Monday, June 8, 2009

Russia After Communism: Elites, Oligarchs, and the New Dictatorship

Below is an essay I wrote a couple of years ago in 2007 about Russia's transition to 'democracy', which I think is worth sharing here. A fully cited version is available upon request.

By Ali Mustafa

The dissolution of the Soviet Union in the closing days of 1991 was an event as monumental as it was sudden. In what was surely one of the most historic events of the twentieth century, a vast empire occupying one-sixth of the earth’s surface splintered into fifteen new states virtually overnight and Communism as a global ideology found itself out of favor and in retreat. The end of the Cold War appeared to signal to many the uncontested supremacy of Western liberal democracy and had some even going so far as to announce, as one commentator boldly put it, “the end of history.” But what has been hailed by the West as the fall of Soviet totalitarianism and a triumphal victory for democracy and freedom has been met by ordinary Russians themselves with growing disillusionment, cynicism, and ironically a newfound appreciation for the security and order that was guaranteed under Soviet rule. The Soviet Union was undoubtedly one of the most brutal and repressive regimes to surface in the twentieth century, reaching its apex of horrors during the reign of Stalin under whom millions are estimated to have been mercilessly purged, but what has since replaced it has proven no more a democracy than its predecessor and in many ways represents a continuation rather than a departure with the past.

More than a decade after the fall of the Soviet Union, the free market is well established and elections are a regular mainstay of post-Soviet Russia; however, while elections are an indispensable element of any liberal democracy, in and of themselves they do not indicate the achievement of democracy. Russian democracy today is still rife with the same deep-rooted corruption, organized crime, and clientelism so redolent of the country’s Tsarist and Soviet past that it can only be properly characterized as a new dictatorship. What in fact prevailed in Russia in late 1991 was not democracy, nor was it the free market, but instead a case of backdoor privatization that saw the old Communist Party elite – disguised under the populism of Boris Yeltsin – merely transform itself into the new capitalist class through skillfully co-opting the popular democratic movement into its own image. Russian democracy was from its inception – and remains to this day – little more than a self coup in which the centralized state never disappeared but only sought to reconsolidate its authority under the guise of liberal democracy by relieving itself of the tarnished legacy and increasingly untenable legitimacy of the Soviet system. As Peter Reddaway and Dmitri Glinski, co-authors of The Tragedy of Russia’s Reforms, affirm:

By 1991, the breakup of the Soviet Union was probably inevitable, but widely differing views existed about the desirable timing and mechanics of the breakup. In practice, it came about in an abrupt, clandestine, and undemocratic way, and the newly independent states that emerged have continued to bear the scars caused by what in about half the cases was a sudden, painful, and premature birth. This is an important issue because a more gradual and democratic process of separation might have created more politically viable successor states (Reddaway & Glinski 2001, 245).

But why exactly did the Soviet Union dissolve in the first place and what were the socioeconomic factors that can be attributed as the source of its undoing? Many historians have situated the economic reforms of Mikhail Gorbachev during his rise to power in 1985 as the beginning of the end of the Soviet Union, and they are not wrong in doing so; however, to dismiss the origins of its decline – the economic stagnation of the mid 1970s and early 1980s that prompted these ambitious, ultimately self-defeating reforms – is to fatally overstate the personal politics of the late Soviet Union and to miss the deep-rooted structural flaws underlying them. By the mid 70s the Soviet Union found itself growing exceedingly dependent on an export-based economy (exporting primarily raw materials and energy) that impeded technological innovation and development and prevented it from staying competitive in the global economy. The Communist Party of the Soviet Union (CPSU) at this point could only encourage production growth within the existing mode of production through systematically applied intimidation and coercion, compensating however possible for workers who failed to find any incentive in exceeding production quotas that would only amount to even more unaccredited labor. Due to a woeful combination of managerial incompetence, backward development, and technological decline, vast portions of the grain harvest were lost annually (as much as 30%), causing the Soviet Union from the 70s onwards to become dependent on grain imports from Europe and the U.S. to feed its population.

As a result of a resurgence in Cold War tensions at the time, The Soviet command economy (whose origins can be traced back to Stalin’s Five Year Plans) was by the early 80s dedicated almost exclusively to military production, allowing it to stay competitive in the arms race with the U.S. and the other NATO countries – but only at the expense of the overall economy, especially consumer goods production, which lagged dangerously behind regional standards. The popular saying that ‘the Soviet Union does not have a military industrial complex, it is one’ reflects well the extent to which the Soviet economy, and indeed the empire itself, grew consumed by the mounting external military pressure applied by the U.S. during this period. But as necessary as it may have seemed at the time to keep pace in the Cold War arms race with the U.S., the bloated military buildup during the Reagan/Carter years contributed in no small way to the exhaustion of both the Soviet economy and labor pool, setting the stage for perestroika and ultimately the collapse of the Soviet Union.

Gorbachev came to power in 1985, inheriting a Soviet system that was already in deep social, economic, and political crisis. Committed to modernizing the Soviet system, while leaving its twin pillars of uncontested Communist Party rule and the centrally planned economy fundamentally intact, Gorbachev launched within months of taking office a programme of limited economic reforms he called 'perestroika.' Gorbachev’s perestroika proved an impractical compromise from the beginning, sitting uneasily on the border between central planning and the free market with the coherence of neither and the inherent pitfalls of both. As the state of the Soviet economy quickly eroded from stagnation to deterioration, Gorbachev’s strategy of reform from above backfired into a revolution from below and not only undermined to a fatal degree the legitimacy of the CPSU, but also provided fertile ground for the populist rhetoric of Boris Yeltsin (himself a former member of the CPSU) who would use the turning tides of Soviet rule to his own undemocratic ends.

As Gorbachev’s authority waned and the CPSU was reduced to a mere shell of its former self, Yeltsin in turn saw his popularity skyrocket and, after forcing the country’s first ever popular elections, was voted president of Russia in June of 1991. The absence of a clear division between Soviet Union and Russian institutions that followed “…gave rise to a dangerous vacuum of authority. Russia in effect suffered from a form of dual power, with two presidents, and two parliaments, which gave rise to a type of ‘dual powerlessness’ and a paralysis of government” (Sakwa 2002, 33). Dual power, however, would prove short-lived as Yeltsin wasted little time in maneuvering to capture piece by piece what remained of the Soviet Union. Sensing nearly a century of uncontested power and privilege quickly slipping away, Communist hardliners in one last ditch effort to save the empire from collapse staged a botched coup in August of 1991 that in the end only precipitated its demise, as Richard Sakwa, author of Russian Politics and Society, affirms:

While the nature of the coup remains controversial its effects are clear: the collapse of the once all-powerful Communist Party and the disintegration of the Soviet Union itself…The Soviet system had destroyed the old Russian middle class and the cultural intelligentsia; it had destroyed the self-sufficient peasantry and Russia’s [agriculture sector]; the system had squandered the vast natural resources of the country and the wealth accumulated from the past; and in its final act the cannibalistic regime devoured itself (Sakwa 2002, 31).

With the Soviet Union dissolved and Yeltsin now firmly in command, the future of the newborn Russian Federation was still very much in the balance. Two coalitions surfaced during this period (from 1990-92) vying for Yeltsin’s favor and an active role in helping shape his socioeconomic programme: the popular democratic movement, campaigning more or less on behalf of the vanished middle class and wider participation in Russia’s political and economic transition; and the old Communist Party elite, or 'nomenklatura,' who saw its best hope for continued survival in securing a frontline position on the fast track towards privatization by transforming power and privilege once enjoyed by custom into property defended by right (Reddaway & Glinski 2001, 268). Russia in effect found itself caught in the balance between democratic reformists and radical freemarketeers, populists and elitists, idealists and shrewd pragmatists; the former carrying with it all the momentum and the latter, much more fatefully, all of the influence. Posed with the choice of empowering a historically marginalized and repressed sector of civil society at the direct risk of undermining his own rule, or turning to a model of free market privatization that would essentially maintain the historical balance of power, Yeltsin decisively chose tradition over change. Yeltsin himself had this to say about Russia’s socioeconomic transformation:

It was a wildly painful break, surgically crude, with the rusty grinding sound of pieces of old parts and mechanisms being ripped out together with the flesh, but the break occurred. Most likely, it simply could not have happened any other way. We had virtually nothing to work with apart from Stalin’s industry, Stalin’s economy, adapted to the present day. And its make-up dictated precisely by that sort of a break: over the knee. The system was destroyed in the same way it was created (Sakwa 2002, 279).

From the very outset of the collapse of the Soviet Union and the official end of the Cold War, Yeltsin understood that the West would represent an indispensable ally on its path towards the free market. In a speech made in October of 1991 Yeltsin declared enthusiastically, “We turn officially to the IMF, the World Bank, and the European Bank for Reconstruction and Development, and invite them to elaborate detailed plans for cooperation and participation in the economic reforms.” IMF loans would indeed follow but only with rigid conditionalities attached that were together politically overbearing and economically counterproductive. The IMF also introduced as a way to stimulate the fledgling free market economy a development scheme fittingly called ‘shock therapy’ that encompassed “…austerity, budget cuts, and deflation, with little regard for the social consequences” (Reddaway and Glinski 2001, 292). The havoc that shock therapy wrought throughout all strata of Russian society – save Yeltsin and the nomenklatura of which he was an extension – cannot be minimized: spiraling out of control prices, plummeting living standards, and a fall in overall production that was only matched by the growing army of the unemployed and poor. While shock therapy did its worst on Russian society, Yeltsin himself remained above the fray and in fact directly benefited from the multibillion dollar IMF loans, much of which were pocketed by Yeltsin and his administration without any intent of repayment. Yeltsin elected to leave the Soviet era behind by assuming all of its defining features: an over inflated bureaucracy built upon patron-client relations, a messianic vanguard model of development and progress, and endemic corruption.

The process of backdoor privatization that occurred in post-communist Russia under Yeltsin gave birth to a new micro-elite class known collectively as 'the oligarchs' whose vast wealth was accumulated by opportunely dividing amongst themselves previously state owned enterprises at bargain prices in the now infamous loans-for-shares scandal of 1995. The loans-for-shares scandal, according to Sakwa, was one in which Yeltsin “…favored certain insider interests in the privatization process in return for funds that would ensure that the machinery of the government could continue to turn… [but] it was understood by all that the government would default on the loans and the oligarchs would get the companies for a song” (Sakawa 2002, 82). Up to 70% of Russia’s economy is currently estimated to be under the control of only a handful of these oligarchs including former state owned enterprises in such lucrative sectors as energy, telecommunications, and the mass media. A country that suffered under the rule of one absolutist tzar after the next, only to endure the brutal dictatorship of Stalin that would follow, now found itself being ruled by a small and elusive self-appointed clique whose wealth and influence far exceeded even the highest ranking Communist Party officials.

Organized crime and the ‘shadow economy’ that it invariably stimulates were both – and still are – very much essential to the continued survival of ordinary Russians; however, what was once tolerated by the CPSU because it functioned largely as a safety valve for popular resentment that might otherwise manifest itself in total rebellion has today found its way into the uppermost levels of the Russian government. The degree to which the “free market” and “democracy” in post-communist Russia has become tied with organized crime is such that it is virtually impossible to distinguish anymore where legal economic activity ends and the ‘shadow economy’ begins. Russian intelligence reports indicate that as much as 40% of the country’s wealth is under the control of criminal groups, with these groups believed to have infiltrated government bodies at both the regional and national levels. As Sakwa accurately notes, “In the absence of a state able to enforce rules and to adjudicate between interests, organized crime stepped into enforce contracts, regulate economic [activity] and property rights. Corruption, in other words, worked from the top down and from the bottom up, squeezing honest business and endeavor entirely out of existence.”

However unbearable life in the Soviet Union may have seemed – and it certainly was awful – the security and order guaranteed under the old system must in hindsight seem vastly superior when contrasted to the vastly reduced public order, increased socioeconomic uncertainty, and generally heightened stratification associated with the post-Communist order. While few would argue for the return of Stalin or the general atmosphere of despair and hopelessness that plagued late Soviet society, when put into perspective the Soviet Union undoubtedly enjoyed many advantages over the current Russian Federation: “free education and healthcare, a comprehensive and diverse system of pensions and social benefits, job security, extensively subsidized housing, basic foodstuffs, public transportation…[all of which] contributed to a meager but reliable floor of living standards for the vast majority of Soviet people” (Kuchins 2002, 147). According to a report recently published by the World Bank, the percentage of the Russian population living in poverty (making less than $2 a day) has grown from an estimated 2.2 million (less than 2% of the population) in 1987-88 to 57.8 million (approximately 40% of the population) by the mid 1990s.

Poverty in Russia today is also largely a female phenomenon. In the late 1990’s almost 80% of the unemployed in Russia were women, most of whom have been forced into prostitution or unwittingly bought and sold into sex slavery via European and Asian human trafficking networks. The commodification and hyper-sexualization of the female body under capitalism has in effect reduced women in Russia to second-class citizens, undercutting to a fatal degree the Marxist notion of ‘class struggle’ valorized by the Soviet Union and the system of gender equality implicit therein.

Vladimir Putin assumed office in 2000 as Yeltsin’s hand picked successor and has essentially picked up where Yeltsin left off in upholding and indeed reinforcing the political and economic status quo. As the state capitalism of the Soviet Union has given way to backdoor private deals, Russia has found itself no closer to genuine democracy and self-determination than it was under Stalin. Since ascending to power, Putin has attempted to reassert the centrality of the state that was lacking under his predecessor’s tenuous and unpredictable reign. After a decade and a half of shock therapy, incomplete liberal reforms, and the emergence of a new dictatorship, the Russian people are left wondering if they are truly witnessing history, or merely history repeated.

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'From Beyond the Margins' by Ali Mustafa is licensed under a Creative Commons License.