A history of Russia
Page 84
Economic reform (later, in its more radical, system-transforming, privatizing form usually termed "transition") imposed an agenda of economic measures which - not at once but with time, and not always in the same order of urgency - came to consist of the following main components. (1) At this point most urgently, stopping the rapid downward slide of the "real" economy. (2) Stabilization: moving to a condition in which - in starkest contrast to the current situation - domestic money is a functioning common denominator of value and an effective medium of exchange, and prices (and foreign exchange rates and interest rates) are market-clearing, reasonably stable, and sustainable.
By 1990-91 stabilization became the foremost issue, overshadowing all the others on the agenda. (3) Marketization of the command economy, a task of no mean order. (4) Legalization of the widest range of private business activity, plus privatization of hitherto state-owned businesses. (5) Resolving the explosive issue of new formulas for union (federal) to republic relations, inter-republic relations, secession or extreme autonomy of some of the republics (now usually calling themselves sovereign states), etc. (6) Integration of the USSR (or what is left of it) and of its individual constituent parts into the world economy. (7) A social safety net adequate to the economic dislocations and the political upheavals that can be fairly expected. (8) Fiscal and banking structures corresponding to the solutions taken under (l)-(7). And of course drafting and enacting a vast amount of legislation. A more daunting agenda would be hard to imagine even for a country not riven by nearly every kind of strife and feud as is the USSR.
Now, in mid-1991, important developments are moving at once on several planes and in contradictory ways. First and foremost, the economy's downward slide has accelerated markedly. Above, I used the word "catastrophic" in this regard; it is not overdrawn. For the first four months of this year GNP fell by over 9 percent in relation to the corresponding period the year before (but see the remarks regarding Soviet statistics immediately below). The record for the whole year may well be substantially worse, as is generally believed likely by well-informed Soviet economists with whom I met in Moscow and in the West during the past 30 days. Hence, I find myself in broad agreement with the "grim" conclusions in the paper entitled "Beyond Perestroyka: The Soviet
Economy in Crisis" (16 May 1991, presented by the CIA and the DIA to the Joint Economic Committee of the U.S. Congress). To wit:
There is no doubt that 1991 will be a worse year for the Soviet economy than 1990, and it is likely to be radically worse… [If the standoff between the center and the republics continues], real gross national product likely would decline 10 to 15 percent and the annual inflation rate could easily exceed 100 percent. (p. iv)
The last may have already happened, largely by virtue of the sharp and mostly administrative increases in official retail prices on 2 April 1991. (It seems that the producers and ministries "ran away" with the prices and raised them significantly above permitted levels.) The monetary "compensation" for the April retial price increase that is being paid to the public, differentiated by social groups, offsets perhaps about half of the actual price rise. Further price increases can be expected before the end of this year.
In the event that the standoff between the center and the republics moderates, the results for 1991 could be less "grim" - but hardly very much less.
This said, in truth it is extremely difficult to establish with any numerical exactness just what is currently happening in the Soviet economy. Although, under its current leadership, the official statistical establishment is trying to improve the quality and comparability of its data, as well as increase the volume of statistical publication, its efforts are thwarted by the fractious realities of the moment. Great ranges of multiple prices for individual goods in a given place and time; physical shortages of goods; wide use of barter (for lack of faith in money); corruption, ubiquitous black markets, evasion of taxes and of administrative regulations; the fragmentation of the country into scores if not hundreds of what amounts to semi-independent principalities (due to erosion of central control), each with its own rationing norms, administrative rules, trade barriers, price controls, etc. - combine to make the statistician's lot not a happy one in the USSR. And yet, the broad trends in production and consumption are probably what we think they are; in other words, close to catastrophic.
No less important is the picture in regard to the distribution of personal income and wealth. Here, our data are even more opaque; yet it is difficult to escape the impression that 1991 has hit a new high (or low) in terms of the differentiation of personal income and wealth. The losers are that large portion of the population whose livelihood depends chiefly on official sources of income (wages, salaries, pensions, etc.), which have generally fallen in real terms this year; and/or whose informal incomes have risen less than inflation; and/or those with few lucrative personal connections. But many others have gained considerably riding the crest of the many new opportunities both for profitable production and commerce and for quick arbitrage and black-market dealing - by dint of growing shortages and soaring prices, substantial liberalization of private business activity in various new legal forms, and the chaos itself.
Thanks to such rising private opportunities in the midst of general confusion and chaos in the economy, the Soviet Union may today present some of the
best prospects for quick personal enrichment. Nor need one keep one's wealth in rubles; there are innumerable ways of various degrees of legality or illegality for transferring private money abroad.
But note that until money and prices are stabilized, the federal issue is resolved, and the legal underpinnings of private business are further secured, private money will continue to shun long-term, illiquid investment and to seek the quick and easy deals. We must not be misled by stories of successful new Soviet entrepreneurs. Few of them are long-term investors.
Needless to say, large personal gain frequently derives from de jure or de facto "spontaneous appropriation" at the state's expense. And since those closest to the state's assets, the traditional elite (including the old management), obviously have the best possibilities of appropriating it, the phenomenon of the "propriation of the nomenklatura" has acquired if not mass dimensions then at least mass attention (as in Eastern Europe) with definite political implications.
There may be nothing wrong with the propriation of the nomenklatura or the use of "dirty money" to buy the state's assets - and indeed this may be the quickest road to privatization - but is this the kind of privatization we have in mind when we list the conditions for Western assistance, such as marketization and privatization of the economy and democratization of the polity? Do we want to see a market economy of sorts ran by cartels of the same old communist bosses and the same lords of corruption and organized crime in a new guise?
If privatization by quick and dubious appropriation be ruled out, how many decades will it take to marketize and privatize the Soviet economy? In the meantime, will democracy develop and survive? Some other economic arrangement would have to be in place. Would it be largely the old command system - thus foreclosing hope of both economic progress and democratic revival? Or will there be a protracted interim phase of state-owned firms operating in a market context, i.e. a socialist market economy (to use an old term)? Indeed, for the reasons just suggested, and despite its disadvantages, the latter may yet have a lease on life in the USSR and in Eastern Europe as an alternative to something less attractive.
What will the USSR be like five years hence? Indeed, what will it be like five months hence? In 1986 who could have foreseen the USSR of 1991, the world of 1991? I suspect that it will be more decomposed (in various ways) than democratic, with an economy still as much administered as marketized, an economy still more chaotic than capitalistic, with great private-profit opportunities precisely for these reasons rather than despite them.
The reasons are that the economic problems are too deep, the political and national problems too acute, the legacy of the old days
too tenacious. The process of privatization of state assets will be too slow (if not too threatening, in the way described above). And most of all, after everything else is set aright, the physical capital stock will have to be rebuilt almost from scratch. This rebuilding and re-equipping, its technical upgrading, and most of all, its re-orientation toward new social objectives and toward the outside world, will be protracted and enormously costly. As will be the management of the accumulated environmental destruction and toxic contamination.
The country will remain poor for a long time; and it will be in need of an expensive social safety net to avert or contain political disasters. Consequently, for some time the role of the state (or most successor states) will remain large, the tax burden heavy, and the rate of investment (private and public) in GNP will continue to be high. The day of a Soviet Thatcher may yet come, but not very soon. The United States should have no illusions on these scores.
It was in this situation of economic, social, and political flux that it was announced on August 19, 1991, that Gorbachev had relinquished, for reasons of health, his high government and Party posts. The rightist coup appeared to be, at least initially, successful. Yet it collapsed within three days because of the popular opposition led by Yeltsin, poor organization, and, apparently, the refusal of key military and police units to execute the orders of the leaders of the coup. The results of the collapse of the coup included the return of Gorbachev, a great enhancement of Yeltsin's position, the arrest of the leaders of the coup, and the discrediting of many more government, Party, and military leaders - indeed of the Party and the police themselves - with Gorbachev leaving the Party and Party activities being "suspended" pending investigation. Also, the process of the dissolution of the U.S.S.R. gathered great momentum. Lithuania, Latvia, and Estonia declared immediate independence, which received international and even Soviet recognition. Most other republics, including Ukraine, also proclaimed independence, although, on the other hand, plans and negotiations continued for a new confederation or perhaps commonwealth, if not an effective federation. In fact, after a negative vote and subsequent modifications, the All-Union Congress of People's Deputies approved on September 6 Gorbachev's "transitional" plan of governing the Soviet Union, which gave more power and authority to the republics, but still provided for some central institutions, including the State Council to deal with foreign affairs, military matters, law enforcement, and security.
On December 25, 1991, Gorbachev resigned. All the Union republics declared their independence, although most of them indicated their willingness to form an undefined loose association which came to be known as the Commonwealth of Independent States. Boris Yeltsin stood out as the central figure in a new and highly unsettled situation.
Concluding Remarks
The disappearance of the Soviet Union proved to be at least as unexpected and sudden as its appearance, and as controversial. Bitterly hated as well as enthusiastically admired during three-quarters of a century of its existence, the U.S.S.R. seemed to receive a universal recognition of its might and its durability after the victory over Germany in the Second World War and its attaining the position of one of only two superpowers in the world. Worshipful communists and related
elements aside, numerous more judicious observers interpreted Soviet history in terms of continuity and stabilization bringing it closer to Western nations whether after the inauguration of the N.E.P., the cultural "great retreat" of the 1930's, the gigantic war itself and the victory over Germany and Japan, the death of Stalin, or the ascendancy of Khrushchev. Although none of these varied developments proved to be a decisive turning point, it was within that framework that many in the West welcomed perestroika and glasnost: The Soviet Union would join democratic states as a major partner, perhaps even with much to offer. Very few expected total unraveling and collapse.
Yet some did. In addition to the unreconciled Whites and other dedicated enemies, who, however, rarely engaged in academic analysis, the most far-reaching critical school or schools arose among the economists. As early as the first years of the Soviet regime, certain economists pointed to the basic flaws of the Soviet economic system, and that initial critique was continued by such specialists as Janos Kornai who worked within the system in Hungary and Gregory Grossman and Vladimir Treml, who studied the second, unofficial, Soviet economy from the vantage point of American Universities. Parts of Grossman's critique can be read in his testimony above. Indeed it became a commonplace to claim that whereas the Soviet Union did well in terms of a traditional industrialization based on coal and iron, it could not keep up with the West in cybernetics, computers, and in general the new communication technology. As Manuel Castells and Emma Kiselyova formulated it:
Thus, at the core of the technological crisis of the Soviet Union lies the fundamental logic of the statist system: the overwhelming priority given to military power; the political-ideological control of information by the state; the bureaucratic principles of the centrally planned economy; the isolation from the rest of the world; and the inability to modernize technologically some segments of the economy and society without modifying the whole in which such elements interact with each other.
And modern technology made isolation always more difficult, and Soviet citizens better acquainted with the rest of the world. The armed race continued to cost the Soviet Union twice the percentage of its much smaller productive capacity than in the case of the United States. Grossman pointed out repeatedly that only a massive export of oil and natural gas kept the Soviet economy for fifteen years, 1970-1985, from sliding downhill rather than being merely in a kind of cul-de-sac. Behind the strange course of the Soviet economy, as of the Soviet policies in general, was the Utopian Marxist vision perhaps analyzed best in Andrzej Walicki's brilliant Marxism and the Leap to the Kingdom of Freedom: The Rise and Fall of the Communist Utopia.
The mistakes were many. Possibly the worst was the inability through the prism of ideology to see reality. Nationalism was misjudged until it destroyed the Soviet Union. Indeed Gorbachev apparently believed that he could go to Vilnius
and persuade the Lithuanians not to secede. But the understanding of Russia itself was not much better, and Russian interests and Russian nationalism played their major role in the abolition of the U.S.S.R. As to Gorbachev's contribution, it was extremely important from any point of view, although it was not what Gorbachev had planned. It was most impressive for those who believe in the great power of totalitarianism and the inability of a fragmented society to challenge it successfully. If so, a totalitarian system can unravel only from the top down. In the Soviet Union it did. In any case, there glasnost and other measures meant to strengthen the system led to a complete collapse. To cite, as a counterpoint to Derzhavin's, Heraclites' even more famous statement: "?? ????? ???" ("Everything flows").
Part VII: RUSSIAN FEDERATION
XLIII
YELTSIN'S RUSSIA, 1991-1999
Much has been written about my visit to the United States both in the United States themselves and in our country; therefore, there seems to be no need to dwell extensively on its main results. There were many interesting meetings, beginning with President Bush and ending with simple Americans in city streets. I shall appeal banal, for sure, but still I was most impressed precisely by the simple people, by Americans who exude a remarkable optimism, a faith in themselves and their country. Although, of course, there were also other shocks, for instance, from a supermarket… When I saw all those shelves with hundreds, with thousands of little cans, little boxes, and so on, and so forth, I was for the first time struck with an all-embracing pain for us, for our country. To bring the richest nation to such destitution… It is terrifying.
Yeltsin (breaks in the original)*
As already indicated, after Gorbachev's resignation on the twenty-fifth of December 1991 and the collapse of the Soviet Union, Yeltsin remained as the undisputed master of the Kremlin. Engineer by profession and Party administrator by occupation, Boris Nikolaevic
h Yeltsin rose by dint of hard and driving work to the top of Party ranks during the last years of the Soviet regime. Party secretary and thus "boss" of the very important Sverdlovsk region for a number of years, he was transferred to head the Moscow Party organization. Yet because of his criticism of Gorbachev and of the slowness of the ongoing reform, he was dismissed from that position at a meeting of November 11, 1987, which - judging by his writings - remained with him as a nightmare ever since. Blocked in the party, from which he resigned in July 1990, Yeltsin turned to the newly possible independent career in the Russian republic, which culminated in his becoming the first President of Russia after a sweeping electoral victory on June 12, 1991, and thus its most important figure to this day.
Yeltsin's career, as well as his pronouncements and his writings (especially the two autobiographical books he produced with his friend the young journalist Valentin Yumashev), depict an extremely high-strung individual, a courageous fighter, and a very poor loser, on occasion volatile and unpredictable. This frequent and at times very serious illnesses and heavy drinking further complicate evaluations of his actions and aims. Still, it is worth remembering that Yeltsin surged past Gorbachev on the Left, not on the Right, i.e., favoring the breakup