Against the Current, No. 28, September/October 1990
SOVIET MEDIA TIRELESSLY repeat that almost everyone is convinced there is no alternative to the market reform. And indeed, few today in the Soviet Union would deny the necessity of significantly expanding market relations. But this is not necessarily the same as support for Mikhail Gorbachev’s “regulated market.”
Despite a massive liberal ideological assault on popular consciousness, opposition among workers to the government’s reform remains a major obstacle to its consistent promulgation and to a large extent explains the vagaries and the fundamentally undemocratic nature of the reform process. Despite their efforts to identify their social program in the public mind with freedom, many liberals find themselves subscribing to Vasily Leontiev’s lament that “it’s a pity that glasnost came to you before the radical reform connected with the transition to the market.”(1) <#N1>
A few days after Gorbachev became president of the Soviet Union in March 1990, Interfax, the press agency of Moscow Radio, reported that Vice Prime Minister L. Abalkin was heading a team of sixty specialists working on a package of economic reform laws to be submitted to the Supreme Soviet in April and take effect by July 1. Gorbachev, upon assuming the presidency, had immediately let it be known that he intended to use his special powers to move the country at an accelerated pace toward a “full-blooded domestic market.”
The work of Abalkin’s team, meeting in a government house in the woods outside of Moscow, was being kept secret for the time being “in order to avoid untimely confrontation in the society.’ But it was revealed that the government was contemplating opening soup kitchens to deal with the increased number of poor expected in the transitional phase of the reform.
Interfax reported that government officials were looking closely at the Polish reform, which they considered the “most fitting for our country,” thus giving rise to rumors that Polish-style “shock therapy” was in the works. (The fact that the Polish government had opted for capitalism was not mentioned.) Economists who had seen some of the documents confirmed that they included the freeing of prices, the “destatization” of up to 70% of the economy, and the creation of programs to deal with mass unemployment resulting from layoffs and bankruptcies.(2) <#N2>
Pravda’s economics editor reported that there would be partial indexation of incomes to protect the poorest strata but warned that the time had passed when it was possible to stabilize the economy without “hard unpopular measures … Serious social collisions are unavoidable.”(3) <#N3>
Gorbachev explained his shift by the necessity to put an end to a situation in which old and new economic forms coexisted antagonistically. The economic results of the first part of 1990 were indeed alarming. Fr the first time in many decades, the State Statistical Agency reported an absolute decline in national income of 1.7% during the first four months. The budget deficit continued to grow, and the increasing mass of money chasing after limited goods caused inflation and shortages.
The government was losing control of the economy. It had increased the powers of local governments and enterprises, but while these hurried to exploit their new powers in their own local interests, they became increasingly demanding of the center for resources, often backing up demands with ultimata and the threat of strike. Ignoring formal restrictions and contract obligations, enterprises were pursuing profits through unjustified price rises, even while cutting back on production. The tendency of enterprises to reduce plan quotas had grown to such an extent that the GNP in 1990 is forecast to be 12 billion rubles less than originally set by the Supreme Soviet.
In heavy industry, an anti-inflationary tax on wage funds introduced in the fall of 1989 was in practice being applied only to a fifth of the enterprises originally targeted. As one analyst put it, “although we often say in anger that nothing has changed over the past four years, nevertheless, our economy is different It is capable of beating back direct attacks from the center, of subordinating any laws to group egoism.”(4) <#N4>
But if the center has lost its ability to direct the economy, it is nevertheless the case that the government itself has consistently encouraged centrifugal, localist and corporatist tendencies. Although on one level this might appear as a series of errors and half-baked measures, on another it is /the inevitable result of an attempt to reform the economy without democratizing the central power./ This policy is dictated by the interests of the regime’s main social base, the reformist wing of the bureaucracy, in loose alliance with the liberal intelligentsia and the growing private sector.
On the one hand, the government decries the “group egoism” of enterprise collectives; on the other, the government and the press condemn “ministerial dictates” and exhort enterprises to fight for their autonomy – as promised by the Law on the State Enterprise.
There is no doubt that the latter appeals to the strongly anti-bureaucratic sentiments in the population. Yet the majority of the population, and the workers first of all, do not seem to favor the subordination of the economy to the spontaneous forces of the market. As liberal economist Kliamkin ruefully noted, they want efficiency as well as social justice, economic security, full employment, price stability, a guaranteed decent minimum for all, and strict limits to socio-economic differentiation. This requires a central economic power capable of submitting the market mechanism to the social goals decided collectively by the population.
If Gorbachev has concluded that this is an impossible combination, it is because he has refused to seriously envisage democratization of central economic power. As long as the center that plans and regulates in a “planned market economy” remains undemocratic – and this is still very much the case, despite the “national discussions” and the less-than-democratic renewal of the parliament — its directives and regulations will necessarily be perceived as oppressive and exploitative by the producers, and therefore will be resisted.
The only basis for overcoming this without abandoning traditional socialist values and the workers’ interests is to democratize the center, i.e. to create a self-management system at all levels. This is not in itself a magic solution to the problem of finding a workable balance between centralization and decentralization, especially when the starting point is the present Soviet reality. But democratization of economic management does create the social basis upon which a solution that corresponds to the workers’ interests is possible. This is the reform orientation advocated by Soviet socialists, including among others the New Socialists and the Marx-1st Platform in the CPSU, but it has been tacitly ruled out by the political leadership.(5) <#N5>
The regime’s treatment of the miners’ movement is an example of its policy of canalizing the workers’ desire for control of the economy into corporatist channels, while discouraging them from seeking collective solutions on a societal level. During the July 1989 strike, the government, aided by a strong media campaign, made great efforts to direct the miners’ social and economic demands toward enterprise autonomy, a demand that even one year later has brought them nothing concrete.(6) <#N6>
The same basic orientation can be seen in the government’s gradual abandonment of self-management in favor of “making workers real owners” through leasing, buyouts, and joint-stock companies. Economists point out that self-management would be an obstacle to the efficient transfer of capital and labor between enterprises and so undermine attempts to build a “full-blooded” market.(7) <#N7>
In March, it seemed that Gorbachev and his colleagues had decided to cut through the contradictions by delivering the economy to the market While the government declared its intention to regulate this market, one can be certain that this regulation was not planned with the interests of the working class majority of the population in mind. The main beneficiaries of a transition to such a system would be the renewed bureaucracy and the growing bourgeois-mafia stratum.
Apparently, the population sensed this too. The news of the impending reform, and the widespread rumors that it would be on the Polish model, significantly raised the level of social tension in a country where a new strike wave was widely expected. The draft laws being prepared in the Moscow woods were late in coming. After a joint meeting on April 18 of the Presidential Council and the Council of the Federation, largely symbolic advisory bodies, Gorbachev seemed to signal a retreat: “The shift to the regulated market must be worked out more carefully … We have to seriously think about firm social guarantees that would be understood by the people.”(8) <#N8>
Gorbachev’s press secretary explained that the President, warned he was risking “social upheaval of revolutionary proportions,” was slowing the pace of the reform while maintaining the strategic course to the “regulated market”. The July 1 deadline was pushed forward to January 1, 1991, using the rest of 1990 to stabilize the economy and create the legal framework for the reform.(9) <#N9> According to a senior Soviet editor, “they approached the edge, looked over and were horrified by what they saw … The anger and frustration are already there, and a few sparks could quickly light the proverbial ‘prairie fire’ in this revolutionary tinder.”(10) <#N10>
A week later, Gorbachev left on a much publicized trip to the Ural industrial region “to verify together with the toilers the course of the ship of state before the major choice that lies ahead.” Gorbachev told the workers that “your cries of alarm have reached us.” There would be no shock therapy, social programs would be put in place to compensate for the effects of price rises and unemployment, and the government “will consult the working class on all major elements of the reform.” But he also made clear that there would be no retreat from the reform itself: “Let’s think about how, when and what to do, to what to give priority, from what to begin. [… J But as concerns the strategic choice, the direction of our policy, no one has yet proposed anything else serious, fundamental.”(11) <#N11>
Gorbachev failed to mention who decided what was serious. Certainly, it is not the people. His own “strategic conception has changed a number Of times since the summer of 1985, when he assured the Central Committee that there would be no market reform. But there has /never been any public debate, let alone democratic decision, about strategic alternatives./
“We are the only country in the world with strong anti-market attitudes, except maybe Albania,” complained economist O. Latsis.(12) <#N12> What bothers the workers about the market reform and to what degree are their concerns justified?
The most immediate fear is undoubtedly a severe decline in living standards. The Soviet press has reported widely on East European reforms, where the freeing of prices and ending of state subsidies have brought hyperinflation, bankruptcies and a 3040% decline in living standards. According to Latsis, “the market system means free prices. But all we know, including even those who say they are by all means for the market, is to shout in unison: Don’t touch prices! It’s as if we’ve invented a rose without thorns. But a market is a rose with thorns.”
Of course, Gorbachev and Ryzhkov promise compensation. But economists are quick to show that the logic of the reform opposes full compensation: It would fuel inflation and weaken labor motivation. Judging by discussions in the press, a new consensus has formed among reformers to compensate only the least well-off, especially those on fixed incomes. Those with average and high incomes – that is, the majority of industrial workers – would have to fend for themselves. Summarizing a roundtable discussion on social policy, the Council of Ministers’ weekly commented: “We now evaluate the system more realistically [ … ] Three years ago, the starting point of discussions was that the reform would have to be introduced in such a way so that the population’s living standard would not suffer. But elementary calculation has shown that it is in no way possible to satisfy that demand.(13) <#N13>
N. Petrakov, Gorbachev’s personal economic advisor, complained that, unlike Poles, Soviets prefer empty shelves to high prices: They will accept queues and rationing but not free prices. At the end of 1988,40% of the respondents in a national survey were for rationing. By the start of 1990 this had risen to 58%. Commenting on these figures, the weekly of the co-operators’ (small business) movement, Kommersant, concluded that
“…/while you cannot fully identify supporters of rationing with opponents of a market economy, nevertheless, in the course of a year an additional 50 million more people moved further from understanding what means are necessary to change the situation in the country for the better. Opposition to the economic reform is growing, and in this case time is not working in its favor./”(14) <#N14>
Whether or not these people understand what is needed – or rather, what is not needed — to improve the situation is open to debate. But those who favor rationing in present conditions do so largely from considerations of social justice: High prices may keep the shelves stocked, but most goods will be inaccessible to average and low income citizens, as in Poland and Hungary today. Besides, rationing, in principle at least, allows for greater control over distribution (albeit greater abuse in an authoritarian context). As a citizen of Yakutsk explained: “Of course rationing is a disgraceful way to regulate social life … But it is in any case disgraceful when in such a rich country in peacetime we have empty shelves. I think that it is basically the corrupted part of society that does not want rationing.”(15) <#N15>
Another fear is unemployment Estimates of 40 million unemployed in the initial wave of the reform were freely bandied about in March – this in a work force of 125 million. Sociologist Bestuzhev-Lada warns that the “market has its own logic. The market means abolishing artificially created ‘superfluous’ jobs and cruel competition for the ‘non-superfluous’ ones that remain.” He notes that women will be the first to suffer and proposes paying them allocations and sending them home.(16) <#N16>
On a more fundamental level, this reform would put an end to job security and, with it, to the basic economic security that was probably the moor social gain of Soviet “socialism.” Moreover, many crucial benefits, including housing, seniority and pensions are linked to one’s place of work. The logic of the reform is opposed to economic security, and “radical” economists make clear that unemployment payments cannot be much higher than minimum subsistence. For “if you establish them at the level of the average wage, many will want to receive them rather than work and social parasitism will develop.”(17) <#N17>
Despite the lofty words about making workers “real owners” through “destatization,” what is in fact being proposed is a system that will continue to be based upon alienated labor. “Destatization” does not means socialization, but the creation of a private sector of small and medium enterprises and the transformation of large state enterprises into joint-stock companies. Will the latter be co-operatives, where stock owning is limited to workers of the enterprise who hold equal shares, or will unequal stockholding and sale of stocks to individuals outside the enterprise be permitted?
Again, the logic of this reform calls for full individual property rights. Many Soviet commentators openly see these collective forms of property only as a necessary psychological transition, give popular attitudes, to large-scale private enterprise.(18) <#N18> 0f course, this is sold as the creation of “people’s enterprises.” But how long would they remain the people’s in a “normally functioning” market, where concentration is inevitable? This means not only growing differences of income but of wealth also, i.e. the concentration of economic power in the hands of a minority increasingly able to determine the social and work conditions of the majority.
The Platform of the Union of Worker Collectives of the Kuzbass, adopted in October 1989, specifically rejects capitalist relations and exploitation.(19) <#N19> But the media are sparing no effort to convince workers to abandon egalitarian values. Izvetsiya’s weekly recently argued that the country needs rich people and that the poor are “losers” who simply cannot make the grade:
“/The dictatorship of the proletariat won, the resistance of the bourgeoisie was crushed, property was socialized, money lost its value, exploitation of man by man is absent Only one thing is missing — the benefits do not flow. A country is rich only when it has a lot of rich people. Nothing needs to be done Only don’t hinder those who want to get rich and who know how to do ii.”/(20) <#N20>
This is not the government’s official position. But liberals have the underlying logic of the government’s own reform orientation on their side. “The term ‘planned market’ does not reflect real intentions,” commented an economist. “It is half ideological tribute and half camouflage.(21) <#N21> Many senior Kremlin officials share this view. Genadii Gerasimov, senior spokesperson of Foreign Ministry, dismissed even the “regulated market economy” as a “self-contradiction.”(22) <#N22>
By the end of May, a “perfected” version of the reform was ready. It provided for popular consul-on on all its basic elements, particularly those affecting prices. At a press conference, Vice Prime Minister Abalkin spoke of a referendum.
The new program was indeed less “radical” than at had been rumored a few weeks before. This undoubtedly reflected direct and anticipated popular opposition. Retail prices would rise on average 43%: bread prices would triple on July 1, and from January 1, 1991 milk and sugar prices would rise 200%, meat 130%, and non-food consumer goods 30-50%. But most retail prices would not be freed: 60% would continue to be fixed and would be allowed to vary within fixed limits. There would be compensation for all income groups: a 15% for the low and moderately paid and a 40 ruble monthly rise for all others. According to the government, this would return to the population 70% of the income from the price rise. The other 30% would be indexed from purchases of luxury goods. Wages would be indexed to the cost of living.
Ryzhkov explicitly rejected liberal calls to legitimate unemployment and reaffirmed the government’s commitment to the constitutional right to a job. It was estimated that there would be only 10 million unemployed by 1992, not the 40 million projected under “shock therapy,” and the government was contemplating expanding public works. At the same time, enterprises would be given more autonomy under this reform, with only 40% of production covered by state orders in 1991.(23) <#N23>
Ryzhkov was vague about privatization and the new forms of ownership, except that they would be of the “most varied sort.” But it is known that detailed measures on these matters have already been prepared. He also said nothing about labor relations under these new forms of enterprise. At present, the labor code, as effect as it is, is not being applied in the new private sector. He did complain, however, about the unjustified rise in incomes, about strikes and threats to strike, and fact that the Law on the Resolution of Labor Conflicts was not being respected.
This program was obviously much less than the “radicals” wanted. Ryzhkov acknowledged the logic of their positions on purely economic grounds, even as he rejected them for political reasons. Nonetheless, this gram was unacceptable to the majority of the population, which met it with almost universal hostility, panic buying and the threat of strikes. This caused the trade-union leadership to step back from its initial endorsement and to demand a shift to the market that would not “so suddenly hit the pockets of millions of people.” The leadership also reiterated its call for a referendum on the reform.(24) <#N24>
Popular opposition to the new program was directed above all at the proposed price rises (which is not to say workers do not support higher prices for their own production). This opposition does not, as government spokespeople and liberals contend, necessarily reflect an irrational unwillingness to make small immediate sacrifices for larger long-term benefits. At the most basic level, it is a healthy reaction to the undemocratic nature of the reform process and a means of asserting some control over it After the Supreme Soviet decided to put off a decision on the reform package until the fall, Abalkin complained that “you cannot keep a leader on a short leash and still expect success from him.”(25) <#N25> But the workers’ historical experience tells them that reforms not subject to democratic control inevitably fail and that the workers are made to bear the costs.
The following are excerpts from telegrams from worker collectives that poured into the Russian trade-union center: “We demand a referendum and the publication of alternative reform conceptions.” “People do not know what a regulated market economy is. There is little information. The toilers of our enterprise demand a national discussion of this question.” “The immediate publication of alternative, less painful alternatives for the transition to the regulated market is necessary.” “We must put an end, once and for all, to secrecy and incomplete information in discussing questions that are vital to people.”(26) <#N26>
The liberals’ reaction to the revised program was also very hostile, though not quite for the same reasons. The members of the Interregional Group in the Supreme Soviet called for a vote of non-confidence, arguing that these measures merely inflicted pain without bringing the market any nearer These criticisms were less than candid. On the one hand, the liberals publicly deplored the suffering this program would cause. But on the other, they criticized it for not being sufficiently radical.
This contradiction did not bother Yeltsin, newly elected president of the Russian republic, who declared that he would have it both ways: a more radical market reform that would cause no suffering. He gave no details on how this could be achieved.(27) <#N27>
Others chose not to ignore this contradiction. Academician O. Bogomolov expressed great concern for the injustice and pain the government’s program would inflict. But he was adamant that the transition required a freeing of prices and he opposed compensation and indexation of wages. In a market reform, he argued, higher prices would be acceptable (to whom?) if the losses could be compensated by overtime or by engaging in private enterprise. The government’s program does not lead to “the kind of market that exists in the [capitalist?] world, in which one could place some hope and for the sake of whose appearance one would be willing to make such colossal efforts and pay a high price.”(28) <#N28>
The liberals are not squeamish about inflicting pain, as long as it leads to a “real” market. In fact, they are quite prepared to do this even if the people themselves do not want such medicine. Nowhere is this dearer than in the liberals’ rejection of a referendum on the reform. Presidential advisor Petrakov ridiculed the very idea. What would the question be? If you ask the people whether prices should be raised, they will obviously say no. “If the question is whether to introduce a market system or not, then you can’t ask about things they don’t know.” Petrakov, however, does not want to act through the parliament either; he wants the government to use presidential decrees. (He also opposes compensation, preferring to open soup kitchens.)(29) <#N29>
Petrakov’s statement illustrates the real dependence of the liberals on the apparatus, which alone could carry out such a reform against popular will.
In the end, the Supreme Soviet endorsed the general direction of the government’s reform but put off any decision on a price rise until September. By that time, the government is to work out detailed measures for the creation of a market economy. In response to the popular outcry for a discussion of alternative programs, a commission on alternatives was set up, consisting entirely of liberaIs.(30) <#N30> Government decrees to implemental-ready adopted laws on property, land, and joint-stock companies were to go into effect July 1, 1990.
As is to be expected, the press and official spokespeople are presenting this latest turn as yet another victory for the regime’s reform concept. We are told that the debate in the Supreme Soviet showed, at the least, that almost everyone understands that there is no alternative to the “regulated market.” Yet, Gorbachev told a recent Central Committee conference that the Soviet consciousness was “absolutely non-market.”(31) <#N31> This would help to explain why the government has backtracked on its proposal of a referendum.
On a basic, “instinctive” level, most workers appear opposed to the government’s reform orientation. /Nonetheless one should be wary of concluding that this opposition will necessarily translate itself in to political action for a socialist alternative./ The workers at present are strong enough to block the introduction of a coherent market reform. But without a positive alternative program, the effect of this opposition will be the exacerbation of the crisis, which could ultimately play into the hand of liberal “democratic” saviors and their seemingly coherent, if painful, program. This is the Polish experience.
Socialist forces are stronger in the Soviet Union than in Eastern Europe and they are finally organizing, but they are nevertheless weak relative to the liberals, who control most of the media and offer a simple program whose validity is “proven” by merely citing the high living standards of developed capitalist countries and by the fact that “the whole world embraces the market.” The socialists, without any existing model to point to, can be painted as utopian “experimenters.” In the existing ideological atmosphere, anyone defending central planning, however democratic, risks being tarred as a conservative. It may be that the workers will have to experience a more “full blooded” market reform before the socialists are able to become a genuine mass force in Soviet society.
I. Nedelya, No. 17, 1990,
back to text <#R3>
2. New York Times, March 20 and May 14, 1990. back to text <#R2>
3. Pravda, April 19, 1990. back to text <#R3>
4. Rabochaya tribuna, March 16, 1990; Trud, March 31 and May 15, 1990; Komsomol’ skaya Pravda, May 1, 1990. back to text <#R4>
5. For a fuller presentation of the socialists’ position, see D. Mandel, “A Market Without Thorns,” in Studies in Political Economy (Ottawa), forthcoming Fall 1990. back to text <#R5>
6. See D. Mandel, “Rebirth of the Soviet Labor Movement: the Coalminers’ Strike of July t989,” Politics and Society, forthcoming Fall 1989. back to text <#R6>
7. R.W. Davies, “Gorbachev’s Socialism in Historical Perspective, New Left Review, No. 179, 1990, 22-3. Of course, as the experience, of Yugoslavia (where self-management is now also being abandoned) shows, self-management limited to the enterprise — and this was the Soviet government’s orientation — is no panacea. But as long as the enterprise remains national property, the door is at least open for combining enterprise self-management with self-management on the regional and national levels. On the other hand, privatization, even if it initially takes collective form, would rule this out. back to text <#R7>
8. Trud, April 20, 1990. back to text <#R8>
9. Rabochaya tribuna, April 24, 1990. back to text <#R9>
10. Gazette (Montreal) April 24, 1990. back to text <#R10>
11. Trud, April 27, 1990; New York Times, May 14, 1990. back to text <#R11>
12. Rabochaya tribuna, March 27, 1990. back to text <#R12>
13. Pravitel’stvennyi vestnik, No. 18, 1990, 6. back to text <#R13>
14. Cited in Komsomol’skaya pravda, May 1, 1990. back to text <#R14>
15. Rabochaya tribuna, April 18, 1990. back to text <#R15>
16. Nedelya, No. 13, 1990, 17. back to text <#R16>
17. B. Raizberg, “Trudnosti na kotorye nado reshit’sya, Nedelya, No. 30, 1990, 5. back to text <#R17>
18. See, for example, S. Shpil’ko, “Eta strashnaya chastnaya chastnaya sobstvennost,” Nedelya, No. 52, 1990 and P. Bunich in Trud, December 12,1990. back to text <#R18>
19. See Mandel, “A Market Without Thorns.” back to text <#R19>
20. Nedelya, No. 17, 1990, 3. back to text <#R20>
21. Raizberg, Nedelya. back to text <#R21>
22. New York Times, May 26, 1990, A-4. back to text <#R22>
23. Trud, May 26, 1990. back to text <#R23>
24. Trud, June 16, 1990. back to text <#R24>
25. Rabochaya tribuna, June 19, 1990. back to text <#R25>
26. Trud, June 16, 1990. back to text <#R26>
27. Manchester Guardian Weekly, June 14, 1990, 9. back to text <#R27>
28. Moskovskie novasti, No. 2Z, 1990, 4. back to text <#R28>
29. New York Times, June 10, 1990. back to text <#R29>
30. Pravitel’stvennyi vestnik, No. 28, 1990, 4. back to text <#R30>
31. Pravitel’stvennyi vestnik, No. 25, 1990, 1. back to text <#R31>
September-October 1990, ATC 28