The Former Soviet Union:
Bureaucratic Anarchy

Oct 31, 1994

Dimitri Vassiliev, Vice President of the Committee for the Management of State Property in the Russian Federation, the "second-in-command" of the privatization process, announced triumphantly in a recent interview for the French daily Le Monde that "70 per cent of Russian industry will be in private hands within three months ... We will have become a bourgeois country again."

Vassiliev is too young to be part of the generation of bureaucrats who promised 30 years ago that the Soviet economy would "catch up and overtake" the American economy ushering in communism in the near future. He has, however, inherited something of his elders’ ability to shape reality to suit his audience. Moreover, since the capitalist West is a source of funding and loans (although until now it has handed out little more than promises), such official optimism is undoubtedly considered necessary.

Vassiliev’s youthful enthusiasm is not widely shared, particularly by others who wish to see a rapid completion of the bourgeois counter-revolution. Gaidar and Fiodorov are now scathingly critical of their successors... for hesitating to make reforms, for not being resolute, for retreating. Jeffrey Sachs, the American economics professor who was Yeltsin’s adviser on privatization and Gaidar’s guiding light, resigned after Gaidar’s departure. Sachs claimed that "the Communist old guard is back in action in Russia". Of course, such complaints are to be expected, from those just ousted from power.

It is also not surprising that some prominent figures among the section of the intelligentsia which noisily advocated Russia’s becoming a bourgeois society should now express impatience, or even their sense of betrayal. Yavlinski, one of the founders of the reformist movement and one of Yeltsin’s chief rivals for the Russian presidency, disputes the reality of the privatizations. He asserts that "what has happened up to now is not privatization but a collectivisation which places companies in the hands of their employees and managers."

Afanassiev, another established figure in the same circles, assessed the first months of the Yeltsin-Gaidar government at the end of 1992. Afanassiev condemned the government because "instead of lifting price controls, with de-monopolization and privatization of the state sector, we have obtained something indefinable, which carries the same label but whose content is completely different. We are witnessing the rise of new industrial monopolies and distribution cartels, while the state continues to intervene in the economy at the company, town and regional level". Afanassiev quotes another author: "Gorbachev continues to be a player, by way of Yeltsin himself: when I say that Gorbachev is still playing, I mean that neither the nature of state power nor, more generally, the system of internal relations in society, has undergone any decisive changes".

We will allow for some exaggeration here because the people in question want a faster and more far-reaching capitalist transformation of the former Soviet Union. Clearly, however, the "system of internal relations" in society is not changing fast enough for one part of the political forces who claim to represent the interests of the bureaucracy. The obvious explanation is that there are other forces slowing down the transformation, apart from those factors caused by the structure of the Soviet economy and industry.

The current privatizations are obviously a move towards the liquidation of what remains of the economic and social transformations brought about by the proletarian revolution. This has been the case with much of what the bureaucracy has done since its earliest days in power. But such moves may also constitute an attempt to ensure the preservation of the bureaucracy; a last phase, perhaps; temporary undoubtedly, but preservation all the same.

From Company Autonomy to Privatization

Afanassiev asserts in My Fateful Russia that "The main concern, one might even say the raison d’être of the Yeltsin administration, like that of its CPSU predecessors, is to hold on to power at any cost, strengthen it if possible, and misappropriate palpable material wealth, which was the main preoccupation of the CPSU nomenklatura". Afanassiev speaks from experience: he was part of the "nomenklatura" himself. So, indeed, were almost all those who constitute the current ruling caste both in Russia and in all the other republics which have emerged from the break-up of the Soviet Union.

His assessment is at any rate more accurate than any of the fables which were fashionable for a long time among Western commentators. The Westerners liked to explain the rapid conversion of the former Soviet leaders to the market economy and capitalism by asserting that the state economy had reached such a dead end that the Soviet leaders had to draw the obvious conclusion. If the mere slowing of economic growth under Brezhnev, or the stagnation of the early years under Gorbachev, had such an effect, what conclusions will Russia’s leaders then draw from the full-scale collapse of production (down 20% in 1992 and 18% in 1993) which characterizes this period which they call a phase of the transition to the market economy!

Economic considerations were never the driving force behind the changes which have led, if not to the transformation of the Soviet Union, at least to its break-up. Far more important was the struggle for "power at any cost", which began in the secrecy of the top bureaucratic circles before spreading to the bureaucracy as a whole. This struggle released political forces within the bureaucracy which not only broke up the old Soviet Union, but also continue to shake up the newly independent republics.

Of course, the organization and functioning of the economy were among the questions raised as the crisis of power at the top gradually became public, but more as a consequence of this crisis than as its driving force; more as a subject of increasingly demagogic declarations than as a prospect held out to Soviet society.

The law on companies passed on June 30, 1987, was one of the first decisive measures of the Gorbachev era. It consisted in giving companies, that is the bureaucrats in charge of them, greater autonomy and consequently a greater degree of independence from the bodies responsible for central planning: the "Gosplan" and the ministries. This law enabled Gorbachev, still barely established as leader of the Soviet Union, to weaken the bureaucratic fiefdoms which ruled over the Gosplan and the main ministries, overshadowing Gorbachev’s still fragile power. At the same time, the law made a demagogic gesture towards broad layers of bureaucrats hungry to see their own prerogatives increased at the expense of central control. Recognition of companies’ management autonomy, with the resulting implications for their relations with other companies, at home or abroad, with opportunities concerning investment and salaries, was an attractive prospect not only for company managers but also for the bureaucrats in local administrations.

But this measure hardly constituted a major turning point, except perhaps in terms of its later consequences. For one thing, the idea of a reform of this type had already been under discussion for some time. The economists and sociologists of Gorbachev’s time were simply reformulating projects drawn up and partly implemented in Khrushchev’s time, and in the early years of the Brezhnev-Kosygin administration. Above all, this law was simply legal recognition of a de facto situation already existing in the Soviet economy.

In the days of the super-centralized economy under Stalin, Trotsky condemned this super-centralization, which stemmed from Stalinist despotism, not from the requirements of planning. This super-centralization, Trotsky pointed out, was an illusion behind which the bureaucrats concealed their individual scheming, just as the bureaucracy as a whole concealed its collective siphoning off of wealth. Although Trotsky defended the state-run planned economy all his life, and constantly underlined its superiority to the capitalist economy, he never idealized the Soviet economy. On the contrary, he always condemned the reactionary aspects of planning under the bureaucracy. In this form, planning did not satisfy the needs of the population by rationalizing the economy but rather facilitated the diversion of a growing proportion of the surplus social product to the bureaucracy. The cost was colossal waste, bureaucratic centralization, and an absence of democracy.

However, it was not some ideal form of state ownership and planning that Trotsky defended against its capitalist detractors, but real, concrete state ownership and planning as they emerged from the flow and the ebb of the proletarian revolution.

The discrepancy between the official economy, as given in the figures of the plan, and the real economy in the country is as old as bureaucratic planning itself. It stems in the final analysis from the contradiction between the collective nature of the economy and the private interests of the bureaucrats who run it. This private interest could take the form of an aspiration towards private appropriation and accumulation, an aspiration as old as the bureaucracy, or it could simply mean the desire to hold onto a position at the head of a company with the privileges that meant. Even under Stalin, some company activity escaped the control of the central bodies and was conducted in the parallel economy. The first decisions recognizing that companies had a certain right to negotiate directly with other companies operating upstream or downstream of them, date back to 1941.

Later, under Khrushchev and then Brezhnev, that is, long before talk of perestroika, nearly two thirds of economic activity resulted from "horizontal relations" between companies, i.e. direct relations between their directors, acting partly or wholly outside the control of the Gosplan and the ministers!

In other words, company autonomy was already largely established even before Gorbachev decided to recognize it in law.

Superimposed on the system of requirements laid down by the Gosplan and the central bodies, a network of relations existed between companies and between the bureaucrats who ran them. This network of relations oiled the wheels of a theoretically planned economy, which otherwise would not have been able to function in the absence of the democratic control of workers as producers and consumers. But it also provided the bureaucrats with immense possibilities for individual appropriation. The increase in this phenomenon at the end of Brezhnev’s reign was the main reason for the slowing down of growth in the Soviet Union. Before this time, despite the above-mentioned flaws, Soviet economic growth had been superior to that of the capitalist countries. The supposed limits of planning were never the cause of a slowdown in economic growth, although they are blamed today by the very bureaucrats busy sabotaging the planned economy.

After the Break-up of the Soviet Union

The recognition of company autonomy was thus an adaptation of legislation to bureaucratic practice. It was probably not part of a desire by Gorbachev at that time to restore capitalism by decrees. We have no reason to believe that the bureaucracy’s wish to consolidate its privileges by acquiring private property, a longstanding aspiration, was any stronger than before. There is no evidence that the bureaucracy pushed Gorbachev so hard that he was obliged to move forward, if only for demagogic reasons.

Gorbachev’s demagogy against centralization and Yeltsin’s attempt to gain the support of centrifugal tendencies by proclaiming the right to independence were not necessarily seen by the bureaucrats as part of a bourgeois counter-revolutionary program.

By railing against centralization and declaring that individual enrichment was no longer an evil but a virtue, Gorbachev and then Yeltsin encouraged tendencies which had long existed in the bureaucracy.

Where are these social forces operating, and in what direction are they moving? Up to now, they have been operating mainly in the political field. The weakening of central power led first of all to the break-up of the state apparatus into rival apparatuses. The USSR has disappeared, divided officially into fifteen republics and unofficially into some hundred or more territorial entities dominated by more or less independent apparatuses. The bureaucracy, although divided, continues to dominate society and the economy because it has state power and not because of its place in the economy.

This disintegration has encouraged the development of a private sector and the emergence and consolidation of an authentic bourgeoisie. Some elements of the bureaucracy have been able to trade in their former position as a party or Komsomol secretary for a more lucrative status as the owner of a luxury shop or even of a capitalist company, generally a commercial one, but sometimes industrial.

Yet the international bourgeoisie may be losing patience with the slow pace of Soviet reforms. The bourgeoisie understands social relations, the relationships of force between classes, and is not impressed by the number of "nouveaux riches " flaunting their wealth although their power in the economy is marginal. The counter-revolution does not occur in Arbat shops or import-export companies, even if such companies allow plundered wealth to be diverted to foreign banks. The capitalist system is concerned with the fate of big industry.

In the same interview in Le Monde where he bragged about the high level of privatization, he also admitted: "Privatization has not radically changed the situation in the country.... Of course, the structure of capital is not very effective: of 8300 companies sold by the end of 1993, the companies’ workforce has bought up 51% of the capital in three quarters of the cases."

Most of these "companies sold" were not bought in cash but in the "privatization vouchers" distributed free of charge to everyone a year ago. Obviously, among those employees who are nominally equal co-owners of companies, some are more equal than others. The bureaucrats who manage the companies continue to manage, while their "fellow shareholders" among the workforce continue to operate the machines. But this situation is not strikingly new, neither for the bureaucrats nor for the workers. In the past, it was the state which was the collective property of the whole population, although it was rather more the "property" of the bureaucrats than of rank and file workers. Now it is companies which have become collectively owned. The relationship between bureaucrats and workers has not really changed by being established on another level.

Yavlinski made this very criticism when he asserted that the privatizations, as they have been carried out, have only "legalized the red directors’ control over property".

Privatization, whether in the name of "workers’ collectives" or in the name of the local administration, makes official the emancipation of the bureaucrats from a central state control which no central institution is actually in a position to impose. Otherwise, things are continuing as before.

The bureaucrats in control of companies are not concerned with profitability in the capitalist sense of the term: they are not seeking to produce more with fewer workers. On the contrary, these bureaucrats are trying to keep as many workers as possible under their control. They do not cut back on their workforce, nor do they cut back on the free services they offer nor do they stop selling some consumer goods through the company, without which many workers would be destitute.

To overcome the deficit this creates, they obtain subsidies from the Central Bank. Up to now, the Soviet banking system has continued to subsidize companies. The IMF has complained, loudly, that at least half the companies in Russia are unprofitable, and subsidies should be stopped. Of course, it is not a question of the bureaucrats’ generous nature; there remains a logic different from capitalist logic. The bureaucracy’s political leaders still prefer to print money and subsidize companies, even unprofitable ones, rather than risk a social explosion. The same is true of the local leaders of the bureaucracy, and indeed of the "management" bureaucrats.

Control by the "red directors" over companies is a temporary stage, the concrete form currently taken by the social counter-revolution. But how long will this temporary stage last? A section of the bureaucracy, the section already in control of profitable companies, may have a vested interest in a complete and rapid change of the system. But what about the others? What about the directors and top executives of the gigantic factories which dominate the social life of whole towns or regions, but which are not profitable according to capitalist criteria? Even if such people are, in an abstract sense, in favor of a capitalist organization of society, they act in their own personal interests and not out of a political ideal. As the head of a company employing ten or twenty thousand workers, whose lives and families depend on the company, they have power in society. If the company closes, they lose that power.

In countries where capitalism is already established, companies close down all the time without their capitalist owners being ruined. In many cases this makes the capitalists a little richer. They have usually invested their capital elsewhere. But this is precisely what the bureaucrat at the head of a former state-owned company cannot do. So long as the company still runs, a manager can carry a lot of weight in "his" company, even with a tiny percentage of shares. He can even carry a lot of weight outside the company by building up a clientele, by using the influence his position gives him to negotiate with the bureaucrats at the head of other companies and with the bureaucrats in the administration.

But the current privatizations, even if they give a manager the chance to enrich himself and deposit dollars in foreign banks, do not enable him to convert "his" company into money capital, which provides social power of a different order. This is not just because "privatization vouchers" converted into shares are not worth very much. In order for the wealth of a company to become capital, and for this capital to change form, circulate and be invested, in order for the bureaucrat to become a capitalist whose power depends not on the form of his capital but the amount, the economy needs to function on a capitalist basis. The money he exports abroad will not give him the same social power in a capitalist country, as it does in Russia.

What he needs is a capital market—something which does not exist in the former USSR. The supply of private capital bears no relation to the huge needs of an industrial base as powerful as that of the former Soviet Union. There is virtually no capital coming in from the West, despite the constant efforts of Russia’s leaders to distort the truth. Russian capital, meanwhile, is very weak, and in any case its owners are not foolish enough to invest it in Russia itself, at least not in the long term. And even in cases where certain people might want to do so, for the moment they cannot. As Sachs, Yavlinski and the IMF point out in their criticism of the current privatizations, these privatizations are generally "closed" privatizations, designed to protect the "red director" and his position of power.

These changes are obviously another step in the social counter-revolution. The replacement of state ownership, even by co-ownership, cooperatives and local government ownership, opens up the possibility of private ownership pure and simple. Companies could issue new shares, remove the protective barriers set up by the "red directors" against the penetration of other capital or, on the contrary, concentrate ownership, not just management power, in the hands of the former director. This is a possibility, but for the moment it is no more than a possibility. It might occur if the crisis ended in the West with capitalists once again seeking to invest their capital at any cost.

Running industry in the former Soviet Union on a capitalist basis would require not only a capital market but a market pure and simple, in which companies could buy and sell. Such a market does not exist either. If it existed and was integrated in the world market, this would spell the ruin of a considerable proportion of ex-Soviet industry.

The bureaucracy’s reluctance and individual heel-dragging in the face of capitalist changes reflect a general problem. Industry in the former Soviet Union owes its level of development not to the laws of the market or capitalist logic but, on the contrary, to the fact that, thanks to the proletarian revolution, the Soviet Union at least partially escaped capitalist logic for several decades. (We say "partially" because the international environment remained capitalist and the Soviet Union could not escape this environment any more than any other country. Socialism is not possible in a single country. Nor is rapid, harmonious and lasting economic growth.)

Part of Soviet industry, probably the majority of it, was able to function only on the basis of state ownership. It seems unlikely a full-scale privatization of former Soviet industry could take place while maintaining that industry at its present strength. The winners of the capitalist counter-revolution could remain indifferent to the ruin of the former Soviet economy if their right to put their hands on the social surplus product be consecrated as private property. But the winners could be faced with a working class which reacts, being threatened by mass unemployment as a result of the liquidation of those sections of Soviet industry considered unprofitable according to capitalist criteria. The winners could also face the bureaucrats who will be left by the wayside on the road to capitalism, who will dig their heels in to avoid this fate. Finally, the winners would also face the imperialists who could decide to flood the former Soviet Union with products and capital. Then the bureaucrats-turned-bourgeoisie would at best be reduced to the status of salaried executives ... if the multinationals’ investors judged them competent.

A Long-Lasting "Temporary" Situation

Ever since the failure of the post-World War I revolutionary wave everywhere but in Russia, which left the Soviet Union isolated as the world’s first workers’ state, the country has gone from one backward social step to another. There were still some zigzags and partial reversals of the situation in the 1920s, even while the bureaucracy was rising and establishing itself. But, since the end of the thirties, since Stalin’s consolidation of his power, there has been no let-up in the retreat.

Yet, thanks to the impetus of the proletarian revolution of 1917, thanks to the radical elimination of the bourgeoisie and the big landowners; thanks to the state-owned and planned organization of the economy, the Soviet Union for a long time experienced a rate of growth unheard of in the capitalist world. The economic organization which the working class bears within it has shown its superiority over the capitalist economy, even in the appalling conditions under which it was carried out. This evolution itself left a legacy of class forces characterized by a very big and highly-concentrated working class, not faced by the bourgeoisie normal to such a degree of economic development.

However, parallel to this evolution which was favorable to the future struggles of the proletariat, the history of the Soviet Union over the past 50 years has been a succession of political and social retreats, all favorable to the international bourgeoisie, all representing so many steps backwards towards the complete reintegration of the Soviet Union in the capitalist world. The fact that these steps were taken in the name of "communism", a label which the bureaucracy’s leaders dropped only very recently, changes nothing.

For some years now, owing to the political crisis which has shaken the bureaucracy from top to bottom, this counter-revolution has been conducted openly. But the path to bourgeois counter-revolution is strewn with obstacles.

The first of these obstacles is still the working class, whose exceptional numerical strength is linked to the state-controlled nature of the economy. Although the working class has not intervened politically for several decades, the potential threat it represents long deterred the bureaucracy not only from reversing the changes in social relations produced by the October Revolution, but even from abandoning the communist label.

To understand what is happening in Russia today, we must take into account this almost congenital fear which the bureaucracy still feels, even though it is nothing like what it was at the height of Stalin’s power. The numerical strength of the Russian proletariat is an essential element in the relationship of forces; at the same time, it serves as an indicator of the counter-revolution’s progress. The completion of the bourgeois counter-revolution, implying the liquidation of the major part of ex-Soviet industry (which is unprofitable from the capitalist point of view), would result in a considerable fall in the number of workers (by some twenty or thirty million), with all that this implies about lumpen-proletarianization. This is an essential aspect of the regression which a complete counter-revolution would represent.

The working class is still not playing a conscious part in the crisis shaking the former Soviet Union. The crisis still remains essentially that of the bureaucracy. The working class’s illusions about the supposed virtues of the market economy, and about the capacity of this economy to fill the shops and improve consumption—illusions which were in any case not so strong among workers as among the petty bourgeoisie—have probably been largely dispelled. But this is apparently not yet enough to give the working class perspectives. But the potential threat of the Russian working class and of its struggles for its own demands weighs on the bureaucracy’s decisions.

Quite clearly, the social counter-revolution is also running up against obstacles internal to the bureaucracy itself. First is the fact that the crisis of the bureaucracy and struggles for power (armed or otherwise) present an obstacle to stabilizing any economic situation. Moreover, the apparent unanimity of the bureaucracy under the banner of the counter-revolution clearly hides divergent interests. These are manifested, obviously with considerable distortion, in top-level conflicts and periodic violent confrontations.

Even if such conflicts are not clearly formulated or expressed in opposing political programs, these conflicts of interest are based on a fundamental contradiction: while the substitution of the bourgeois mode of appropriation of the surplus product for the bureaucratic mode of appropriation is certainly a desirable objective for the privileged layer, the considerable decline in production this implies could deprive a large part of the bureaucracy, perhaps even the majority, of any possibility of appropriating any surplus.

Another difficulty is linked to the extremely centralized structure of Soviet industry. It is more difficult to privatize gigantic complexes than companies the size of those in the capitalist countries, even those found in the main imperialist centers.

How will this contradiction be resolved, and by way of what struggles? Will the struggles remain within the bureaucracy or spread beyond it? Will this contradiction be resolved at all in the coming period? Or will the former Soviet Union sink for the foreseeable future into a bureaucratic anarchy punctuated by military conflict against a backdrop of worsening economic decline, without the capitalist elements in the economy being able to grow stronger?

Only a struggle between conflicting social forces will decide the outcome. In the present relationship of forces, the dominant layer facing the proletariat is for the moment the bureaucracy. The political break-up of the bureaucracy obviously poses new political problems for the proletariat in comparison to the days of the Stalinist dictatorship. These problems, and in particular, the future of the former Soviet Union, demand answers. But on the level of social relations, the new bourgeoisie is for the moment only a minor component of the dominant layer. The country does not have any great bourgeois dynasties or financial groups dominating economic and social life and capable of subordinating both the petty bourgeoisie and the bureaucracy itself. This means that the former Soviet Union still represents something different from capitalism.

The Trotskyist characterization still remains the best for understanding Soviet reality, and, as a result, the surest guide for action when the Russian proletariat seeks to discover new political perspectives and a program for struggle.