As Russia's leaders falter, fumble and fail …
The Crisis behind war in Chechnya
AFTER THE CAPTURE OF GROZNY, Russia's brutal war against the Chechen people continues in the southern mountains in even more difficult terrain against a guerrilla army of national liberation. While the siege of Grozny was approaching its successful conclusion, President Boris Yeltsin, after nearly ten years in power, suddenly stepped down in favour of his protégé. It is appropriate at this juncture that socialists re-assess what is going on in the ex-Soviet Union, and ask: What kind of society is being created by the "free market" and "Shock Therapy"? Here Dave Packer discusses some of the issues.
The Dauphin takes power
No sooner had Boris Yeltsin dramatically resigned as President of the Russian Federation - on the last day of the millennium - than the Russian Dauphin, Vladimir Putin, moved quickly into the Kremlin to secure his inheritance.
Clearly an element in Yeltsin's decision to step aside was the extraordinary good showing in December's Duma (parliamentary) elections by Unity, the so-called 'Bear' coalition, which was endorsed by the popular Putin, gaining 23.32% of the vote (64 seats).
The success of Unity, and Putin's spectacular rise in popularity, which still stands at around 75%, can be put down entirely to the stage-managed and politically convenient war in Chechnya - he is seen as a strong man and main architect of the war. It can also be put down to the fact that in the run up to voting, Russian TV and media mounted an extended campaign in favour of Unity.
Unity, had been hurriedly thrown together only a few months before the elections in a desperate attempt to defend Yeltsin 'family' interests, by cynically benefiting from the kudos derived from the bloody Chechen war.
Another right wing block, the neo-liberal Union of Right Forces, led by former prime minister Sergei Kiriyenko, and including Anatoly Chubais and Yegor Gaidar, achieved only 8.52% (24 seats) despite the fact that they, along with the Unity gang and the IMF, are the main architects of "economic genocide".
The vote of Communist Party of the Russian Federation (CPRF), the largest party in the Duma, managed to hold up, raising its share by two percent to 24.29% (67 seats), although its other allied parties, the Agrarian Party and Popular Rule, failed to break the 5% threshold to win any seats!
Significantly, an alliance between Unity and the Union of Right Forces, together with defectors from Fatherland/AII Russia to Unity, will mean that the CPRF will no longer be able to dictate in the Duma.
A 13.33% vote (37seats), was also disappointing for Fatherland/All Russia, a so-called 'centre-left' bloc, headed by Moscow's mayor Yuriy Luzhkov and former prime minister Yevgeniy Primakov. They seem to have lost millions of voters to Unity.
The ultra nationalist Zhirinovsky Bloc received only 5.98% (17 seats); and the liberal, Yabloko also received 5.98% (16 seats). Many other coalitions did not reach the 5% to gain any seats.
Half of the lower house of the Duma was elected on the party list system and half on the basis of individual mandate constituencies.
When the figures are combined with the so-called independent candidates standing in the 225 seat single constituency section, the final composition of the Duma, after wheeling and dealing will be different. The distribution of seats will look something like the following: The CPRF will get 150-160 seats; Unity: 120-130; Fatherland/All Russia: 65-70; Union of Right Forces: 30; Yabloko: 25; Zhirinovsky Bloc: 18.
Vladimir Putin, a poker faced ex-KGB operative, should have a smile on his face. With Grozny now in Russian hands and his defence minister Igor Sergeyev claiming the war is nearly over, the linked successes on the military and political fronts make him the most likely winner in the March Presidential elections. There is no challenger in sight.
Putin had been plucked from relative obscurity by his patron to be groomed as Prime Minister and subsequently heir apparent. He is a man in a hurry, with policies geared to electioneering for the Presidency. It therefore came as no surprise when, after hardly warming his new seat in the Kremlin, he rushed off to the front-line in Gudermes near Grozny to give out ornamental hunting knives to Russian officers in the new year day awards. The trip was a coldly calculated gesture to further reap the kudos and to ensure the confidence of the military - the power of last resort in Russia.
Putin vowed to the TV cameras that he would "crush the terrorists" and halt "the break-up of the Russian Federation."
According to The Observer (2/1/2000), at about the same time as Putin was in Gudermes giving out the awards, his other big backer and a third element in his rise to power, the media mogul and Kremlin crony, Boris Berezovsky, was ushering in the new millennium with a ball at the Bolshoi costing $1,500 per head! His TV station was one of those on the air showing Putin live giving out the new year awards.
Shortly after his visit to Chechnya Putin was obliged to make one of the pay-offs. He signed a new presidential decree guaranteeing Yeltsin and his family immunity from prosecution for corruption (and probably from official investigations).
Meanwhile Kremlin officials were searching for a new country dacha for Yeltsin just outside Moscow. This was part of the deal, as was a large pension, official car, bodyguards and attendance by top medical experts.
The Yeltsin camp created Putin to be their protector - and they have plenty to fear. The failing ex-President and his cronies have their hands so deeply in the till that it could be said that Yeltsin and Putin stand at the head of a near-gangster state with a criminal mafia its most dreaded export.
It has been estimated (Fitch IBCA) that between 1993 and 1998 an enormous $130 billion has flowed out of Russia legally and illegally. A single mafia/businessman, Sergei Mickailov, stands accused of laundering $10bn of IMF money thorough the bank of New York - which alone is equivalent to a staggering 40% of Russian government spending.
Most of the IMF's $25 billion sent to Russia since 1992 has been laundered back into western banks. International investigators in Moscow, Geneva, London and New York, who were soon on the trail of the IMF/World Bank's lost billions kept coming across the names of Yeltsin's political cronies and members of his family.
Hence the necessity to ensure the succession and his immunity. (See December,1999 Socialist Outlook) Everybody knows that organised crime is linked to the state bureaucracy. In his New Year Address to the nation Putin stated, probably tongue in cheek, that, "it will be some time before we can appreciate how much this man [Yeltsin] did for Russia."
However, Putin is not just a puppet. He has a programme which promises to make Russia powerful again - a country that "the people and the army can be proud." He lays emphasis on a powerful centralised state, on patriotism and on 'collectivism'.
He told the assembled military at the new year awards in Gudermes that the war; "is not just about restoring honour and dignity to the country. No, this is about more serious things. This is about how to bring the end of the break-up of Russia. That is your fundamental goal."
Putin has been reported as saying that; "To the Russian a strong state is not an anomaly ...It is the source and guarantor of order, the initiator and main power behind all changes."
The Yeltsin regime had already effectively ended the 'partnership for peace' and begun to rebuild its alliance with China and other major third world countries while increasingly adopting a confrontational stance towards NATO.
In mid-January a Presidential decree (No 24) effected a shift in Russia's defence doctrine by placing the armed forces in a higher state of combat readiness and new more aggressive ground rules for the use of nuclear weapons and promising a 60% increase in the defence budget.
It is not surprising therefore that Western commentators are a bit concerned about what Putin represents; is he a pragmatic, pro-west, pro-market reformer like Yeltsin, i.e., a pro-capitalist neo-liberal? Or is he, as the growing consensus seems to suggest, a strongman who will pursue Russian national interests ruthlessly - albeit in a capitalist framework?
In my view he is likely to move in the latter direction. However, the construction of a national capitalism which can survive and thrive, will rely heavily on the state apparatus and on resources taxed and robbed from the socialised 'collectivist' sector.
Some of this damage created by Yeltsin/ IMF "Shock Therapy", which failed to create a viable free market but has wrecked the command economy, will have to be reversed. But a turn towards creating a national capitalism based primarily on internal resources will be a brutal business requiring a strong centralised state based on a reliable army and a cohesive nationalist, even xenophobic ideology.
Such a course will of necessity be a harsh capitalist bonapartism - an authoritarian regime which is able to smash working class resistance, both passive and active, in order to finally carry through the bourgeois counterrevolution.
If such a regime became stabilised, it could in the future constitute a kind of fascistic state capitalism in Eurasia, with imperialist aims. This will pose the danger of war, for example, in the scramble for oil in the Caucasus and the Caspian Sea regions.
To fully understand what Putin may become, we must analyse the options open to him.
The road to capitalist restoration
The roots of the Russian crisis are usually traced back to the collapse of Stalinism which followed on the heels of Gorbachev's failed attempt, through his policies of glasnost and perestroika, to reform the decayed bureaucratic Stalinists system and the stagnant command economy it had created.
In fact the counterrevolution we witness today is merely the catastrophic last act, which has been played out since the rise of Stalin himself and his consolidation of bureaucratic rule in the 1920s.
Gorbachev's reforms opened the floodgates of discontent and undermined the principle of compulsion on which the bureaucratic command economy relied. The Stalinist system soon began to unravel.
As Trotsky decades before predicted would happen, the dominant sections of the bureaucracy who had always looked after their own material interests first, opted for private property and capitalist restoration.
However, there was no democratic mechanism for deciding how this should be done (or whether it should be done), or who would most benefit from it (i.e., which layers of the bureaucracy). The Soviet Union started to fracture and splinter, particularly after the fall of the Berlin wall and the demise of the Warsaw Pact.
In 1990 Yeltsin the radical reformer was elected speaker in parliament, while Gorbachev began to falter and equivocate about the consequences of the course of action he had adopted.
On 20th August 1991, sections of the so-called old guard - those bureaucrats and generals who wanted a different process of restoration, one more in tune with national interests (i.e., their interests) rather than foreign interests - half-heartedly attempted a coup.
They seized Gorbachev in the Crimea and sought Yeltsin's resignation. Yeltsin rejected their demand and boldly drove down to the centre of the city and stood on a tank in front of the world's media and denounced the plotters and declared himself the government. Because they had not gathered enough military of popular support, the coup-makers immediately gave in.
After the failure of the coup, the USSR disintegrated. Trotsky had rightly called the Soviet Union a "prison house of nations", and this analysis was confirmed by the tumultuous rise of powerful nationalist movements in diverse Republics.
Led by the Ukraine, they succeeded one by one. This partial and qualified victory of the masses in struggles for national self-determination was undoubtedly a step forward for democratic rights, but was not without its contradictions. Independence was achieved under right wing nationalist leaderships, not socialist ones.
Gorbachev was finished too. He was released after the coup, but was then humiliated in the parliament by Yeltsin, who ousted him. The man of the hour was unambiguously in favour of the restoration of capitalism and adopted the neo-liberal IMF plan of radical marketisation plus lucrative aid. The policy soon became known as "shock therapy."
State planning mechanisms were dismantled, stock exchanges set up and privatisations embarked upon.
Partial privatisations, fake purchases, the distribution of vouchers/coupons, and other schemes were launched in order to kick-start the capitalist market economy - all were to fail. They producing only a relatively small capitalist sector of 'cherry picked' industries, which ran parallel to the disintegrating socialised command economy.
Thing went from bad to worse for the population as well as the economy. Other diverse sections of the old guard who opposed the neo-liberal excesses of the new government again attempted a coup with the seizure of the White House. Yeltsin called in the army and shelled them into submission. These were the 'heroic' days of the Yeltsin regime.
On so called, 'Black Tuesday', 11 October, 1994, the rouble lost over a fifth of its value in one day. This was followed by a total budget crisis, with the state unable to pay its wages or collect its taxes.
1994 also saw the beginning if the first war in Chechnya, while in 1995, Yeltsin's heart began to fail with two heart attacks. From then on, inertia, gangsterism and corruption became increasingly widespread and flagrant.
Establishing his political grip on society was one thing, restoring capitalism was not so easy: and the economy went from bad to worse. "Shock Therapy" led to a catastrophic fall in industrial output. Because of the semi-disintegration of the state apparatus, Yeltsin from the beginning failed to get any grip on the state finances, while social and economic chaos and mafia-like crime grew rampant.
Only about 60% of taxes had been collected in the first half of 1996 and already the state owed a huge £3 billion in back wages. Also, by 1996 wages had plummeted to half of their 1990 levels, and millions - according to the Wall Street Journal between 20% and 30% - lived in abject poverty. Since than the situation has deteriorated further.
Yeltsin started to back away from the full implementation neo-liberal programme, although not publicly. The traditional fear the bureaucratic robbers have of the working class had begun to take effect.
There had already been actions taken by miners and teachers among others, demanding back wages, or else. The fear of a social explosion was reinforced in the summer of 1996 when over 100,000 Ukrainian miners struck over the back-pay issue. However, it was too late: the economy was in ruins, and the violent kleptocracy was giving birth to a mutant gangster capitalism.
During the 1990's the old 'reformed' Communist Party (CPRF) consolidated a significant base among the lower ranks of the old Stalinist bureaucracy and sections of the organised working class.
It stood at the head of the Peoples Patriotic Alliance, which is a coalition of rightist, nationalist forces. During the elections in 1996 Zyuganov, its current leader, who was himself a lower ranking bureaucrat, made it clear that his election would not threaten business (as the CPRF made clear in the December, 1999 elections). The CPRF rejects neo-liberalism, but only offers the workers a nationalist state capitalism and a strong state.
Despite Yeltsin's sometimes eccentric Bonapartist methods, political rifts and confrontations continued to undermine his government. The Western media claims never to have understood what the ruthless power struggles in Russia were all about, putting it down to the Russian character and its inability to get to grips with democracy.
The repeated plans and articles of faith; the succession of hand picked Prime Ministers with intentions to implement the IMF plans and restore the capitalist system, faltered, fumbled and finally failed. These failures had profound political reasons and were not due to Yeltsin's clowning.
The big question remained: how to engineer a social counterrevolution, consolidate a new hegemonic ruling class, with all its social consequences, in the face of one of the largest working classes in the world, which had made a social revolution and had a standard of living closer to western Europe than to the Third World?
In 1998 the crisis of the Russian economy reached catastrophic proportions. A fall in the price of oil on the world market, mainly due to the growing crisis of the East Asian tiger economies, triggered in August of that year a catastrophic collapse of the rouble and general economic activity.
Russia defaulted on its debt-repayment to the IMF. This in turn contributed to the growing world financial crisis at that time. The collapse of the debt market in August happened even though the International Monetary Fund had just begun payments to Russia from one of the largest economic "rescue" packages in history.
Boris Kagarlitsky writes about the central role of the IMF in the Russian Crisis.
"Russia has in general followed the instructions of the IMF and other international financial institutions. ... the IMF has accepted and supported economic policies of the Russian government, while the Russian government has accepted the basic principles and advice of the IMF decision-makers.
"These decisions resulted in the current chaos which has not only led to the total collapse of the Russian economy, something unprecedented in peace time, but also is bringing the whole world economy closer to recession. ... Along with the devaluation ... the crash marked the definitive failure of the key strategies that the IMF and major world governments." [Labour Focus on Eastern Europe, No. 61, 1998]
The price of oil has increased over the past year, easing the pressure on the Russian economy to some extent, but little has changed as far as its underlying problems are concerned. Although the economy which we see today has many of the surface appearances and paraphernalia of capitalism, it is without the substance.
The crash made it clear to the whole world that the restoration of capitalism in Russia had not only stalled again, but had never got seriously off the ground.