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IW 03

Russia

Russia: the transition to capitalism, in crisis


manifestación en rusia

The apparent stabilization of the restorationist regime in Russia under Putin and the wide spread legend about the “popularity” of its President have received an all powerful blow by the Russian popular masses themselves in a first major social confrontation, early in 2005. Symbolically it occurred in the 100th anniversary of “Blood Sunday”, the beginning of the first Russian revolution in January 1905. Three hundred thousands of pensioners, workers and youth launched an unprecedented mobilization with rallies, road blocks in the major motorways, demonstrations that encompassed more than 70 regions of Russia , in more than 120 urban densely populated centers, from Moscow and Leningrad to Archangelsk in the far north and Irkoutsk in Siberia in the Far East . The immediate cause that triggered the explosion was the implementation of the infamous Law 122, abolishing the social benefits of the workers and pensioners, including the free transport for the elders, and replacing them with an insignificant monetary “compensation”.

Whilst there were in the past 14 years, following the collapse the Soviet Union, other protest movements, strikes, even local rebellions,( for example the uprising in Moscow in 1993 or, more recently, the campaign by the independent unions against the Labor Code and the revolt in Novgorod ) all these struggles were more or less localized and dispersed. For the first time there was a major social mobilization on a national scale, with the support of the majority of the people. In contrast with the so-called “orange revolution” in Ukraine, it was a spontaneous social upheaval, which was not manipulated by conflicting clans of oligarchs and pro-Western NGOs. Very soon it acquired a political character: for the first time after Putin’s rise to power, the call for the resignation of the President and of his government became the popular slogan of mass demonstrations in the main cities of Russia . After the January 2005 events, of course, the most different political and social forces have intervened to influence the course of this mass popular movement, which, for the time being, supersedes the barriers that the disintegrating apparatuses of liberalism, Stalinism and nationalist populism (including some oligarchs behind the scenes) try to impose.

The conflict cannot be stopped, despite the confused reactions of the regime, going from open State repression to concessions. The abolition of State subsidies to social services and the “monetization” of pensions is a crucial and necessary step to be taken by the restoration process to re-commodify the Russian labour power, whose reproduction, until now, is supported in a great extent (nearly 70 per cent) by the State subsidies of the Soviet past. Entry to the World Trade Organization in 2006 makes mandatory the implementation of Law 122, the abolition of all the remnants of the Welfare State, the privatization of housing, health services, transport, pensions etc. A real labor market with an undervalued labor power as a commodity has to be established urgently. This is the demand of foreign capital and of the restorationist forces at home.

In one sense, the nature and depth of the present conflict demonstrates that the process of restoration that started 15 years ago is neither linear nor without unresolved contradictions. It passed through successive crises and phases, coming now in a new crucial turning point. A periodization of the restorationist process until now could be drawn in the following general lines:

1991/1993

The turn to the capitalist market economy became more and more a dominant, conscious strategy of survival by the privileged bureaucracy in the last years of the Gorbachev period, in the late ’90s. The partial liberalization in the management of Soviet enterprises allowed the managerial bureaucracy in collusion with the corrupted State bureaucracy to sell the low priced Soviet goods, particularly from the oil and gas industry, at the higher prices in the world market, accumulating enormous wealth- a practice which will escalate in the ’90s under Yeltsin leading to the formation of the rapacious elite of the “oligarchs”.

After an initial, preparatory period, the capitalist restorationist counter-revolution started officially with the IMF imposed “Shock therapy” introduced in the former Soviet economy by the Gaidar-Yeltsin government, on January 2, 1992.The attempt to introduce the free functioning of the law of value by the liberalization of prices produced hyperinflation. Popular savings evaporated, production has shrunk dramatically. Social misery spread in an unprecedented and rapid way.

The former Stalinist bureaucracy had split into fragmented conflicting interest groups and clans enriching themselves mainly by parasitic activities based on the theft of public property. Their antagonisms are mediated by a huge and corrupt State bureaucratic machine raising itself over society. In this first phase of 1991-1993, even before the beginning of the privatizations orgy of the mid ’90s, fabulous wealth was accumulated by speculation on domestic and world commodity prices: commodities, particularly metals, other raw materials, oil, gas etc were bought cheaply on State regulated low prices and exported and sold on world prices. In the same period, while inflation was running at 2,500 per cent, the Central Bank issued credits at 10-25 per cent year, transforming public income into private. A third way to make big money in the period 1991-92, when the fear of famine was very real and the State provided yet subsidies for food, was for speculators and black marketers to import food from abroad paying only 1 per cent of the ongoing exchange rate and reselling them freely at home, pocketing the subsidy (See article by Anders Aslund, adviser to Yeltsin at that period, in Foreign Affairs No5 September/October 1999). These three parasitic business activities amounted to 79 per cent of the GDP in 1992(op. cit.).

This hybrid economy was based on the difference existing between the world capitalist environment and the internal economic milieu of a transition in crisis: the differential relation between state controlled prices and world prices, the lack of proper capitalist criteria issuing credits, the absence of a proper labor market where workers could be fired and hired freely ( workers were not paid their wages as well as pensioners their pensions for long periods of time, but the still existing old Soviet structures of State subsidized social services gave a solution to the survival problem).

The accumulation of money (not capital) led to the emergence of a powerful financial sector of speculators as well as to the permanent outflow of capital from the country to save heavens in the West, in Switzerland, New York, Cyprus or the Caiman Islands etc; a hemorrhage continuing until now.

This first period exacerbated social differentiation leading to mass impoverishment, emergence of nouveaux riches- the “New Russians”- merging the State bureaucracy, managers, speculators and Mafia into an infernal machine, sharpening social contradictions without the possibility of a political regulation of them. The transition itself was blocked, the IMF had to declare the failure of “shock therapy”, Gaidar had to resign and social tensions ended to the political explosion in autumn 1993, with the occupation of the House of Soviets in Moscow , the military siege and massacre that followed. This marked an important turning point. To stabilize the situation Yeltsin abolished the remnants of the old bureaucratized system of Soviets, establishing an Upper and Lower House of Parliament (Duma) and transforming the local authorities into quasi-feudal fiefdoms of corrupt local bureaucratic lords and governors. The first post Soviet war in Chechnya, an important factor to take again the control of the situation in the entire country by the ruling restorationist bureaucracy, was launched at the end of 1993 with tragic consequences.

1993/1998

The second period that followed and lasted until the financial crash in August 1998 was above all characterized by the waves of privatizations initiated by Anatoli Chubais, then Yeltsin’s First Deputy Prime Minister. The first attempt for privatization by distribution of “vouchers” to managers and to workers’ collectives failed to produce the expected results. The second sweeping wave of privatizations in 1995 was much more successful, although it was a product and a factor of crisis. The growing financial sector and the bubble in the Russian Stock Exchange expanded without the necessary material basis in production and with a deepening fiscal crisis. At the end of 1995 the “loans—for-shares” deals, the extension of credits by banks to the State to finance its debts and deficits in exchange of shares in State enterprises, led to a scandalous large-scale privatization, most notably of the big oil companies Yukos, Sibneft and Sidanko, and the concentration of the main resources of the country in the hands of a tiny minority, the “oligarchs”, who already have accumulated enormous amounts of money thanks to the speculation on the dichotomy between world and domestic commodity prices. Through these deals between the State bureaucracy and the oligarchs a few large banks were allowed to privatize some large enterprises in auctions they themselves controlled. But as Aslund remarks “No qualitative change accompanied these takeovers. The new majority owners did not behave like self-interested proprietors but just continued the management theft, primarily by selling the products below market prices to their own trading companies, letting the old state companies deteriorate […] Privatization’s severest critics have always been those very elites who seemed to profit from it, since the emergence of real private property rights threatens their state-oriented way of making money. The problem is not that businesses are formally private but that state officials’ extensive and arbitrary interventions severely limit private property rights. (Op. cit p.69). Zbigniew Brzezinski, the well known former U.S. Security adviser to President Carter and one of the main architects of the Afghanistan war and of the imperialist policy to disintegrate the Soviet Union and the former workers States, had emphasized the formal character of these private property rights and even suggested the need for a re-nationalization as a necessary step towards a proper transformation of this ex Soviet public property to capitalist property( an advice that is taken very seriously under the centralist Putin administration).

More Bureaucracy Than Ever

Private property rights in post Soviet Russia were always entangled with administrative State interference and systematic practices of official’s corruption. Stalinism had collapsed in 1991 but bureaucracy afterwards knew a tremendous growth to try regulating the unleashed contradictions. It occupies more than ever all the centers of decision and interstices of post-Soviet society. There is a staggering number of state agencies-local, regional, and federal- authorized to inspect and regulate businesses, receiving bribes as a rule accepted by all. “To open up shop”, Daniel Treisman writes, “a typical small retailer must first satisfy the licensing office, building inspectorate, police, fire department, health inspectorate, tax inspectors, tax police, trade inspectorate, labor inspectorate, consumers rights office, weights and measures center, environmental protection committee, and medical insurance fund. One entrepreneur recently told the newspaper Novie Izvestia he had visit 24 offices, pay nearly $5000 in fees, replace the bulbs of 35 street lamps, and resurface part of his street before he was allowed to build a small addition to his café ”(Foreign Affairs No6 November/December 2002 p.66)

The mass theft of public property effectuated with the “loans-for- shares” exchanges and its concentration to the hands of the finance oligarchs exacerbated all the contradictions of a transition in crisis; in the new global finance environment after the 1997 July international crash centered in Asia-Pacific, the Russian Stock Exchange knew a “collapse in slow motion” from October 1997, when the index fell 20 per cent, culminating in a meltdown in August 1998, when the index fell 94 per cent from its peak in 1997 and the government defaulted on its treasury bills and declared a 90-day moratorium on foreign debt payments. This marked the most dramatic turning point after the collapse of the Soviet Union .

Putin

The State bureaucracy had to make a U turn. Under Minister Primakov the process of re-centralization and re-nationalization of Russian national resources restarted. The replacement of the alcoholic Yeltsin and of his infamous “Family” rule in Kremlin by the sober, relatively young, ex FSB(KGB) officer Vladimir Putin, the St Petersburg clan of bureaucrats and the overwhelming FSB rule, on January 1, 2000 gave a new orientation to all post Soviet developments. The re-launching of the Chechen war, after a series of mysterious bombing in populated urban areas in Moscow and other cities, consolidated the power of the new ruler of Kremlin. A third phase in the capitalist restoration process started.

Under Putin, the centralizing tendencies to confront the crisis of transition and stabilize the situation were intensified. The 89 regions of the country were centralized into seven administrative districts, each under a presidentially appointed prefect. The Kremlin had re-asserted its “right” to appoint or fire the governors. The system for appointing the federal parliament’s upper house has changed. The tax system was reformed; the region’s share of revenues has shrunk in favor of the center. But above all, Putin has clashed with the oligarchs: not with all of them (he kept some allies and distances of neutrality to others), mainly with Berezovsky and Goushinsky, who had to fled the country, and above all with Khordokovsky, the baron of Yukos, who is now in prison and “his” company at the hands of the State, part of Gazprom, the biggest oil company in the world.

The re-nationalization effort has not to be mixed up with any apparent return to the Soviet past: it follows the lines already sketched by Brzezinski as a necessary stage to overcome the obstacles that have obstructed the capitalist restoration process. Foreign policy is an extension of home policy: the pro-imperialist foreign policies of the Putin regime, especially after September 11, in full support to the international imperialist “war on terror’ launched by the Bush Administration, providing the US military machine, for the first time, facilities for its bases in former Soviet Asia and the Caucasus, is in full harmony with the restorationist project at home to re-integrate the world capitalist market.

The astronomic rise of oil prices was of a great importance for the successes of Putin’s “stabilization program”. It played the opposite role that in the period of Gorbachev when the fall of oil prices depleted the Soviet Treasury and precipitated the implosion in 1991.

Nevertheless, despite of the growth of oil revenues, the Russian economy saw, in the first quarter of 2005, $19 billion in capital flight and a fall of the growth rate to 4.9 per cent on an annual basis, down from 7.4 percent during the same period in 2004. As the U.S. private intelligence agency Stratfor notes on April 28, 2005 “Russia’s growth rates have been declining gradually since late 2003-not coincidentally the same time Khordokovsky’s arrest triggered the dismantling of Yukos- but the recent figures show the first decline of real magnitude during this period. In other words, the economic trend line for Russia right now does not look good[…] The Russian economy’s declining growth in spite of high oil prices illustrates that much of the rest of the economy is in recession- a recession large enough to begin to overwhelm the strong energy export sector.”

In such conditions at home, in a world plunging into a new round of financial crises, a deep structural crisis in the European Union, revealed and exacerbated by the victory of the “No” in the French referendum, permanent imperialist wars, and social rebellions from Bolivia to France, the Russian restorationist bureaucracy sees, with fear, its dreams of stabilization under Putin fading, imperialist encirclement and pressures to become suffocating and threatening the Russian heartland after the Ukrainian events, and above all its gravedigger, the Russian working class and popular masses to awake and mobilize in struggle.

History, definitely, did not ended in 1991, neither in Russia nor in the entire world. On the contrary, the rhythm of History is accelerating leading inescapably into a denouement. As the founding programmatic thesis of the CRFI stresses, against all the other capitulationist and defeatist currents in the Left, the historical circle opened in October 1917 has not been closed.

July, 7 2005

By Savas Michael-Matsas