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Capitalism From Above | The Nation

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Capitalism From Above

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Boris Yeltsin celebrated the first anniversary of his reign in the mood of a satisfied yet rather puzzled survivor ("we jumped into the river not knowing how to swim...but we didn't drown"). His surprise is not really surprising. In a country in which production has slumped, prices have rocketed and real wages have dropped dramatically, Mikhail Gorbachev's successors must feel grateful that, though their popularity too has declined, they have not been swept aside. Bewildered, and deprived of a genuine alternative, the Russian people have so far shown an extraordinary forbearance. But what next?

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Daniel Singer
Daniel Singer, for many years The Nation's Paris-based Europe correspondent, was born on September 26, 1926, in...

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It is a battle royal, and it foreshadows many more like it in the struggle for the economic mastery of Europe.

Shortly before the anniversary, Rossiyskie Vesti published a governmental "program for deepening economic reforms," a summary designed for Parliament and the general public covering the period to 1996. As a projection of Russian production it is not worth a penny. It promises to eliminate the budget deficit, to halt inflation and to create jobs, not just eliminate them. It clams that by the end of that period Russian living standards will be higher than those prevailing in Eastern Europe--pious hopes not backed by any calculations. But as a document revealing the social plans and ambitions of Yegor Gaidar, the acting Prime Minister, and the economic team of fervent marketeers surrounding him, it is illuminating. This is the manifesto of a clique hoping to cling to office as spokespersons and vanguard of a capitalist class in the making.

The grabbing of what used to be called, inaccurately, collective property is the magic cure for all the country's ills. Privatization is described as "the heart of the economic reform" for political reasons as well. The avowed purpose is "the formation of a broad stratum of property owners" and the strengthening of "the entrepreneurs as a social stratum with specific interests in determining the basic directions of economic policy." The worshipers of the International Monetary Fund are clearly in search of followers, of a constituency.

On paper, at least, they hope to build capitalism at breakneck speed. Already this year many enterprises are supposed to become joint-stock companies, and vouchers or checks to buy shares in these companies are to be distributed to every citizen. By the end of next year about 80-90 percent of the retail trade should be in private hands and some 30 percent of the capital in the large and medium-size firms. By 1996, even in the latter sector more than 80 percent is expected to be privately owned, at which point Russia would have no more public property than most countries of Western Europe.

Nor is the takeover to be limited to trade and industry. Although Russia's rural population seems to be showing little enthusiasm, the government is determined to "restructure the agrarian sector on the basis of the private ownership of land." Therefore, it proposes to remove any restrictions on the purchase, sale and mortgaging of that land. The plan advocates the breakup of state and collective farms and the predominance of private capital in the food processing industry. Simultaneously, the government intends to start dismantling the welfare state, or what is left of it. In all the sections dealing with social policy there is a recurring refrain about the virtues of commercialization. The preference for private housing was to be expected, but the project provides a key function in the health service for insurance companies and pleads for "the creation of conditions for the development of nonstate educational institutions.'' Naturally, the despised state will be badly needed to deal with the new scourge of unemployment, but its role, wherever possible, is to be reduced to a minimum. In their imaginary quest for deregulation, the Thatcherite authors of this document are trying to catch up--not with Western Europe but with the American model in its most Reaganite version.

Little attempt is made to be neutral. Capitalism equals civilization, and it will be imposed on people by hook or by crook: by driving state enterprises into bankruptcy; by granting private investors favorable terms for loans, tax reductions for reinvested profits and priority access to foreign credit. In the vision of Russia's marketeers, foreign capital, able to come and go freely while taking profits along, is to play a crucial part in Russia's transformation. In particular, it should enable Gaidar's protégés, entrepreneurs straight out of the textbook, to embark on the conquest of their country.

The only limit to the greed of this new acquisitive class is apparently the fear that people will not put up with it: "The reforms must not be conducted so vigorously as to evoke resistance from society or undermine confidence in the path that has been chosen." This point is illustrated by the three-way privatization plan. Since the changes, as a rule. are not popular in most plants, the first stage is to give some shares freely or at preferential rates "to the leaders and the workers" (i.e., to management and staff). However, the possibility of allowing the working people to run their own affairs does not even arise. That task is reserved for the "entrepreneur," which is why the second and vital stage in privatization is the search for a "strategic investor." It may be an investment fund (preferably private, but in the transitional period it may have to be a state one) or a wealthy speculator or a foreign capitalist--anyone willing to acquire a controlling interest in the company. Once this is done, the third stage involves the sale of residual shares, preferably in small packages.

This is where the ordinary Russian with his vouchers, or "privatization checks," comes in. In the latest Yeltsin version every citizen will be given 10,000 rubles, which he or she can use to buy shares directly or through an investment fund. The shareholder can also sell them to anybody, which, as the document stresses, "is extremely important for the least well-off strata of the population." This allowance really gives the game away. Ten thousand rubles now amounts to less than three months of average wages and probably two months by the time they get their check, given the rate of inflation. For most Russians that is less than the difference between their nominal wages and the cost of living. The government is distributing with one hand what it has grabbed with the other, and most impoverished recipients will have to sell their checks to make ends meet.

And this mess of pottage is being offered to the ex-Soviet people as payment for their revolutionary birthright--the ownership of the means of production. Admittedly, it was a purely theoretical right, never exercised in practice. Now, however, the Russians are to be deprived even of the claim, which will be legally transferred to a bunch of profiteers and their hangers-on, the likely ultimate beneficiaries of this crooked sale. What we are witnessing throughout Eastern Europe, not just in Russia, is the biggest daylight robbery of the century. If the new barons hedge and hesitate, it is because they seek the best way to bribe a few and fool the many. What they fear is the wrath of the people.

How worried they are about popular resistance is shown, for instance, in the parts of the document dealing with housing, health and education. The authors insist on "the high degree of social sensitivity" In this sphere and give that as a reason not to use "crash methods of transition to private paid services." In short, that this is the only limit on the greed of the new masters is Russia's rugged reality, a reality that the government and the draftsmen of this document often want to forget. In a country where most companies are on the verge of bankruptcy because of the financial squeeze, where the new marketeers speculate on how to spur education and culture through the sponsorship of private patrons and enterprises, one is bound to conclude that obsession with the American model has gone to their heads. Or, as Viktor Gerashchenko, the new head of the Russian central bank, put it in an interview with The Washington Post, referring to his government's intention to make the ruble freely convertible by June I , these are fairy tales straight out of Hans Christian Andersen.

Gerashchenko's words are a reminder not only that there are still pragmatists in Russia but also that a struggle over policy is going on at the top. It is not a battle between left and right, between defenders of socialism and capitalist aggressors. It is a conflict over power between two sections of the nomenklatura. Incidentally, Russia's privileged elite was not born at the time of perestroika. It grew under Stalin, although with his continuous purges the Georgian dictator prevented it from crystallizing its interests. The nomenklatura asserted them gradually under his successors. The logic of the situation and self-interest were driving this budding bourgeoisie to consolidate its power through the acquisition of property. The nature of the regime, however, was still undecided when Gorbachev took over, at which time the trial of strength between the apparatchiks and the managers began. That battle was won by the managers. Now the confrontation is really over the role the state is to play in the construction of classical capitalism.

Gaidar and the other orthodox darlings of the I.M.F. are for the breakup of the old enterprises and the building of new ones. But they will not carry out this transformation with mythical entrepreneurs. In the Russian circumstances--after all, where can the money come from?--they must rely on domestic swindlers and foreign speculators. The other side, well represented by Arkady Volsky's Russian Union of Industrialists and Entrepreneurs, is no better. It is the old industrial nomenklatura, the men who ran factories as Soviet managers and who are now eager to run them as capitalists bosses. It makes sense that In the current conflict over the I.M.F.-inspired squeeze, which threatens most public companies with bankruptcy, Gaidar should stand for "creative destruction" and Volsky for relaxation, insuring their survival. How bloody is their confrontation likely to be? Their common fear of movements from below pleads for compromise. The power, profits and property at stake in this struggle, on the other hand, point to a ruthless clash.

And on which side does Boris Yeltsin stand? Whichever is the one most likely to win. A year ago his triumph was being hailed by a priviligentsia that had deserted Gorbachev, whom they accused of heading too slowly in the capitalist direction. After all, Yeltsin did pick Gaidar and the monetarists to reform the economy. On the other hand, he is too shrewd a politician not to have perceived that the economic policy of his government is sowing discontent or that his vice president, Aleksandr Rutskol, who dares to criticize that policy quite openly, is now successfully competing with him in popularity ratings. This may be why Yeltsin keeps his options open. He has maintained Gaidar as head of the government but brought into it as ministers three "practitioners," that is to say, members of the industrial lobby. He has also taken care so far not to commit himself too much in the controversy over the financial squeeze. Judging by the mounting talk about the need for constitutional change and for strengthening the powers of the President, one may deduce that the former apparatchik who miraculously converted to the capitalists gospel might feel most at ease in a property-owning autocracy.

More is at stake, however, at this stage than the whims of a ruler. The Soviet Union having faded dismally in its search for a shortcut to socialism, Russia is now seeking an equally spectacular shortcut in the opposite direction. The government's program might be mockingly titled "A Five-Year Plan to Build a Bourgeoisie, or How to Produce a Capitalist Class at Top Speed Without Tears." But this is a serious matter. The Russian leaders would be well advised to brush up on their Marx and reread (or read for the first time) the chapters in Capital devoted to primitive accumulation They would learn that the formation of a new class of exploiters is a messier, bloodier and tougher task than the drafting of a program or the scribbling of a manifesto.

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