Why Capitalism Founders in Russia



A scandal broke in the mass media on Aug. 19, when the Bank of New York admitted to cooperating with money-laundering of some $4 billion to $10 billion swindled from the Russian people by Stalinist bureaucrats and capitalist tycoons. (Russian bureaucrats and tycoons, more often than not, are the same people.)

The fact is, however, that most, if not all, banks everywhere in the capitalist world are in the money-laundering business. It is a most profitable source of revenue for banks that exact a healthy fee for such services. Thus, it suggests that the billions of dollars laundered by the Bank of New York is only the tip of a very large iceberg.

The Economist, a London-based news weekly reflecting the views of British capitalism, gives some evidence of this in an article reporting on Russian money laundering, in which it says: “The paper trail has touched several European banks too, all of which are said to have helped, over the past year, to move $4 billion from Russia to the Bank of New York’s London office.” (The Economist, like all other reports in the capitalist press, makes sure to add, “All the banks deny wrongdoing.”)

Further evidence pointing to a huge movement of Russian capital into the personal accounts of unidentified Russians was reported in the Sept. 19 New York Times. The report stated that “since the collapse of Communism in the Soviet Union, former citizens and their capital have flooded into Switzerland and into its banks.” The report goes on to say: “Though there are no official figures, the Swiss authorities estimate that $40 billion to $50 billion in Russian capital is deposited in Swiss banks.”

There can be little doubt, however, that we are still merely observing just a little more of the iceberg’s tip. Other evidence, as we shall see, suggests that the giant rip-off of Russian state property-the property of the Russian people-may reach a multiple of the amount deposited in Swiss banks.

Moreover, the likelihood is that similar evidence of mass plundering by bureaucrats and capitalists will eventually be uncovered in China and other degenerating workers’ states in the former Soviet bloc countries.

Furthermore, it is even more likely that in time it will be revealed that the finance and industrial capitalists in the major imperialist countries-with the United States in the forefront-have garnered the lion’s share of the plunder from Russia.

In fact, as we shall see, the major force behind what is really a far bigger and more destructive assault on the economies of Russia and other degenerating workers’ states has been masterminded by imperialism’s financial and industrial capitalists with American imperialism leading the marauding pack of imperialist wolves.

Meanwhile, blame for the disintegration of the Russian economy has been placed on the shoulders of what the media calls a “kleptocracy.” The term is clearly intended to hide the failure of capitalist restoration in Russia and the resulting devastation of the country’s economy, and blame it all on a regime they claim is so corrupt, that a new term had to be invented. (The term combines the Greek words, klepto, meaning “to steal” and kratia, meaning to rule-hence, “kleptocracy.”)

After all, this king-sized crime wave only began in earnest1 when the openly pro-capitalist government of Boris Yeltsin-advised, aided, abetted and financed by official representatives of American and world imperialism-began its attempted forced march to transform Russia from a degenerating workers’ state into a capitalist state. No reasonably intelligent person with a modicum of awareness of world events could believe that it occurred without the knowledge and culpability of the political and financial representatives of world capitalism.

The Times lets it all hang out

Shortly before the hue and cry about Russian bureaucrats and tycoons laundering funds through the Bank of New York hit the headlines, the Sunday magazine section of the Aug. 15 New York Times carried an in-depth report headlined on its front page, “Who Lost Russia?” This was not the first time that an authoritative mouthpiece of the capitalist class has implied that the restoration of capitalism in Russia is failing or has failed, but it is certainly the most dramatic.

Just a few quotations featured in this report tells why the movers and shakers of world capitalism are agonizing over their failure to transform Russia into a source of long-dreamed-of superprofits.

The article begins with this finger-pointing introduction: “The country has spent the years since Communism spiraling downward. Who is to blame? Great privations have been visited on the country in the name of necessary sacrifice. Yet what has changed for the better?”

The author goes on to answer his own rhetorical questions with this damning indictment of the attempt to impose capitalism on the Russian masses:

“Russians, free to get rich, are poorer. The wealth of the nation has shrunk-at least that portion of the wealth enjoyed by the people. The top 10 percent is reckoned to possess 50 percent of the state’s wealth; the bottom 40 percent, less than 20. Somewhere between 30 and 40 million people live below the poverty line-defined as around $30 a month. The gross domestic product has shrunk every year of Russia’s freedom except one-1997-when it grew, at best, by less than 1 percent.”

John Lloyd, the author of this report, goes on: “Unemployment, officially nonexistent in Soviet times, is now officially 12 percent and may really be 25 percent. Men die, on average, in their late 50s; diseases like tuberculosis and diphtheria have reappeared; servicemen suffer malnutrition; the population shrinks rapidly.”

Then the author zeroes in on who is really to blame. He writes:

“What the United States Treasury and the IMF were doing was financing and licensing a Great Grab and calling it reform. And there was so much in Russia to steal that was so precious: oil, diamonds, nickel. It was the kind of opportunity that comes once in a millennium.”

There it is-straight from the horse’s mouth! While the Stalinist bureaucracy and capitalist tycoons participated in the world-class rip-off, it could not have happened without the assistance, advice, and direct participation by the bipartisan United States capitalist government acting in the interests of-and through the representatives of-American financial and industrial corporations.

The Times reporter proceeds to describe how all American participants in the process of self-enrichment in the course of their failed attempt to create a market-driven capitalist economy, point the finger of blame at each other. (A typical example of the aphorism: “Success has many fathers, but failure is an orphan.”)

The two political factions of the American capitalist class have already begun to accuse each other as bearing major responsibility for the “loss” of Russia. And since capitalist politicians never miss a chance to make political hay to assure their own reelection, it promises to be a major point of contention in the upcoming year 2000 presidential election.

Why capitalism failed to take hold

What about the hue and cry about money laundering and other illicit financial transactions? It essentially serves the capitalist media as a diversion. Rather than simply stating that capitalism failed to take hold in Russia, and worse, has left the country’s economy and the living standards of its great majority in shambles, the money-laundering headlines serve as a whipping boy. In other words, it’s the fault of the so-called kleptocracy, not capitalism or the capitalist class.2

The deeper question is touched on by The Times article discussed above. But the source of the controversy among capitalists over “who lost Russia?” and the attempted diversionary propaganda appear to be based on a 100-page report by Clifford G. Gaddy and Barry W. Ickes titled: “Beyond a Bailout: Time to Face Reality About Russia’s ‘Virtual Economy.'”

According to its publisher, the Brookings Institute Press, the report has been “circulated among the highest levels of the Russian and U.S. governments and has been reported in leading world publications” oriented to such an audience. (The Brookings Institute, which sponsored the report by Gaddy and Ickes, is an authoritative capitalist think tank.)

The two authors argue that Russia’s economic system is something new. They call the system now in place a “Virtual Economy.” This is an economy that they argue is based on “illusion or pretense about nearly every important Russian economic category.” They describe an economy in which the prices of things-from raw materials to wages have little connection with their real values-something alien to the laws of the capitalist market.

The authors, Gaddy and Ickes, further describe the Russian economy this way: “Over the past six years of ‘radical reform,’ Russian companies, especially those in the core manufacturing sectors, have indeed changed the way they operate. Only, they have not done so in order to join the market but rather to protect themselves against it.”

To put their thesis simply and clearly, they believe that capitalism has failed to take hold in Russia, and the country has been devastated economically and reduced to the worst of both Eastern and Western worlds. The authors also argue that the Virtual Economy is “deep-rooted and enjoys strong popular support.”

However, it would be closer to the truth to say that given the terrible reduction in the quality of life described by Gaddy, Ickes, and other bourgeois analysts, the popular support could hardly be deep-rooted among those at the bottom of the heap. Rather it appears to be a standoff in which neither bureaucrats and capitalists on one side, nor workers on the other, have gained the upper hand.

But to the extent that there is popular support for something in the Russian economy, it is not for a so-called “Virtual Economy.” Rather it is for the halting, at least for the moment, of further pro-capitalist “reforms” and further damage caused by accumulated “reforms.”

In any case, the bottom line that comes through, independent of the authors’ intentions, is that the struggle over Russia’s future-toward capitalism or socialism-has yet to be decided!.

Nonetheless, in regard to their primary thesis, the authors are brutally frank about the very dismal prospects for a successful transition to a market-driven capitalist economy. They give very candid descriptions of Russia’s industrial and economic collapse since the Stalinist bureaucracy took the leap toward capitalist restoration.

They report that in 1997, “the overall level of capital investment in the economy’s production sectors (industry, agriculture, transportation, and communications) was 17 percent of what it was in 1990 [before the Soviet Union was dissolved]. In the core manufacturing sector of metal-working and engineering products, the volume of real spending on plant and equipment in 1997 was no more than 5.3 percent of the 1990 level.”

They describe how “enterprises don’t pay their suppliers; they don’t pay their workers; they don’t pay their taxes. While the nonpayment of taxes and wages attracts media attention, it is in a sense not the real story. Payments are being made, just not in actual money. The share of barter in payments among all industrial enterprises in Russia is now above 50 percent. Last year, 40 percent of all taxes paid to the Russian federal government were in nonmonetary form.”

In support of their thesis, the authors weigh very heavily the fact that Russia’s “largest companies conducted 73 percent of all their business in the form of barter and other forms of nonmonetary settlement of debts.”

It’s hard to believe, however, that these very perceptive and informed authors of “Beyond a Bailout…” cannot see what should be patently obvious: It is the remaining social and economic conquests of the October 1917 Russian socialist revolution and the dogged resistance by workers to the privatization of basic industry that has served as an objective barrier to capitalist restoration.

In other words, despite all the inroads made in the state created by the great October Socialist Revolution, the law of value that operates in all capitalist countries does not operate in today’s Russia.

Gaddy’s and Ickes’ thesis that a new type of social system now exists in Russia, which they call a “Virtual Economy,” seems to have been advanced only for the purpose of making their case that Russia is far from capitalism and that the strategy imposed by American and world imperialism to reach that goal has definitely failed and any further efforts along those lines should be stopped.

But they also admit to not having an alternative strategy to propose-beyond stopping what life shows has not worked and, if continued, will only make the inevitable consequences far worse.

Whither Russia?

From the point of view of those of us who are partisans of the struggle for a socialist world, the more important question is: Can the Russian working class find their way back to the struggle for world socialism advanced by the Bolshevik Party of Lenin and Trotsky in 1919 with the launching of the Third (or Communist) International as the world party of socialist revolution?

The struggle for a world socialist society is what revolutionary Marxism is all about. And the Russian socialist revolution that occurred 82 years ago was a giant leap forward toward that goal. It was a historic triumph for the world working class and the human race as a whole.

But a socialist revolution in one country, and a backward one at that, cannot achieve socialism by itself since socialism is predicated on the expansion of the productive forces to at least the level achieved under capitalism-and beyond. But without access to the world division of labor, such an expansion of the productive forces, and thus, achieving the preconditions for socialism, is impossible.

The reasons for the Soviet Union’s failure to fulfill the promise of the Russian Revolution of October 1917 is another story, too long to summarize here. It must suffice for now to say that the main cause of the Soviet failure to fulfill the promise of world socialism was the Stalinist bureaucratization of the Soviet Communist Party and the Third International. Stalin had counterposed to world socialism the program of “socialism in one country.”

In reality, it led inexorably to the Stalinist policy of using the revolutionary struggles of workers everywhere as a bargaining chip to offer imperialism, in exchange for “peaceful coexistence” with world capitalism on the basis of the preservation of the capitalist status quo.

The question before us today, however, is what are the prospects for a revival of the struggle for world revolution in Russia and other degenerating workers states-as well as in the capitalist world? The two questions are organically interconnected and the solving of one advances the solution of the other.

Contrary to accepted wisdom, we think that the prospects for world revolution today are greater than ever before in the history of the world. But it must also be said, that civilization and the human race has never been closer to extinction than it is today-and the outcome lies in the balance!

Today, those of us that perceive the awesome challenge facing humanity, and we consider the readers and supporters of this newspaper to be among the vanguard of the movement for a socialist world, must dedicate ourselves to a determined struggle for the realizable alternative of world socialist revolution. And for that a mass revolutionary workers’ party3, based on the lessons of hundreds of years of class struggle experience, is indispensable.

Objective factors favoring world socialist revolution

Now in regard to the factors leading to our conviction that the world has long been ripe for world socialist revolution and is on the brink of a pre-revolutionary crisis more severe than the one that we know as the Great Depression:

Already, the global capitalist economic chain is breaking apart at its weakest links. The neo-colonial world of Africa, Asia, Latin America, and the Middle East have been the first to experience a significant economic decline, along with a concomitant reduction in mass living standards.

More evidence of an impending global economic collapse is registered by the decades-long decline in the living standards of American workers. And now workers in the strongest industrial countries of Europe are faced with a mounting capitalist attack on their living standards as their economies slow down, stagnate, and slide toward one or another form of the coming social, economic, and political catastrophe.

Thus, because world capitalism has clearly entered a qualitatively deeper stage of decay and has begun to be ever-more deeply wracked by social, economic, political, and military crises, the objective conditions for socialist revolution are ripening before our eyes.

And because this developing crisis is increasingly more unfavorable for a successful transition to capitalism in Russia, China, and other such states, that possibility now seems to be highly unlikely. And by the same token, the prospects for world socialism are potentially the most favorable in world history.

Reformist socialists and the Stalinized “Communists” had hegemony over the world workers’ movement when world capitalism entered the most serious crisis of its history in the 1930s.

Revolutionary opportunities were lost that could and should have been won. But the world working class failed to construct a revolutionary party in time primarily because, while socialist reformism was largely discredited, Stalinism appeared, falsely, to be the authoritative revolutionary representative of the party that had led history’s first socialist revolution-in opposition to the reformists of its time, as well as to world capitalism.

But now that delusion has been shattered by Stalinism itself by its openly unambiguous endorsement of the world capitalist status quo. Consequently, Stalinism’s declaration of political bankruptcy is the most favorable of all factors favoring the victory of the working class and world socialism. They have, thus, removed themselves as a principal obstacle to the construction of a mass revolutionary socialist party!

This is not to say that the struggle will not be a long, hard, and difficult one. No, the struggle will be those things and will inevitably include both setbacks as well as victories. But the world working class is more than equal to the task of fighting and winning the struggle for its own emancipation from capitalist exploitation and oppression and by the same token the liberation of the human race from capitalist barbarism and nuclear annihilation.

The history of working-class struggle shows that workers do indeed have the power to defeat capitalism, but only if a mass revolutionary party-one that has absorbed the lessons of battles lost and won-can be constructed in time. That must be the goal of all those aware of the deadly alternatives faced by the human race incorporated in the revolutionary Marxist watchwords, Socialism or Barbarism!

1 The march toward the restoration of capitalism began in 1985, led by Soviet president and Communist Party head Mikhail Gorbachev before the Soviet Union was dissolved.

2 The term, kleptocracy, applies to capitalism, which is based on the systematic expropriation of surplus value. Profit, in its strictest scientific meaning, is the unpaid portion of the product of human labor systematically but “legally” stolen by the capitalist class.

3 Socialist Action is an active proponent of the Fourth International and its goal of becoming a mass world party of socialist revolution.

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