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Volume 14, Number 8
Russia's Distorted Mirror
Yuri N. Maltsev
"We Russians are doomed to teach mankind," wrote philosopher
Grigory Chaadayev in 1848, "some awful lesson." The lesson turns
out to be more than proving socialism's brutality and futility.
It is also about the unlikelihood that elections alone will
resolve a deep social and economic crisis.
After the Soviet Union collapsed in 1991, the Russian
political scene became highly volatile, with over 600 different
parties and 22,000 political organizations competing to fill the
ideological vacuum left by the Communists. It has now begun to
Four major ideological forces, represented by the major
candidates, dominate Russia. Underlying each are theories of how
big the state should be, where the center of government should
be, and how free the market ought to be. In this way, Russia is a
distorted mirror of the U.S., which is having its own
difficulties with reform. The battles center on same themes and
feature similar struggles.
Social Democracy. These people combine anti-communism
and a strong belief in welfare and warfare. They resist total
state ownership of industry and land as much as they oppose a
free market and denationalized political life. They have adopted
the economic priorities of the international lending agencies to
which they are heavily indebted.
The social democrats are grouped around Boris Yeltsin and his
government. His platform reveals the inner contradiction of
social democratic politics. On the plus side, he promises to
privatize all industry by the year 2000, cut inflation to 5
percent a year, make the ruble fully convertible, balance the
budget, cut taxes, and abolish the draft.
On the downside, he pledges that he will make welfare payments
the highest in Eastern Europe, that everyone will enjoy a "living
wage," and they will be given free medical care, free
transportation, high pensions, free education, and
full-scholarships for professional training.
Yeltsin is the candidate of the ruling elite in action:
promising obviously incompatible goals as a means to maintaining
control, and hoping the public has a short memory. His
constituents are post-communist bankers, oil and gas executives,
traders in raw materials, and government bureaucrats.
Part of his pitch is that he is a moderate who will go slow
with privatization. This is appealing for only one reason. The
man on the street and Western Sovietologists believe that past
privatization allowed managers of state enterprises to steal
factories and become enormously wealthy at others' expense. Like
many widely-held beliefs, this is false.
Swedish economist Anders Aslund has calculated that Yeltsin's
privatization so far has been worth less than 1 percent of GDP.
Today many of these supposed private enterprises have no market
value at all. Nor is private economic crime the cause of personal
wealth in Russia. The new wealth comes overwhelmingly from three
other sources: subsidized credits, implicit export subsidies, and
Since there was no free market, these roads to riches took on
enormous importance in 1991, when the Soviet economy finally
collapsed. Yeltsin used them to build his new political machine.
Now these tycoons have a vested interest in keeping the handouts
going. They, in turn, provide the necessary financial backing to
keep the government in power. The prices of most public utilities
and large industrial commodities are still determined by
Since September 1995, Yeltsin's tycoons have been holding down
the price of electricity, oil, gas, and coal, to enhance
Yeltsin's grip on power. In exchange, Yeltsin has given them raw
materials at subsidized prices and then encouraged malinvestment
with export subsidies. Some of them made profits up to 300
percent. So it is with other privileged sectors and
public-private partnerships: for example, telecommunications
giant Rostelecom boasts annual profits of 147 percent.
Yeltsin's' program consists of little more than an itemized
list of guaranteed handouts by a benevolent state. "I feel your
pain, all the country's pain," Yeltsin said while campaigning. He
should, since much of it was inflicted by his own interventionist
policies camouflaged as "radical economic reform."
Popular support for Yeltsin is based on a simple fact: people
remember the terror of communism and don't want to go back. He
tries to persuade people that he is all that stands between them
and a return of the bad old days. Yeltsin's slogan is "normal
life with gradual improvements for all." This message has an
appeal for people who served as guinea pigs for all kinds of
social experimentation for 75 years.
Internationally, Yeltsin's most generous backers are the
Clinton White House, the United Nations, and the International
Monetary Fund, which bails out failing socialist economies from
Mexico to Mongolia. Two months before the election, they
collectively released $10.1 billion to the government.
Communism. Gennadi Zyuganov presents himself as a
pro-market reformer. A former mathematics professor, his speeches
sound much like those of any left-wing academic. His enemies are
the "monopoly bourgeoisie" and "capitalist exploiters" while his
friends are the "oppressed," "victims," "poor," and
"unprivileged." The rest of time, he attempts to unlink himself
from Stalin, the Gulag, collectivization, and tyranny.
His pitch is for the support of the biggest losers from the
reform period: people living on fixed incomes who have seen their
wealth destroyed by inflation, former apparatchiks who can't find
work, and Soviet militarists who dream of a restored USSR. They
are large enough to be a strong pressure group.
The communist program is to halt economic disintegration, with
no coherent plan for doing so; provide a decent standard of
living for one and all, with no prospect for success; and restore
Russia's superpower status by reclaiming all lost territories,
which would quickly bankrupt what's left of the government.
National Socialism. The leader of the Liberal
Democratic Party Vladimir Zhironovsky is well known for lecherous
antics. He promises to recreate of the Greater Fatherland from
the Arctic to the Indian Oceans, but the real source of his
support is his open hatred of the ruling elite. He calls Russia
the "lavatory of Europe," while promising to restore its
greatness by declaring war on Muslims and on Turkey, where he was
His economic program is national socialist. Private property
gets formal recognition, but the state, with its great leaders,
will create industrial might and military superiority though
heavy intervention and trade protection. The worst turn of events
for him was when the establishment, which hates him, changed
their tactic from denouncing him to ignoring him.
Free-Market Nationalism. The leader of this movement
is Aleksandr Lebed. He combines a call for law and order with a
commitment to free enterprise. His economic program is drafted by
the free-market economist Vitaly Naishul, and rests on what is
called "self reliance": delegating powers from the central to the
local government, dramatically reducing taxes, and rejecting all
foreign aid (thus the label nationalist).
"I do not promise you anything," he says. "Since my childhood
I have believed that free cheese is found only in a mousetrap."
This is the right spirit. But Russian politics has a tendency to
chew up even the most principled person. Having joined Yeltsin's
government, how long will Lebed's principles will hold up?
Let's review the choices: duplicitous and misguided social
democrats, old-style communist propaganda, fatuous nationalism
socialism, and the slight hope that someone, a moderate
free-market nationalist, understands the problem and offers a
solution, providing he too doesn't sell out his principles the
closer he gets to power.
Contrary to all predictions, democracy is not curing Russia's
problems. And more democracy is not likely to help either. A
constellation of economic interests and a lack of public
understanding of economics has kept social peace at bay. Without
liberty and property, all talk about rebuilding Russia after a
disastrous century of socialism is meaningless.
Yuri N. Maltsev, formerly of the Soviet Academy of Sciences, teaches Economics at Carthage College