Russia - Does President Putin represent the last act of the Stalinist counter-revolution?
Enter the Dragon!
IN PART 1 of this article ( issue 32 ) Dave Packer discussed the seamless transfer of power from President Yeltsin to his chosen protégé Vladimir Putin, since elected President of the Russian Federation.
Yeltsin established his political grip on society with relative ease, but this was not the same as restoring capitalism, which proved far more difficult.
The IMF-endorsed "shock therapy" which Yeltsin tried to implement led inevitably to social and economic chaos and a catastrophic collapse in industrial output – the biggest economic collapse in peacetime – while mafia-like crime grew rampant and the state became increasingly dislocated.
As Tony Blair and other western leaders cynically pay homage to the new strong man in the Kremlin, "their man" President Putin, the Russian crisis deepens and the final act of the Stalinist counterrevolution approaches its climax.
Reactionary Russian chauvinism has been whipped up by Putin and the pro-capitalist elite as a political weapon, especially over the Chechen war. However, this weapon is aimed not just against the Chechen people fighting for self-determination, but is also a dagger pointed at the heart of the Russian working class.
Nationalism in Russia today is a powerful ideological force in the hands of the pro-capitalist political elite which cuts across the underlying class polarisation which is taking place, dividing and confusing the masses.
Unfortunately, many of those who claim to speak for the working class, such as the leadership of the so-called Communist Party, have also played the nationalist card and supported the slaughter in Chechnya.
The restoration of capitalism under Yeltsin was at an impasse. By August 1998 the social, economic and political crisis reached catastrophic proportions with a collapse of the rouble and a default on Russia’s debt-repayment to the IMF. This in turn contributed to the growing world financial crisis at that time.
Yeltsin’s failures over ten years to fully restore a viable and stable capitalist system had profound socio-political reasons and were not due to Yeltsin’s drunken clowning or the unfathomable "Russian soul", as is sometimes suggested by the Western media. Nor is it all down to a misapplication of free market policies pursued by the IMF, as billionaire speculator George Soros claims.
Rather, as Marx explained, it is not possible to lay hold of the existing state apparatus, and fundamentally change/overthrow an existing social system and mode of production.
Revolution or counterrevolution is required, which means the destruction of the old state apparatus – which in Russia today has nearly been achieved – and the creation of a new state power. The disintegration and dislocation of the Russian state is not the same as its total destruction.
Petr Aven, president of Alfa, Russia’s biggest and most successful private bank, esteemed economist and a former Russian trade minister, understands this crucial issue. He supported Putin in the presidential elections and publicly argues that the new President must end the chaos by using totalitarian methods.
First, Putin must assemble a reliable military force out of the ruins of the old state apparatus. He suggests that the regime should be modelled on that of Augusto Pinochet.
In a recent interview he said:
"Pinochet tried to enforce obedience to the law, and sometimes that’s difficult for a country. Sometimes you need to use force. The only role of the state is to use force when needed."
And again:
"The only way ahead is for fast liberal reforms (more "shock therapy" – DP), building public support for that path but also using totalitarian force to achieve that. Russia has no other choice." (The Guardian, 31.3.00)
Putin’s chief economic adviser German Gref also insists that they will make the transition to a normal market system, "in the shortest possible time." Putin, Gref and Aven understand that this requires the closure of thousands of enterprises and the sacking of millions of workers – this would make the Great Depression look small beer.
This was why Yeltsin pulled back from the brink and looked foolish and compromised. The bureaucracy knows that the working class would be kicked into violent resistance if such a brutal, counterrevolutionary policy was adopted.
But can the former Red Army be relied upon to impose the will of the emergent, and still narrowly based, capitalist class? Putin will first have to construct a reliable military force which is entirely loyal to the President. This is the symbolic meaning of his New Year’s Day visit to the army in Chechnya the day after Yeltsin’s resignation.
However, Putin will have noted the important increase in votes for the Communist Party, his main opponent in the March Presidential elections. Despite a lacklustre campaign they reached 30%, making the CP by far the largest party.
Despite its mainly working class vote, the Communist Party remains a Stalinist party, putting a nationalist and pro-capitalist policy. However it is not a pro IMF/neo-liberal party, and it has campaigned against the corrupt theft of national assets.
This is why important sections of the working class support it. Nonetheless, it is not a party of political revolution and socialism which is the only fundamental choice which would meet the needs of the working class.
The first part of this article (issue 33) maintained that the economy we saw in Yeltsin’s Russia had many of the surface appearances and paraphernalia of capitalism, but was mostly without the substance. More than any other event, the 1998 crash made this clear. The restoration of capitalism in Russia had not only stalled, but had hardly got off the ground.
"Economic genocide" and the failure of the IMF policy.
Today , IMF "shock therapy" is seen by ordinary Russians as little more than "economic genocide." Overall, the shock tactics have led to a massive decline in GDP, stagnation and partial functioning of whole industries, indebtedness, collapse of welfare, etc.
While this has made the few in the political elite enormously rich., the international bourgeoisie have increasingly perceived the Russian "transition" as a bottomless pit, and the economy a ‘basket case.’
Western bankers lost $20 billion in the 1998 debt default alone. The crash caused imports of consumer goods, mainly for the bureaucrats and capitalists, to fall drastically (50% of all consumer goods were imported before August,1998). Boris Kagalitsky writes:
"The policies of the IMF were based on the assumption that a stronger currency automatically leads to a stronger economy. The currency should be strengthened at whatever price, including the decline of production, the impoverishment of the population and even the disappearance of most basic services in the spheres of health care, education and social security." [Labour Focus on Eastern Europe, No. 61, 1998]
Although it is claimed that 50% of GDP is now privatised, the form of this is often little more than a ‘juridical formality’, a distribution of vouchers which excluded outsiders, making the workers and managers the direct or collective owners.
This did not lead to restructuring of the undercapitalised enterprise collectives, just mass under-employment rather than mass unemployment. The law of value still does not generally operate in the Russian economy, where barter is the order of the day.
However, after the 1998 crash, increasing numbers of unpaid workers were forced to sell their enterprise vouchers, mainly to the management, and between August 1998 and April 1999 real unemployment rose by 30%, while wages continued to fall by approximately 40%, despite a small economic recovery.
Nonetheless, there is a widespread survival of companies and industries (ie thousands of factories) which would not survive in a genuine capitalist market operating according the laws of value: in capitalist terms they are bankrupt. Nor do the privatisations include all the big industrial sectors, parts of which remain state property.
Eventually, if the working class can’t assert their control and management, the law of value will assert itself: but in the meantime, the existence of the socialised sector is crucial for subsidising the much smaller capitalist sector with cheap raw materials, fuel, transport, engineering, metal work, and so on.
Moreover, the competitive pricing of exported commodities is in effect due to subsidies from the state, through payments to workers in kind, state benefits such as low cost housing, cheap transport and health care, etc, which are hidden costs of production and reproduction not added to the prices of goods sold on the world market. It is a combination of this factor and the devaluation of the rouble which has created the recently announced $30 billion "trade surplus" (The Economist. Feb 19-25, 2000)
Nor do the figures include the huge black market or the widespread private/personal subsistence production of food. It is estimated that a staggering 50% of all internal trade is now barter. The result is that large parts of these ‘new market economies’ are small scale and by-pass taxation.
At the root of the problem for the neo-liberals is low investment and a slow rate of capital accumulation. Investment in Russia is chronically low even compared with East Europe.
Prior to 1998 there was a snowballing in the number of banks to more than 500, however, most were involved in speculation rather than investment and many went bust when the rouble collapsed and Russia defaulted, in August,1998. In Russia investment in industry stands at about $50 per head of population compared to $2,700 per head in Hungary.
A rapid restoration of capitalism in Russia requires a massive injection of capital, as occurred in East Germany, only on an impossibly larger scale.
Loans from Western banks and the World bank/IMF are crucial but not enough.
Indeed many of these loans have been directed not towards investment in infrastructure or industrydered back into Western bank accounts belonging to the mafia barons. The result has been a net outflow of capital. Much of the profit from socialised heavy industries, which are still functioning, also ends up in foreign bank accounts.
Foreign buy-outs have not been without their difficulties either. An example is the large Vyborg Paper and Cellulose Mill bought out by British investor Alcem UK in 1997. The plant’s 2,100 workers, fearing massive layoffs and saying they were owed more than $8 million in back wages, occupied the plant.
They posted their own armed guards, organised a democratic strike committee to operate the plant, and fought for eighteen months to keep out the new owners. They ran the plant under workers’ management and used the profits to feed their families.
The workers gained wide and active solidarity from local and regional working class organisations, and even managed to block the highway running from Helsinki to St Petersburg to attract attention to their struggle.
In the autumn of 1999, when the strike committee was planning to block the railway line, the authorities acted by organising a dawn raid by special heavily armed riot police which resulted in a shoot-out. This time the state won, and occupied the plant, but the struggle continues.
This struggle not only illustrates a high level of solidarity and combativity with advanced experiences of democratic workers’ control and management, but the use of special armed forces, the kind that Putin will need to carry forward the counterrevolution.
Last but not least, the agricultural sector continues to operate essentially on the basis of state-owned collective farms. Agriculture has been even more resistant even to formal privatisation than industry – since even with tractors, small family-operated plots of land would be far less efficient than the giant mechanised collective farms. However, when the machinery wears out, if it can’t be replaced, there will be a retreat into smaller peasant holdings.
The human cost of "shock therapy"
In all the countries of the former Warsaw Pact, to a greater or lesser extent, women, children, the disabled, refugees and pensioners have been especially devastated by the neo-liberal offensive and the "shock therapy".
A UN Development Programme report (Summer 1999) provides some stunning figures, and confirms the picture that can be gleaned from occasional reports in publications like the Financial Times and the Economist. It claims that the economic transition and upheavals of the 1990s;
"have been calamitous for a vast swathe of Eastern Europe and Central Asia. Leading to widespread poverty, alarming falls in life expectancy, widening inequalities between the sexes, falling investment in education, the collapse of public health and the spread of disease, crime, nationalist violence and suicide."
It shows how these countries have been pushed into a "Great Depression," plunging, "more than 100 million people into poverty with many millions more hovering precariously above subsistence." It cites World Bank figures showing that in 1989 about 14 million people in the former communist bloc lived on less than $4 a day.
By the mid-1990s that number had risen to about 147 million. After the Crash in August 1998 the numbers falling below the poverty line shot up to about 40%. Poverty is endemic while malnutrition affects millions.
The number of pregnant Russian women suffering anaemia trebled between 1989 and 1994, while in Moldova between 20 and 50 per cent of children had rickets from a lack of Vitamin A.
The state’s inability to pay wages or benefits on a regular basis has been a major cause of poverty. In 1992 alone, after the first year of "shock therapy", real wages fell, due mainly to wage cuts and inflation, by over one third and average personal consumption had fallen by over 40%.
This situation got much worse with inflation at the end of the 1990s reaching about 2,500%. By 1998 wage arrears in Ukraine and Russia amounted to more than 4 per cent of GDP. This is the good news – in Kazakhstan they are estimated to amount to some 40 per cent of GDP.
The UN report shows that there is a widening inequality in wealth and incomes. This is exacerbated by hyper-inflation, which tends especially to affect the food prices. Between 1991 and 1996, food prices in Armenia rose by 24,000%, whereas non-food items rose by only 7.800%. The weakest in society, pensioners, the disabled, single mothers, have been exposed to the most acute financial difficulties, by loosing access to benefits.
Since the fall of the Berlin Wall, there has been a decline in life expectancy almost across the whole region, with falls of at least four years in countries such as Russia. Average male life expectancy is now only 58! Several million people have not survived the 1990s who would have done if the life expectancy levels had been maintained.
Between 1991 and 1994 infant mortality increased by nearly 15% and things are much worse today. Accompanying these developments is a grim rise in suicide. Tuberculosis and other diseases have returned as big killers, especially in the former Soviet Union. Aids and sexually transmitted diseases are also spreading rapidly.
Women have increasingly been pushed out of public life and out of the workplace – inequality between the sexes is growing. Violence against women has also risen with physical abuse from spouses becoming more noticeable and more women are falling victim to crime.
Women desperate to find employment have found themselves forced into prostitution both within their region and by organised crime networks in western Europe.
There is a dramatic deterioration of education, due to sharp falls in spending on schools and universities. Almost everywhere enrolment and attendance rates, especially at pre-primary schools have fallen.
In the former Soviet Union, more than 30,000 pre-school facilities were closed between 1991 and 1995. Overcrowding, dilapidation, lack of heating, underpaid teachers and a lack of health checks have also taken their toll.
Underlying all this social deprivation is the economic melt-down caused by forced marketisation. Banker Petr Aven advises Putin that even more cuts in welfare and social provision are necessary if capitalism is to be restored. The spectre of a most brutal and untrammelled capitalism haunts the region.
The nature of the Russian Federation today
The conclusion of this analysis is that the Russian Federation contains a peculiar combination of property ownership; social property, and private property, including corrupt accumulation.
Despite the growth of private enterprise and the market system, neither the bulk of production and distribution nor labour is dominated by the law of the market or the law of value. Also, debt, wages and taxes are regularly not paid, and there is a process of de-monetarisation and a widespread system of barter.
A majority of workers in industries such as extraction, transport, manufacturing, even many service industries such as health, still have jobs – of a kind, although unemployment is steadily rising. Most manufacturing enterprises are on part time and wages are in arrears, however, company shops, housing, even nurseries, often still exist.
To some extent this maintains the social weight of the working class in society. However, it also maintains the old corporate, paternalist structure which ties the workers to the management who run the enterprises, in so far as they function. The same managers often cream off some of the surplus for their own ends. Corruption is endemic.
Although more than 50% of enterprises are formally privatised, it is clear that non-capitalist social relations continue to predominate in a decayed form because capitalist social relations have not replaced them to become the dominant mode of production. Such a system of transition in reverse can’t be stabilised for long, but it does reflect the failure so far of the neo-liberal offensive and the IMF’s project.
Paradoxically, the difficulties in restoring capitalism are due to the social strength and the traditional fear of the working class by the bureaucracy, while at the same time the reason restoration has made such advances is due to the political and organisational weakness (compared to the generation of 1917) of the working class.
Although, unlike in a capitalist society, the struggle of the workers always becomes directly political struggle, there is no major political party representing the interests of the working class. The crisis of leadership is profound.
The fact that the Russian Federation has a rabidly pro-capitalist government dedicated to the restoration of capitalism is not the only factor in determining the class character of the state.
For Marxists, government is not synonymous with the state (although it is part of it), which is a distinct apparatus for the enforcement of class rule.
Nor does the existence of an embryonic capitalist class mean that it is the ruling class – even if its representatives are in the government. That the picture looks bleak and counterrevolution is gathering strength is undeniable, but so far it lacks the social weight, or adequate alternative state structures, or the accumulated capital to carry it through.
A parallel can be drawn with the overthrow of the English Commonwealth and the restoration of Charles II in 1660, or with the fall of the French Republic and the restoration of the Bourbons in 1820, neither of which led to a feudal counterrevolution (whatever were the subjective ideas in the heads of the reactionary monarchists) – this was Proudhon’s mistake.
As Marx explained these royal houses became capitalist monarchies: conservative regimes composed of feudalists and aristocrats but based on capitalist states and a predominantly capitalist mode of production.
In the last analysis, our understanding of the process of counterrevolution underway in the Russian Federation must be influenced by our understanding of the class character of the state, and its structures including the army.
The social class which holds state power (which is distinct from governmental power) is the not the embryonic capitalist class or its lieutenants in the mafia. The working class remains in that position through the mechanism of the multi-millioned remnants of Stalinist bureaucracy (a parasitic layer of the workers’ movement – not of the capitalist class).
This is true even though, for the most part, the foremost ambition in life for these bureaucrats is to become capitalists – and a minority of them already have become capitalists, albeit often in an illegal, gangsterised form.
In this Marxist sense outlined above, and despite appearances to the contrary, Russia can’t really be called a capitalist state. The Russian Federation at the turn of the millennium is a hybrid social formation undergoing a capitalist mutation.
This counterrevolution is being driven forward by the dominant sections of the old state bureaucracy which attempts to transform itself into a new capitalist class by looting the socialised sectors.
Russia is a transitional society in reverse gear, with parallel and competing modes of production. The economy of Russia, along with most of the countries of the ex-USSR, is no longer a planned socialised economy, yet neither is it predominantly subject to the law of value or integrated into the world market.
To call these states transitional or hybrid societies is true but avoids the crucial issue for revolutionaries; the class nature of the state (which has to be overthrown, "smashed").
A society cannot just evolve from one social system to another, it requires huge and violent ruptures – (counter)revolutions which overthrow the existing state forms and bring the construction of new ones. It is in this sense that Russia remains essentially a collapsed, degenerated workers state.
There has never been an established capitalist state without a hegemonic, stable capitalist class, which by making the revolution (or counterrevolution) constructs a new capitalist state machinery in its image.
However, we can be sure that capitalism and a capitalist state will be restored if the masses do not intervene to stop it. The steady destruction of socialised property and the consolidation of the market, can only lead to the extreme impoverishment and social atomisation of the masses.
This is laying the basis for a counterrevolutionary dictatorship. Enter the Dragon! Vladimir Putin could be that ruthless leader the counterrevolution has been waiting for.