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Socialist Review Index (1993–1996) | Socialist Review 172 Contents
From Socialist Review, No. 172, February 1994.
Copyright © Socialist Review.
Copied with thanks from the Socialist Review Archive.
Marked up by Einde O’Callaghan for ETOL.
The resignation of the prominent economic reformers Gaidar and Fyodorov from the Russian government is not simply a reflection of their bad showing in December’s election. It is also a result of the complete failure of their ‘shock therapy’ reliance on the market to solve the economic crisis bequeathed to Yeltsin by Gorbachev and Brezhnev.
Gaidar and Fyodorov were typical of the most ardent market reformers across the former Eastern bloc. They made their careers inside the old Stalinist framework (Gaidar used to be a leader writer for Pravda). When it collapsed, they swallowed whole the orthodox Western line that free market capitalism is intrinsically superior to state capitalism and that there is no third option.
But, as we predicted in this Review more than five years ago, the market could not solve the crisis, but was bound to exacerbate it.
Russia’s economy was dominated by huge enterprises, often monopoly producers of vital goods, with up to 40 percent of output from the military-industrial complex. The shock treatment amounted to giving a free hand to the enterprise bosses to determine their own levels of output and prices to maximise profits. The monopoly concerns responded quite logically by pushing up their prices, and by reducing the output of non-profitable lines, even though these were essential inputs for other sections of the economy. Over three years prices shot up more than a thousandfold, while output slumped by 40 percent.
The reformers had rested their hopes on massive Western aid. But it simply did not materialise – neither Western governments nor Western banks saw investing in Russia as profitable.
The only response Gaidar and Fyodorov had to accelerating inflation was to threaten a monetarist clampdown on credit. But it would have bankrupted many huge enterprises, throwing millions of people out of work, with the risk of enormous social unrest. And it would have produced further cumulative economic contraction as even the remaining profitable firms found themselves losing both market and supplies of essential inputs.
Some pro-market intellectuals were prepared to embrace this perspective without flinching. But the heads of the decisive sectors of the Russian economy were not. Nor, particularly after December’s elections, were many of the careerist politicians grouped round the government.
Prime Minister Chernomyrdin, former head of the state gas monopoly, summed up their views at the end of January. ‘The period of market romanticism is over,’ he said. ‘The mechanical transfer of Western market methods to Russian soil has caused more harm than good.’
However, abandoning Gaidar’s disastrous policies will not solve the economic crisis. Two fifths of output will still be in the military-industrial complex and of no use in solving the desperate shortages of food and consumer goods. Nearly half the population will still be stuck below the poverty line. Education and health facilities will continue to fall apart, and unemployment will continue to spread.
Zhirinovsky’s far right will attempt to get mass support by blaming inflation and unemployment on minorities – especially the Jews and people from the Caucasus. And they will argue within the ruling class for a foreign policy which sees the military-industrial complex as an asset rather than a liability – for a policy based on renewed military expansion, re-establishment of the empire and hard bargaining with the West.
There is still one force that could wreck all their schemes. Russia’s working class may be suffering terribly from the crisis, but it still has not experienced any decisive defeats – as was shown when the government rushed to settle with striking miners at the end of last year.
Those who fought against oppression and for democracy in 1989 and 1990 are in complete disarray since the collapse of the marketisation programme. Most of them had come to see it as the only alternative to the old order. Now they are terrified by the advance of Zhirinovsky but do not know what to do to counter him. They do not yet see that the key lies in posing the alternative of planning from below, based on workers democratically deciding what needs to be produced and fighting for the rational reorganisation of the economy.
Yet among the mass of people throughout the old Eastern bloc there is a growing feeling that some alternative must exist – a recent opinion poll in eastern Germany showed almost half the population (46 percent) believed a ‘third way’ between communism and capitalism should have been found at the time of unification.
If the best of the democrats turn to the working class, there is every chance of the working class fighting for real democracy. Barbarism is still a long way from winning its race with genuine socialism.
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