Increasing chaos in Soviet economy

May 15, 1991

By Renfrey Clarke

MOSCOW — An "Action Program of the Council of Ministers of the USSR for Leading the Economy out of Crisis" has been placed before the parliament of the Soviet Union. Despite its innovative-sounding title, it is basically a reworking of strategies set forward in the "500-Day Plan" of mid-1990. Nevertheless, the program and the controversy surrounding it shed light on the processes now unfolding in the Soviet Union.

The Soviet economy is in an appalling state. The "price reform" of April 2 — an attempt to create abundance for the better-off by chasing the poor out of the shops — has not brought any noticeable improvement in supplies of most goods. This is not surprising: in the first quarter of 1991, output of food products was down by 6% on the figure for last year, while light industry declined by 8%. Total industrial output fell by 5%.

This decline is matched by chaotic state finances. A series of republics have refused to pay their regular tax contributions to the all-union government in Moscow. Historian Roy Medvedev observed recently that the central government is not even assured of being able to pay army officers their salaries for May.

The old "command-administer" links between enterprises have been destroyed, while the mechanisms of the marketplace — wholesale trading organisations, commodity exchanges and the like — either do not exist or are weakly developed. Hopes that the infrastructure of a modern national market could be created quickly and smoothly have not been borne out.

Adding to these problems has been a rise of labor struggles. At some point in March, according to government figures, a total of 542 Soviet enterprises were on strike, including large parts of the vital coal and metallurgical industries. The lack of coal, Pravda complained on April 24, "has dragged after itself a long chain of lost production in other branches of industry and agriculture".

The reasons for labor militancy are obvious. In the city of Sverdlovsk, for example, the cost of a "minimum [family] consumer basket" at the beginning of the year was 304 roubles per month. Following inflation and "price reform", it is now 626 roubles. The only compensation most workers have received is a rise of 60 roubles. Almost half the families in Sverdlovsk are now unable to afford the "minimum basket".

Neo-liberal illusions

In newspapers and pamphlets, there are any number of "action programs" for getting out of the mess. For the most part these tracts, like the swarm of new political parties, retail naive neo-liberal free-market proposals with their roots in 19th century capitalism.

These proposals ignore crucial facts. Firstly, the removal of state controls would not lead to a free market. Many items are produced by only one factory in the entire USSR; if price controls were s would simply boost prices and grow fat. The backwardness and shortages would remain.

Just as importantly, the country does not have a capitalist class with highly developed entrepreneurial skills and nationwide perspectives. Members of the bureaucratic apparatus still enjoy substantial privileges, but are very different from a capitalist class, as recent developments have underlined.

If a Soviet bourgeoisie had been waiting in the wings, the loosening of central controls during the past two years would have been followed by a rapid expansion of private entrepreneurial activity. Sectoral and regional boundaries would have been broken down in the rush to create a broad arena for investment and profits.

But so far, private business activity has been weak. Instead of regional boundaries being broken down, the very opposite has occurred; over the past year, internal trade has fallen off sharply. Customs posts have appeared on the borders of the Baltic republics, limiting the flow of goods to other areas of the USSR.

The same process has gone ahead where different nationalities are not involved. In Moscow today, big-ticket items can be bought only by Moscow residents. This system was introduced in retaliation against neighbouring provinces which had restricted supplies to the capital. In many cases, vital industrial inputs are now obtained only through complicated barter deals between provincial leaderships.

There is a fragmentation of internal trade as "regional kleptocratic mafias" — a fusion of the old republican and provincial bureaucracies with black-marketeering "shadow economy" operators — use their control of the local apparatus to defend their power and privileges, which would suffer gravely if a functioning national market were established.

The creation of an effective system of economic exchange — a market — is a pressing need. The state apparatus is largely indifferent or hostile to this task.

The best known propagandists of the market are liberal politicians and publicists, who see market mechanisms as a road back to the capitalism they yearn for. But the main social forces which have an interest in the creation of a genuine, unified national market are the working class and the peasantry.

Two views of privatisation

Many workers now understand why market mechanisms must be introduced, and this understanding has been a factor in bringing about the election of free-market Thatcherite liberals to majorities in the Russian parliament and in the municipal councils of Moscow, Leningrad and other major cities.

But this alliance of liberals and workers is a historical oddity, and is already beginning to fall apart. The liberals and working people have fundamentally different interests as regards the marketplace.

For the liberals, "destatisation" and "privatisation" mean handing over the means of production to private individuals, to sell off or do large numbers of workers now look to "privatisation'" as the handing over of state firms to the collective ownership and direct control of those who work in them. As the strike movement continues, the demand for "privatisation" in this sense is becoming more commonplace.

Soviet workers do not have the entrepreneurial skills of Western capitalists, any more than do the apparatchiks and black marketeers. But the workforce now has a high level of general education; it has economists, computer specialists and other technical experts. We can surmise that worker-owned and controlled enterprises would improvise many of the needed market structures within a relatively short time. In any case, the working class is infinitely better equipped to carry through this task than any other social layers which might take it on.

Communist Party

The Communist Party is no longer a party in the sense of having a unifying ideology and set of political perspectives. It has become an increasingly loose coalition of regional organisations, incorporating individuals and currents with viewpoints as diverse as those of Leon Trotsky and Ronald Reagan. It is held together by its effectiveness as a system of patronage and source of contacts within the state apparatus and, these days, in the commercial world outside. The party can grant jobs, advance careers, clinch deals and provide a fast track through bureaucratic mazes.

Characteristically, the leadership's "Anti-Crisis Program" represents an effort to reconcile the interests of the apparatus with the demands of the liberal majority in the Russian parliament. For the liberals, there is the assurance that privatisation will proceed and will include not just petty enterprises, but also large industrial complexes. There is also the promise of "the most rapid possible liberalisation of prices", a formula which, in conditions of shortages and monopoly supply, is a recipe for heavy inflation.

For the state apparatus, the new program contains the assurance that functionaries will still have secure jobs, and that the local bureaucratic machines will share in the carve-up of centrally owned enterprises. In a report to the CPSU Central Committee on April 25, Soviet Prime Minister Valentin Pavlov stressed that for many years the major shareholders in large enterprises would be the central, republican and regional governments.

For the workers, the program contains little apart from assurances that their sufferings are necessary, that the most brutal, Polish-style economic options urged by the liberals will not be resorted to, and that a gradual recovery of living standards will begin "by October".

There is nothing to convince striking workers to go back to work. The chaos in the economy is now so extensive that there is probably no way any government could prevent further drastic falls in living standards. In these circumstances, there are only two ways in which labor unrest can be ended. One is through shootings and jailings. The other is through a full-blooded program of handing enterprises over to the genuine ownership and control of their workers.

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