Russian left searches for an economic program


By Boris Kagarlitsky

The closer elections come, the more vital it is to have an economic program. Russia is ready for new ideas. Neo-liberal theories no longer evoke the earlier rapture, and people no longer applaud every mention of the "market".

Against such a background, democratic socialists enjoy much better prospects than two or three years ago. This is particularly the case since the Communist Party of the Russian Federation has rejected serious discussion of an alternative economic strategy; the Communists will gain most of their votes not from an anti-crisis program, but from the slogan of restoring the Union.

The Party of Labour, the left Social Democrats and the Socialist Party of Workers are preparing to go into the elections in a single bloc. They understand perfectly that their future depends on their ability to present an alternative.

In the late 1980s the idea of "collective property", taken up by the liberals, was also popular among non-communist leftists. But once the labour collectives obtained property, they were not necessarily able to manage it properly, or to hang on to it. Often, the collective owners leased their property to the first smart entrepreneur who came along, despite the absence both of trade unions and of social security provisions.

Handing over enterprises to their labour collectives was no more a solution to the structural problems of the economy than any other form of privatisation. The shortage of investment funds, the severing of economic links, and technological decline all remained.

Grappling with the experience of privatisation "to the advantage of the labour collectives", trade union militants and activists of the Party of Labour concluded that full employment, modernisation and the conversion of military production could be ensured only through the reconstruction of the state sector. In developing a concept of how to rehabilitate the state sector, an important role was played by the theoretical work of the British economist John Ross, who in 1992 acted as a consultant to the Moscow Federation of Trade Unions.

The crisis of our economy in the 1990s is on a greater world history, apart from the Great Depression of 1929-1932. It was precisely during the Great Depression that the ideas of J.M. Keynes on state regulation became firmly established in the West; later, they were taken up by left parties. The use of Keynesian strategies helped Western Europe to escape from the crisis and in large measure to overcome poverty. Today, socialists consider, Russia needs its own radical version of Keynesianism.

Liberal models are applicable only in countries where developed forms of the market economy exist, while Keynes' theories are most effective in circumstances where market mechanisms are not working or have proved inadequate. We need a complex of stabilising measures aimed at restoring production and the internal market.

Industry must be modernised, and the technological level of production raised. At the same time, production must be reoriented to serving the interests of the population — that is, it must supply the needs of individual and collective consumption. The conversion of military to civilian production, demonopolisation, the retraining of workers and the redistribution of investments between regions are all indispensable.

Structural renovation must not be carried out at the cost of impoverishing the workers. Such an outcome would not only be unjust, but economically counterproductive, since it would restrict the internal market and undermine labour stimuli.

These tasks cannot be carried out by the blind play of market forces. We are entitled to demand that the state put forward a clear program and strategy. We are entitled to insist that this state strategy should be discussed openly, and that it should be approved by the trade unions, by the regional organs of power, by state sector administrators and by entrepreneurs. Without a strong state sector, it is impossible to carry out structural renovation while at the same time guaranteeing social welfare. The state sector has to ensure the modernisation of production and the mobilisation of funds in the key sectors of the economy, playing the role of a sort of "locomotive of development". This does not mean a rejection of private entrepreneurship, but it would be naive to think that Russia's new-born "national capital" or transnational corporations will be willing or able to cope with the tasks involved.

Leftists see in the state sector a guarantee of stability and employment. While ight to private entrepreneurship, they oppose the plunder of state property. The creation of new private firms provides the country with jobs and production. The seizure of state property by private individuals and groups, on the other hand, simply means that funds which earlier went into the state budget are poured instead into the pockets of the new owners.

Privatisation cannot in principle be effective in monopolised sectors and where structural renovation requires large state investments, orders and guarantees.

The weakness of the state sector is one of the main obstacles to private investment in production. No-one will make long-term capital investments if there is no confidence in the future. It is usually considered that entrepreneurs are waiting only for "reliable legal guarantees". But in a country beset by economic crisis and lacking a developed market infrastructure, the only reliable guarantee is the economic activity of the state.

How can one talk of respect for private property, if state property is not respected? What rule of law can exist if the state is undermined and weakened economically? Where there is no state, there is no law.

Russia has never been noted for a high level of legal culture, and during the period from 1990 to 1993 respect for the law has been undermined still further. The problem has consisted not only in massive breaches of the law, but also in endless contradictions between innumerable laws, decrees and resolutions on the one hand, and on the other, in the complete inability of the authorities to ensure that the law is respected and obeyed.

Today the "new entrepreneurs" are expanding their businesses and seizing state property, while tomorrow their own property may be taken from them. This will be a completely natural "expropriation of the expropriators", in the most literal sense.

Just as "easy money" cannot become the basis of solid enterprises, people do not feel a sense of responsibility for property that is received as a gift. We will not create a class of responsible proprietors who have acquired their capital through hard work over many years. We are nurturing a lumpen- bourgeoisie characterised by parasitism, greed, boorishness and improvidence. It is a well-known fact that long before the coming to power of the Communist parties, the economies of Russia and of the other countries of eastern Europe, with the exception only of the Czech regions, were developed mainly through the efforts of the various state apparatuses. During a hundred years of capitalist development the national bourgeoisie showed itself to be completely incapable of becoming the moving force of modernisation.

It is thus even more absurd to suppose that the new entrepreneurial layers that have arisen virtually overnight through the plunder of state property and the selling off of national wealth will be able to cope with this task. It is no less naive to imagine that labour collectives acting in the conditions of the "free market" will be able to fulfil this role.

It must, of course, be said openly that the only possibility of bringing about a radical improvement in the economies of Russia and of most of the countries of the former Soviet bloc is through the nationalisation (or often, regionalisation) of a substantial part of the privatised enterprises and organisations. Any other policy would serve only to reproduce and intensify the crisis.

Where production is monopolised, and where enterprises objectively cannot survive without state support in the form of orders, guaranteed supplies and subsidies, and where modernisation is impossible without investments by the state, privatisation can serve no purpose apart from the theft of state assets. If production is kept afloat through public funds, state bodies are not only entitled to control the activity of the enterprises concerned, but are obliged to do so, and the representative organs of power have to know precisely what their money is going towards.

Of course, the old model of a unitary state sector and of centralised planning has exhausted its potential. But if the system of rule is to be reorganised and democratised, production must first be maintained.

However terrible it might seem, in many sectors of the Russian economy today even a return to the old, historically doomed methods of state administration would be a tremendous step forward. We are forced to choose not between greater and lesser degrees of efficiency, not between socialism and capitalism, but between the preservation of the economy and its destruction.

Once property has been returned to the state, the labour collectives can be given the right to participate in making decisions and to administer the social funds of the enterprises, and managers in the public sector can be given the possibility of acting independently.

The mix of private and state capital in various "joint stock companies" allows the private shareholders to plunder state property, while bureaucratic control over the enterprise is maintained. Entrepreneurs have to take responsibility for their decisions, pay their bills themselves and invest their own capital, not public funds.

It is impossible to defeat corruption and ensure effective management unless a clear line is drawn between the private and state sectors. The state sector should interact with the private sector only through the market, supplying production, concluding contracts, and placing orders. Only then will we have competitive private entrepreneurs, and state

enterprises capable of operating in the conditions of the market.

Voucher privatisation has encouraged inflation and done nothing at all for production. Normalising property relations will change this situation. Private investments will be directed toward the creation of new enterprises and jobs.

Whatever the case, the question of property will only be resolved in the course of bitter political confrontations and conflicts of interests. The relationship of the private and state sectors in any society depends ultimately on the relationship of political and social forces.

Dividing the private and state sectors will be a painful process, especially for the "entrepreneurs" who for the past two years have succeeded mainly in enriching themselves at the expense of state property. The assets of privatised firms have to be revalued, and additional shares issued, which will remain in the hands of the state. Then it will be necessary to decide afresh what should be privatised and what should remain in the state sector.

Assets that have been seized illegally must be returned to their rightful owner, the state. Where assets have been privatised legally, it may be necessary for the state to buy them back. People who have bought shares must not be allowed to suffer from the irresponsibility of the State Property Committee.

Nevertheless, the problem is not as critical as it may seem. In creating a layer of small shareholders, [deputy prime minister] Anatoly Chubais and [prime minister] Yegor Gaidar hoped to create a mass base for their policies. What people need, however, is not shares, but the means of survival. Many shareholders would gladly hand over their shares in return for decent compensation.

The state shareholding in enterprises which ought really to be privatised must be sold in full. In this way, funds will be obtained for the payment of compensation. Labour collectives which have taken part in privatisation can in exchange be given special

funds for purposes such as social development, additional wages and so on.

The question of renationalisation is critically important for implementing the strategies of the left. Renationalisation must not take on the character of reprisal. The confiscation of illegally privatised property must take place according to clearly defined rules and only on the basis of court decisions.

The investment funds created by Chubais for the purpose of privatisation can become an important instrument of the policy of demarcating property. Shares in the investment funds can be allotted as compensation when enterprises are renationalised. State property which needs to be sold can be transferred to these funds.

Bankruptcy procedures can play an important role. Bankrupt enterprises should be placed under the administration of a special state organ that decides their fate — whether they are to be put back in operation, or to be reprofiled, shut down or sold. New public enterprises can be formed on the basis of the reconstructed firms.

Subsidies provided by the government to the privatised sector should also be paid for in the form of shares. In some cases it will be necessary to conclude agreements with the labour collectives and enterprise administrations under which they renounce property in return for the right to receive state investments within the framework of a program of development. Some enterprises will simply have to be bought out.

The idea is being discussed of forming national and regional investment funds which could invest in important programs such as conversion, the reconstruction of enterprises and the development of infrastructure. This would not provide a guarantee against inflation, but would make it possible to restore production.

Controlled inflation is clearly a lesser evil than mass unemployment and poverty. In the interests of restraining inflation, investment programs in the public sector can be combined (within certain limits, of course) with Central Bank policies of high interest

rates. One of the members of the Party of Labour, the economist Andrei Kolganov, has described this as "an inevitable policy contradiction arising from the diverse and multi-layered nature of the economic crisis".

Returning property to the state does not in itself guarantee economic growth, any more than does privatisation. But if privatisation created the preconditions for the fall in production, renationalisation can create the conditions for its recovery.

The present authorities, like the Communist Party before them, are impeded by their own ideology. A program for the revival of the state sector can receive the support even of a section of the entrepreneurs. But a change of course needs people and ideas. So long as the ruling group rejects everything that smells even vaguely of "socialism", one cannot speak of serious and constructive reforms.

The program of democratic socialists in Russia is very close to the traditional ideas of Western leftists, but the acuteness of the crisis means that greater radicalism is required. Today the democratic left in Russia is still extremely weak, but it has new ideas and new people, along with the responsibility and good sense that are so necessary today in a country torn by right-wing and left-wing extremism.