By DAVE HUDSON
The following article is part of a document submitted to the world discussion in preparation for the World Congress of the Fourth International, which will take place next year. Socialist Action is in general agreement with the political views expressed in this article.
Dave Hudson is a British member of the International Executive Committee of the Fourth International.
The seamless transfer of power from Boris Yeltsin to his chosen protégé, Vladimir Putin, the new president of the Russian Federation, marks a new stage in the tortured process of capitalist restoration. It is therefore an appropriate time to make a balance sheet of Yeltsin’s decade in power.
It is also necessary to assess the options open to the new president-a poker-faced ex-KBG operative-and ask what role he is likely to play in the coming years. In particular we should ask what strategy he, as figurehead and leader of the multimillion bureaucracy, will adopt to conclude the last act of the Stalinist counterrevolution, and what are the prospects of working-class resistance.
First, we should note the relative ease with which pro-capitalist Yeltsin established his political grip on society on the one hand, and why this was not translated into a rapid restoration of capitalism, which has proved far more difficult, on the other. The IMF-endorsed “shock therapy” that Yeltsin tried to implement was soon at an impasse, leading inevitably to social and economic chaos and a catastrophic collapse in industrial output-the biggest economic collapse in peacetime.
Yeltsin’s “reforms”-carried through under pressure from the IMF, the World Bank, and other Western institutions and governments-included the liquidation of the state planning mechanisms and the atrophy of the channels of state investment, which were combined with draconian monetarist austerity packages that were justified in the name of reducing hyper-inflation and defending the value of the currency (a brutal monetarist fiscal policy).
At the same time, the regime was introducing market mechanisms-a stock market, private property, and privatizations, the real causes of the currency collapse-which were often little more than the looting of state property by top bureaucrats (but without the availability of massive private capital investment).
The result was an economy spiralling out of control into economic and fiscal collapse, which was accompanied by a rampant growth of mafia-like crime. The state became increasingly dislocated and its apparatchiks at all levels became implicated in criminal activities, with gangsterism and large-scale laundering of foreign aid and other money back into Western banks. This process has further starved the Russian economy of the necessary capital for capitalist restoration to successfully take place.
An economic “basket case”
By August 1998 the social, economic, and political crisis had reached catastrophic proportions. The sudden fall in the price of oil (due to the Asian crisis) resulted in a major default on Russia’s debt repayment to the IMF and a collapse in the value of the ruble (which in its turn contributed to the growing world financial crisis at that time.) The West lost $20 billion in the debt default alone.
In addition, the crash caused imports of consumer goods, mainly for the bureaucrats and capitalists, to fall drastically (50 percent of all consumer goods were imported before August 1998). This finally exposed Yeltsin’s failures after eight years to create a credible and socially hegemonic capitalist class and fully restore a viable and stable capitalist system.
The international bourgeoisie belatedly came to recognize that the Russian “transition” had become a bottomless pit and in capitalist terms the Russian economy a “basket case.”
Overall, the “shock tactics” have led to a massive decline in GDP, stagnation and partial functioning of whole industries, mass underemployment and now increasingly unemployment, indebtedness, collapse of welfare, and dire poverty. The masses have suffered appalling deprivations, with unpaid wages and benefits and the gradual disappearance of the most basic services in the spheres of health care, education, and social security.
However, this terrible fiasco has made the few in the political/bureaucratic elite enormously rich and created the biggest criminal Mafia the world has ever seen (this of course is why the bureaucratic nomenclatura jumped on the IMF/World bank bandwagon).
Socialized sector still important
The economy and society in Yeltsin’s Russia had many of the surface appearances and paraphernalia of capitalism, but it was mostly without the substance. Although it is claimed that more than 50 percent of GDP has been privatized, the forms of these privatizations have often been little more than a “juridical formality,” for example, 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 undercapitalized enterprise collectives, just mass under-employment rather than mass unemployment. The law of value does not generally operate, and barter is the order of the day.
However, after the 1998 crash, unpaid workers were increasingly forced to sell their enterprise vouchers, mainly to the management. Partly as a consequence, between August 1998 and April 1999 real unemployment rose by 30 percent, while wages continued to fall by approximately 40 percent-this, despite a small economic recovery.
Nonetheless, there is a widespread survival of companies and industries (ie., thousands of factories) that would not survive in a genuine capitalist market operating according to the laws of value; in capitalist terms, they are bankrupt and should be closed. Nor do the privatizations include all of the big industrial sectors parts of which remain state property.
Eventually, the law of value will assert itself if the working class can’t assert their control and management of these enterprises, but in the meantime, the existence of the socialized sector continues its crucial subsidizing of the smaller capitalist sector with cheap raw materials, fuel, transport, engineering, metal work, etc.
Moreover, the competitive pricing of exported commodities is in effect due to subsidies from the state, through payments to workers in kind, 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. A combination of this factor and the devalued ruble 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 percent of all internal trade is now barter (ie., not included in the official GDP). The result is that large parts of these “new market economies” bypass taxation.
Last but not least, the agricultural sectors continue to operate essentially on the basis of state-owned collective farms. Agriculture has proven to be even more resistant to formal privatization than industry has-since even with tractors, small family-operated plots of land would be far less efficient than the giant mechanized collective farms. However, when the machinery wears out and if it can’t be replaced, and if there are no investors, there will be a retreat into smaller peasant holdings.
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 (nearly non-existent) even compared with East Europe. In Russia investment in industry stands at about £50 per head of population compared to £2700 per head in Hungary.
Prior to August 1998 there was a snowballing in the number of banks to more than 500. However, most were involved in speculation rather than investment. In any case, many went bust when the ruble collapsed and Russia defaulted.
A rapid restoration of capitalism in Russia will require a massive injection of capital, as occurred in East Germany (with its global negative impact on the world economy), only on an impossibly larger scale. Loans from Western banks and the World bank/IMF are crucial but not enough.
Even so, Western loans have not been effectively directed towards investment in infrastructure or industry, while most of it has been embezzled and laundered back into Western bank accounts belonging to the Mafia barons. The result has been a net outflow of capital. Much of the profit from socialized heavy industries, which are still functioning, also ends up in foreign bank accounts.
This failure has profound socio-political reasons and were not due to Yeltsin’s drunken clowning or the unfathomable “Russian soul”, as is sometimes portrayed in 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-although their arrogance is astounding.
It is because it is not possible to lay hold of the existing state apparatus, as Marx explained, and fundamentally change/overthrow an existing social system and mode of production (every state apparatus is class based and custom built to serve the dominant class).
Revolution or counterrevolution is required to ensure the destruction of the old state apparatus so that it can make way for the new. This, of course, may not be achieved in one upheaval. In Russia today it has nearly been achieved through an extended process of dislocation and disintegration since 1989.
However, the creation of a new institutional state power has not been achieved. The disintegration and dislocation of the Russian state is not the same as its total destruction, nor does the existence of private property-real or merely juridical-a stock market, or the dismantling of the monopoly of foreign trade, or corruption within the officer cast of the armed forces equal a capitalist state.
Peculiar combination of property ownership
What then is the nature of the Russian state today? The conclusion of this analysis is that the Russian Federation contains a peculiar combination of property ownership-social property, private property, including corrupt accumulation. Also, debt, wages and taxes are regularly not paid, and there is a process of de-monetization and the growth of a widespread system of barter.
Despite the partial establishment of the market system and private enterprise, neither the bulk of production and distribution nor labor is dominated by the law of the market or the law of value. 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 a certain cohesion and 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 and organize exchange (barter). The same managers often cream off some of the surplus for their own ends. Corruption is probably endemic.
Although more than 50 percent of the GDP is from the privatized sector, the remaining socialized sectors are often barely functioning and their workers go unpaid. It is clear, although impossible to accurately quantify, 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 stabilized for long, but it does reflect the failure so far of the neo-liberal offensive and the IMF’s project.
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 an apparatus for the enforcement of class rule and a distinct analytical category. 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 (Putin is a crucial figure here), but so far it is without the social weight, adequate alternative state structures, or the accumulated capital to carry it through.
A certain 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 who took political power).
This was Proudon’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.
In my view, the social class that holds state power (which is distinct from governmental power) is the not the embryonic capitalist class or its lieutenants in the mafia.
Rather it remains (in the most tenuous fashion) the working class through the mechanism of its crumbling multimillion bureaucracy (a parasitic layer of the workers movement-not of the capitalist class) even though, for the most part, their foremost ambition in life is to become capitalists.
And a minority of them already have become capitalists, albeit often in an illegal, gangsterized form.
A hybrid social formation
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 that attempts to transform itself into a new capitalist class by looting the socialized sectors.
In other words, Russia is a transitional society in reverse gear, with parallel and competing modes of production and a disintegrating state apparatus. The economy of Russia, along with most of the countries of the ex-USSR, is no longer a planned socialized 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-in this case counterrevolutions that overthrow the existing state forms and begin the construction of new ones.
It is in this sense that Russia remains essentially a collapsed, deformed workers state, but with a pro-capitalist government. 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 in its image.
However, we can be sure that capitalism will be restored and a capitalist state be rebuilt if the masses do not intervene to stop it. The steady destruction of socialized property and the consolidation of the market can only lead to the extreme impoverishment and social atomization of the masses. This is laying the basis for a counterrevolutionary dictatorship.
Enter the Dragon! Vladimir Putin could be the ruthless leader that the counterrevolution has been waiting for.
This article will continue in our next issue with a discussion of the prospects for working-class resistance to the pro-capitalist policies of the Putin regime.