“Comrade democrats–in the widest meaning of this word–you have scattered. The reformers have gone to ground. Dictatorship is coming…. No one knows what kind of dictatorship this will be, and who will come-what kind of dictator, and what the regime will be like.” Thus Eduard Shevardnadze in his December 20, 1990, resignation speech.

The sixth year of Mikhail Gorbachev’s perestroika is drawing to an end with all the signs of a drama reaching its climax. The Soviet economy is on the brink of disaster. Production is falling, the distribution system is collapsing, lines are lengthening and prices are ready to take off. In a context of political relaxation and glasnost, nationalism–exacerbated by economic discontent–has brought the Soviet Union to the point where it may break up altogether. Faced with the combined threat of economic debacle and dissolution of the union, Gorbachev decided toward the end of last year to streamline the government and strengthen his own position, preparing to take special powers in case of emergency. But his first attempt to assert central authority led to bloodshed in Vilnius and Riga and brought about a nationwide outcry. In the January 20 Moscow News, whose pages were edged in black, the list of protesters, from filmmaker Tengiz Abuladze to sociologist Tatyana Zaslavskaya, read like a roll-call of Gorbachev’s former associates. More worrying still was the support of several of his former advisers for the hundreds of thousands of demonstrators who took to the streets in Moscow to express their indignation.

No wonder that some Western pundits are already advising their masters, with cynical candor, that once the Persian Gulf crisis is over Gorbachev will become dispensable, with Boris Yeltsin perhaps being a better bet for capitalist restoration in Russia. This is not the first time the experts have buried Gorbachev, and the obituaries may again prove premature. In any case, the main preoccupation of Nation readers is not to find out what is best for capital. I shall try instead to suggest what is at stake in the Soviet Union, what interests are involved and why the present struggle is so bitter and passionate.

It is hard to assess and predict the course of events in Europe, since what is taking place there is unprecedented. In Budapest, Prague and Warsaw–and now, with a time lag, in Moscow and Leningrad–we are seeing what might best be described, to paraphrase E.P. Thompson, as the remaking of a capitalist class. This is a lengthy process, and its final outcome is uncertain. But already it has altered the terms of the debate, gradually replacing talk of a socialist market economy with market tout court and now to the necessary change in property relations. This change will involve not just minor enterprises such as peasant farms, handicrafts or small family firms but also the huge plants and trusts that are now in the hands of the state. It is far from clear when and how these will be privatized, yet the issue is already on the agenda because what is at stake is a fundamental transformation of the regime, a shift from mainly political to more economic means for extracting the surplus from the working population. The huge economic and social reform will not only affect the lives of ordinary people. It will also reshape the power and privileges of those at the top.

The power of Russia’s ruling class was always incomparably greater and yet at the same time more fragile than in the West. Our Rockefellers and Rothschilds, our Agnellis and Krupps, actually stay in power, with their economic strength and privilege intact, even if they are kicked out of office. The prerogatives of Soviet leaders, on the other hand, have always depended entirely on their holding on to political power. In the present transition, this problem goes well beyond a handful of Politburo members. It also affects a host of party apparatchiks at all levels, and, if less directly, even greater numbers of the nomenklatura, those whose national, republic-level or local jobs were considered important enough to require party approval. The fate of these millions of functionaries will be shaped by the ways in which economic management is reorganized, by the remaining influence wielded by the party in particular and by central authority in general, and by the manner in which property is distributed. This explains why they are now fighting for position with such bitterness.

Gorbachev did not come to power in 1985 with the idea that capitalism is the normal state of things and the Soviet system a historical accident. A product of the party, he rode to the top at the head of a faction determined to reform a system of management and rule that had obviously reached the end of its tether. It took the reformers a couple of years to decide that the solution lay in the market. Even then, they did not grasp that the market has its own logic and that to function efficiently it must have a different set of rules, including different property relations. A further period of mismanagement in a hybrid system was then required for the full conversion to capitalism. By last autumn Gorbachev had given his blessing to the so-called 500-day plan of Stanislav Shatalin, whose broad lines were subsequently endorsed by the orthodox judges of the I.M.F. and the World Bank.

The present mess is not the direct product of the old system, whose impending bankruptcy merely forced Soviet leaders to seek a different course. Rather, it is the offspring of the new system or, more accurately, of the transition. The authorities allowed the old disciplines and old links between enterprises to lapse without providing any new ones to take their place. Monopolistic producers took advantage of the situation and raised prices and incomes. So much hot money is now floating around the country that without a monetary reform, attractive consumer goods will vanish as soon as they reach the shops. (The government’s sudden withdrawal from circulation of high-denomination bank notes of 50 and 100 rubles is an attempt to mop up some of this money and also to hit the “shadow economy.”) Both sides are being accused of having aggravated the situation on purpose: the reformers in order to prove that the process must be speeded up, and the conservatives to show that life was better under Brezhnev.

But there is no need to look for ideological motives; the mafia has reasons of its own. The black market flourishes. At the turn of the year in Moscow you could buy a Zhiguli, or Soviet Fiat, for 100.000 rubles, more than thirty times the average yearly salary. A bottle of Stolichnaya vodka cost nearly a week’s wages. At the same time shortages, whether of cigarettes or toothpaste, persist, driving people up the wall. Last year, to epitomize the folly, a bumper crop was largely wasted because there were not enough people to harvest it–this in a country that spends nearly $10 billion a year on food imports!

All this led to hoarding, to barter, to parochialism and to a search for autarky at every level that has aggravated national conflicts. Some kind of national crisis was inevitable. In this multi-ethnic society, the Georgian tyrant, Stalin, had driven national feelings underground and kept them there with his iron fist. Those feelings gradually resurfaced after his death and were bound to find a powerful, occasionally jingoistic, expression in the new political climate of glasnost. But the bitter economic discontent, the growing shortages and the mood of free-for-all made the nationalist revival violent and disruptive, threatening the fabric of society and the very survival of the Soviet Union.

Gorbachev has tried to redress the balance by offering to grant the fifteen republics sovereignty, part of which they are supposed to transfer to the union in a treaty now under negotiation. But he is coming late to the negotiating table, with the Western Ukrainians as well as the Balts and the Georgians reluctant to play, and with few cards in his hand. The Communist Party has long ceased to be a unifying force; its ideology is not taken seriously. The only attraction Gorbachev has to offer is the prospect of a common all-union market. At this stage, however, it is not easy to convince the republics that divided they fall, let alone that united they stand. And it is very difficult to attract them with the offer of a market that is conspicuous only by its absence.

Thus everything brings us back to the economy and the social consequences of its crisis. Here, however, there is a mystery. By the second half of last year the die-hard defenders of the old economic system were plainly defeated and the “marketeers” had the upper hand. Admittedly, they may have differed on the pace and the means for reaching their shared goal of a “normal,” not to say capitalist, economy. “Radicals” like Shatalin and Grigory Yavlinsky argued against half-measures, claiming that if one wanted the market one couldn’t also promise full employment, but one did have to be aggressive in the defense of private property rights. More moderate marketeers, like Prime Minister Nikolai Ryzhkov and his deputy, the economist Leonid Abalkin, warned that shock tactics à la polonaise, bringing a dramatic fall in living standards and a sharp rise in unemployment, would lead in the Soviet context to a social explosion. It could also be argued that Ryzhkov and his associates wanted the central government to play a more important role during the transition period. Be that as it may, the differences were not insuperable. For a time, Gorbachev himself expressed a preference for Shatalin’s plan, and even when he finally produced a different text–his “guidelines for the stabilization of the economy and transition to a market economy”–this left all the doors open to further collaboration. What happened between October, when the mood was seemingly one of compromise, and December, when Shevardnadze used his resignation as a tocsin to warn of the danger of dictatorship, is still shrouded in secrecy.

While it is hard, then, to say what the battle is really about, it can be stated quite clearly what it is not about. It is not, as is usually described, a conflict between Gorbachev the dictator and Boris Yeltsin and his democratic libertarian supporters. Those intellectuals who stood behind Gorbachev in the heyday of glasnosf and have now flocked to Yeltsin have long ceased to be great champions of democracy, Advocates of an economic policy that involves great social inequalities and unemployment, and that is therefore likely to be unpopular, they are more preoccupied with the problem of how to “save a country” from the inclinations of its inhabitants. Americans, who do not normally have access to the thoughts of the Russian “radicals,” had an excellent sample last August in a piece in The New York Review of Books by one of the brightest of them, Moscow Mayor Gavril Popov, eloquently titled “Dangers of Democracy.” (Popov has since developed his views in a book published in Moscow with a borrowed title: What Is to Be Done?)

Popov admits that the reform movement will meet increasing difficulties because it advocates “a society of economic inequality.” He continues candidly: “The masses long for fairness and economic equality. And the further the process of transformation goes, the more acute and the more glaring will be the gap between those aspirations and economic realities.” From this he draws a dual conclusion: “We must speed up changes in the forms of ownership…. we must seek new mechanisms and institutions of political power that will depend less on populism.” Yeltsin, who is determined to defeat Gorbachev, needs popular support and cannot therefore speak with such candor. But if he should triumph, those who see him as a rampart against dictatorship may be in for a rude awakening.

To debunk the so-called “democrats”–also known as “radicals” or “leftists”–is by no means to whitewash Gorbachev. Whatever prior knowledge he may have had, his responsibility for the Baltic crackdown cannot be denied and his stubborn refusal so far to condemn either the paratroopers or those who ordered them to open fire is significant. There are also ominous signs that freedom of expression is being restricted, with the banning of three successive broadcasts of the popular TV current affairs program Vzglyad (Outlook) being only one of many dangerous examples.

What has happened to the man who launched glasnost and even spoke at one stage of restoring power to the soviets? To grasp his evolution, one must reflect on the limits of his “revolution from above.” After an exhilarating start, Gorbachev abandoned his search for a third way between neo-Stalinism and capitalism. He rapidly gave up experiments with different forms of democracy, notably in the factories and offices. Surrounded by reformist apparatchiks and the priviligentsia, he failed to seek an alternative constituency among the working class. And so, when he was deserted by the marketeers, who felt he was not moving fast enough toward capitalism, he found himself alone facing a country that was disintegrating. As instruments of his power he could rely only on a party that he had badly shaken, an army he had deprived of an empire and a police whose powers he had tried to rein in. Is he still in charge or has he now become the prisoner of those forces?

Whatever the answer, the time has come for a change of the guard. The four men with whom he launched perestroika have all gone. Yegor Ligachev went first, at last year’s party congress, when his conservative caution no longer seemed to be required. Others followed in quick succession: In Ryzhkov’s case, a heart attack facilitated the separation; Shevardnadze left the stage spectacularly and Aleksandr Yakovlev on tiptoe. In the past Gorbachev has surprised the world by his ability to rebound, moving one step back and then two forward. Does he still have room to maneuver and the team to mount such a comeback? All that we can say for certain is that the making of a capitalist class is a tougher task than Western preachers and Eastern practitioners may have imagined.