse of the Soviet Union, the continuing decay of the main successor states, including Russia, and the disintegration of the state apparatus into regional and local fiefdoms, are the main development of the past ten years. In a kind of historical backlash, the bureaucracy, this social layer which developed out of the state apparatus on the corpse of Soviet democracy and whose form of political domination was for decades that of a brutal dictatorship based on a very centralised state apparatus, has been the architect of the break-up of its own state apparatus, with which it identified.

Having established itself under the iron rule of Stalin's personal dictatorship, this senile bureaucracy is now sinking into bureaucratic anarchy.

The bureaucracy did not take long either to officially dismantle the planned economy. Bureaucratic planning always had as one of its essential functions the concealment of the bureaucracy's plundering and of the waste for society resulting from the lack of democratic control by the labouring classes over the economy. In other words, the "official economy" had always concealed a "parallel economy". During the Brezhnev years, this "parallel economy" had taken on considerable importance. The establishment of politico-economic mafias dominating whole regions or branches of production, and trafficking on a large scale, largely emptied economic planning of any content. But by winding up the economic ministries and federal bodies, and abolishing Gosplan (the supreme planning body) at the end of 1991, the political leaders of the bureaucracy finally buried economic planning officially.

The disintegration of the state did the rest. The new state borders broke up an economic unity which had been forged on the scale of the whole country. Strongly complementary sectors found themselves in different states. Many links between interdependent companies were broken. In addition, the disappearance of central control opened up the possibility for national, regional, local or industry-based bureaucracies to carry out their plundering openly. And they did it by asset-stripping companies much more than by running them for their own profit.

The destruction of the planned economy has not so far led, however, to the emergence of a capitalist economy, or even a market economy.

Looking back on ten years of "reform" in Russia, a representative of an American institution responsible for economic relations with this country wrote recently that there was an "enormous élan between the end of 1991 and the beginning of 1992", which, however, slowed down by mid-1992. "Up to 1994", he added, "the tendency towards reform was stronger than the tendency to move back". But from that point on, "things really started to stagnate", so much so that the process of transformation has been a failure in his view.

The enthusiastic advocates of a quick restoration of capitalism hoped, during this period of "élan", at the beginning of the process, that the accumulation of capital necessary to run the economy on a capitalist basis would take place rapidly. The distribution of privatisation "coupons" in 1992 was presented as something which should give a decisive boost to this accumulation. This measure was supposed to bring about the miraculous transformation of a mainly nationalised economy into a mainly privatised economy. This was enough for superficial minds. But it is not legislation which transforms an economy. It can only hasten changes, or else slow them down. The expression "privatised company" concealed economic (and political) realities that were very different. In agriculture (one should not forget the immensity of the country's agricultural land), there was virtually no change. In industry, the true nature of the privatisations varies from genuine capitalist ownership, held up as an example by such bodies as the IMF, to the legal formula enabling a group of bureaucrats to protect their hold over a company, or over all the companies in a locality, a region or a particular industry, both from any interference from the central state and against any outside investor. This second category is by far the largest. This is not to mention another category where there is an element of privatisation in the sense that private plundering is now taking place, but without private initiative playing any role.

Before the present political changes, the private accumulation of capital was legally prohibited (although this did not prevent, even at that time, the private accumulation of wealth). Today, not only is it authorised, it is even encouraged by all the consultants in capitalist transformation both inside and outside Russia. And yet it is not taking place. This is one of Russia's major problems. The money accumulated by the wealthy is converted, at best, so to speak, into financial capital, or sometimes into commercial capital, but not into productive capital (and for the most part, it continues to be invested in the West). Banks have sprung up like mushrooms - what will remain of them after the financial crisis is another matter - whereas there is practically no investment in production, "confirming the existence of a deep divide between the financial and economic spheres of the country", to quote the French bank Paribas. Foreign capital, meanwhile, is interested in Russia above all in the form of speculative capital. The 10 to 12 billion dollars which entered Russia in 1998 were almost exclusively invested in the much-publicised Treasury Bonds (GKO), and contributed above all to the bankruptcy of the Russian banking system we have since seen. Investment from foreign capital is ridiculously low. Western investors are as distrustful towards this country which has no state authority, no law and not even a minimum level of security as the bureaucrats are distrustful of any interference by western investors in their affairs. Like many others, Paribas underlines "the failure of the Russian state to ensure compliance with laws (...), property rights and contracts."

The Russian economy today is an economy suffering plundering and regression. Production has fallen by between 30% and 50% depending on the sector. A recent study by the French Centre for International Information and Prospective Studies (Cepii) notes that "in 1970, 41% of industrial equipment in activity in Russia was less than five years old, and this ratio fell to 29.5% in 1990 and to 8.5% in 1996."

While money is being gobbled up by the financial circuits, and inflation, which was slowed down for a time, has taken off again, the economy is becoming demonetarised. The state, which is unable to collect taxes, is not paying its employees either. And a growing number of companies are not paying their workers - or at least not in wages. Nor are they paying their suppliers. It is estimated that payments in arrears, counting both wages and company debts, currently represent 36% of Russia's total domestic product.

Economic life mainly functions by way of barter, the ultimate indictment after ten years of "restoration of the market economy". This applies to consumption, where the market essentially concerns only the best-off section of the population (basically the same section which in the past had access to the "special shops"). The majority of workers, state employees and pensioners must make do, without wages or pensions, thanks to payments in kind by companies, thanks to these companies maintaining canteens or the supply of various goods and services, and thanks to tricks inherited from the days when bureaucratic planning was at its height.

Most companies, meanwhile, are in no situation whatsoever to form economic links with each other on the market. According to the latest estimates, at least 50% of exchanges between companies apparently take place on the basis of barter. For company directors, this offers the advantage of allowing them to escape taxation as well as the effects of monetary ups and downs. But it hardly encourages the constitution and stabilisation of a market of the means of production and intermediate products. Payments in money, meanwhile, are virtual, as they are reduced to companies recording in the memories of their computers, or on their bank accounts, the money owed to them by other companies or the debts contracted with others. The system works, as in the halcyon days of bureaucratic planning, thanks to networks of connections between bureaucrats who manage companies and those in the local, regional or state administration. Instead of a market economy taking over from bureaucratic planning, the "parallel economy" of the past is filling the "no man's land" between planning which has been destroyed, and the market economy which is unable to emerge.

Making a comparison between the "success" of the restoration of capitalism in at least some of the former "People's Democracies" like Poland or Hungary on the one hand, and the Soviet Union on the other, Grigori Iavlinski (who, as the economist who co-authored the 500-day plan and the leader of the Iabloko party, passes as someone close to western financial circles, particularly the IMF) correctly observed that, for the former, the foundations of the economy had been laid before the Soviet occupation imposed nationalisation and planning on them, whereas in the Soviet Union "socialist planning was not applied to the economy; planning created the economy". As regards the size of companies, their geographical location, their concentration and the links between them, the Russian economy was constructed according to a logic which does not comply with capitalist logic. It is not enough simply to denationalise companies in order to keep them in operation. Capitalism has so far proved incapable of doing so. Will it succeed in doing so in the near future, by clearing away the ruins of the planned economy, i.e. by taking the time to implement the initial recommendations of the IMF - the closure of companies considered unprofitable by capitalists, but which the bureaucrats who have appropriated them continue to run after a fashion? The cost of this would be even more poverty than at present, for this would mean that tens of millions of workers, who are already no longer paid regular wages, would then not even enjoy the few benefits which the companies destined for closure still provide them with (not to mention the fact that there would then no longer even be any hope for these millions of workers). The bureaucracy as a whole has refused to commit itself to this path out of a conscious choice, no doubt through fear of a social explosion, but also, probably, because they sense in varying degrees that, in the battle to obtain the enviable social position of a capitalist, there is not enough room for all bureaucrats, or even for the majority of them.

We have often quoted Trotsky, writing in substance, shortly before his death, that the bureaucracy would already have completed the restoration of the bourgeoisie if the reign of the bourgeoisie had not become obsolete on the worldwide scale. The current crisis demonstrates this inability, for the capital available in the world is not being invested in the former Soviet Union (or anywhere else, for that matter).

More than half a century on, and after several years under the openly unfurled banner of the social counter-revolution, the bureaucracy is still having difficulty in achieving this restoration - and certainly for the same fundamental reason.

As to its state apparatus, it broke up before being able to become the instrument of the social counter-revolution.

Despite the emergence of a capitalist bourgeoisie, it is still the bureaucracy which constitutes the dominant privileged layer of Russian society. It is present everywhere in this huge country where, apart from Moscow, Petrograd and a few other cities, the bourgeoisie is embryonic or non-existent, and still parasitic. The bureaucracy's social position and its income still stem from its power, and not the other way round as for the bourgeoisie. Its mode of internal promotion is no longer the same as at the time of the centralised dictatorship, and is no longer decided from a single top decision centre. Power no longer emanates from one dictator. On the contrary, the increasingly deleterious central government depends on the consensus of a host of local powers. The clans and networks of influence linking the bureaucrats of the state administrations and big companies have replaced the system of appointments according to a "nomenklatura", although the beneficiaries of the new system are practically the same as in the old one.

We do not have any more reasons to change our characterisation of Russian society, the Russian economy and consequently of the Russian state than we did at the time when the texts quoted above were written. At the very most, after ten years of changes, we can only note, as a statement of fact, the originality of this Russian society dominated by a bureaucracy broken up into a host of power centres, and of this economy in which plundering (often connected with the mafia) is mixed with the practice of barter as the predominant expression of the division of labour. Unfortunately, the deterioration in the conditions of existence of the labouring classes has confirmed all the pessimistic predictions.

We can only reiterate our hope that the working class will find itself in a position to oppose the current process. We have no more means today than ten years ago to assess the changes which have taken place in the mentality and consciousness of workers during this time. At the very most we can imagine, without too much risk of being mistaken, that any illusions with regard to the ability of capitalism to bring prosperity have dissipated within the working class and probably even among much of the intelligentsia and the petty bourgeoisie. But the ability of the working class to raise itself to the level of understanding what policy is necessary to stop a catastrophic evolution is linked, in Russia as elsewhere in the world, to the emergence of a militant force with the proletarian revolution as its goal. The former Soviet economy has been ruined, but not yet restructured on a capitalist basis. Despite the economic decay - or rather, precisely because of it - the policy we would propose would still be the same today as the policy we would have proposed if we had had militant forces in that country eight or ten years ago, as outlined in the texts quoted above. The only difference is that it would no longer be a case of fighting to maintain the planned economy but of fighting for its restoration under the control of proletarian democracy.