No market for reforms
Tracey Brown reports from Russia, where international support for the
status quo has helped make 'economic transition' the national joke
The collapse of the Russian currency and financial markets has led to
talk of a world financial meltdown on the scale of 1929. The European and
US press is full of concern that Russia will abandon market reform, and
the planes to Russia are packed with jittery businessmen making frantic
reports to head office.
The problems in Russia are real enough. The government is completely
out of cash and unable to call on the banks to bail it out one more time.
Even before the current crisis the Moscow administration announced that
wages in many government sectors would be cut by 40 per cent. Now even
this looks optimistic; few have been paid at all for three months. The
marginal improvement on tax collection has done little to alleviate large-scale
These problems, however, have been constant features of Russian life
for five years. The crisis has been a long time in the making. So why now?
We are told that the 'international community' is now forcing Russia
to face up to its predicament. Tony Blair has been talking tough on the
telephone to Bill Clinton and Helmut Kohl. There will be no more cash.
Bill agreed and told it straight to elite economics students in Moscow.
As the Russkiyi Telegraf reported on the Clinton visit, 'It would have
been great to read out some sort of large-scale plan to save Russia. But
there will not be one'.
Clinton's 'bitter pill' presentation to Yeltsin-the road to reform
is hard but you must stick to it-has been hailed in the British and US
press as the moment of truth. Russia has lagged behind schedule. Its 'gangster
capitalism' has meant too many payouts and its corpulent bureaucracy has
held up progress in the transition to the market.
In some ways this is a moment of truth. But the bitter pill is one that
Clinton, Blair and Kohl have to swallow. Russia is in this mess precisely
because of all the frantic, external attempts to stabilise the heart of
the former Soviet Union. The billions of dollars pumped into Russia over
the past five years have never made economic sense. They have never been
seriously linked to any 'reform programme'.
Since the early 1990s every international discussion about Russia's
progress has been shaped by exaggerated fears about communist comebacks,
Nazi takeovers and general collapse. From the beginning of marketisation
Western leaders hastily committed themselves to Yeltsin in an attempt to
consolidate a stable leadership. Their rather excessive anxiety-fearing
the region would be plunged into turmoil, spilling over into Western Europe
and the world economy-led them to fixate on stability and pump in cash
to shore up the existing Russian leadership.
Having once decided that Yeltsin was their man, foreign leaders have
been unable to disentangle themselves for fear that any alternative would
be destabilising. And of course the Yeltsin regime has become adept at
playing to these fears. During the presidential elections in 1996, Russia
received massive foreign cash injections in a bid to guarantee that Yeltsin
won. The German loan of DM4 billion, just prior to election day, was personally
overseen by chancellor Kohl. As the major regional power, Germany has been
more frenzied than Britain or the USA in its attempts to consolidate and
stabilise Russia, with the result that current figures show Germany holding
nearly $30 billion of Russian debts (almost 40 per cent of the total).
The International Monetary Fund (IMF) has also timed the release of
loan payments to relieve pressure on Yeltsin at key moments. In July 1997
it pledged a further $22 billion, insisting that a proper repayment plan
must emerge from Russia. The following December, despite the IMF's pleas
that the Russian administration improve tax collection before further payments,
it relented again. As Yeltsin tried to push his budget through the Duma,
four major banks made another emergency loan to avert a crisis. The real
problem for the IMF seems to be its inability to restrain its own payments.
The slightest hint that the stodgy status quo in Moscow might be disturbed
sends Western bankers and premiers running for their cheque books.
All kinds of comparisons have been made between Russia's situation and
other crises, past and present, such as Britain's forced withdrawal from
the ERM or the East Asian stock market contraction. These are quite inappropriate,
and have only become popular in the Western press because nobody knows
what the Russian path to reform is supposed to be.
From the beginning of Russia's marketisation, foreign ministers in the
developed nations have seen cause for nervousness rather than opportunity.
Since the early days of perestroika in the eighties, the international
discussion about Russia has fixated on the more anxious issues of central
stability, firing the imagination with the threats of the past and new dangers
of extremism. Despite constantly barracking Russia to develop a free market,
leaders in Germany, Britain, Japan and the USA have prioritised political
stability. They themselves have shown little confidence in the market's
ability to transform the former Soviet Union. So much so that anybody studying
the past five years of Western intervention in Russia could be forgiven
for thinking that market-oriented reforms mean shoring up the state and
creating a preoccupation with order; which sounds not dissimilar to the
approach of the old Stalinist regime.
Russia's own concerns today mirror the fearful preoccupations of the
international elites, putting political stability before economic reform.
Its decadent economy reflects the speculative character of world markets.
Much of the investment that has occurred has been financial speculation.
As a report by the Russian-European Centre for Economic Policy noted last
year, the expansion of Moscow's new stock exchange has meant little to
the rest of the economy.
All of the warnings about reverting to the past and bringing back old
economic solutions are missing the source of the problem: Russia has now
consolidated its past in the new conditions.
There have been many changes in Russia's economic life, from the removal
of price and trade controls to privatisation and the creation of a stock
market. But because of the Western insistence on keeping things stable,
there has been little urgency behind any programme to restructure the economy
more fundamentally. This leaves few ways out of the current situation.
The government may even print money again to pay its wages debts, which
will be hailed as yet further evidence that Russia is in danger of reverting
to the past. It would be nearer the truth to say that they will be forced
to print money now because the pressure to restructure the taxation system
has for years been alleviated by fear-fuelled Western aid and state borrowing.
The discussion about Russia descending into civil chaos, or even a 'new
revolution', makes no sense now. The only political conflict is a narrow
jockeying for power within the elite. Even Russians who were quite opinionated
when I met them during earlier elections feel that nothing much is at stake
in the contest to be prime minister.
It struck me almost immediately on my arrival that Russians were treating
this 'crisis' much like every other pronouncement of crisis in the past
few years-meeting it with black humour and a lot of shoulder shrugging.
'I would have a BMW but I'm in transition', quipped my lift from Kazan
airport when I inquired why he hadn't managed to sell his car. 'Transition'
(perekhod) is now the butt of irony in Russia, long replacing perestroika
Russia's 'transition' to a free market has in reality been a period
of consolidation of the old bureaucracy in its new position as gatekeepers
of business. The past few years have seen the growth of financial speculation
and the powerful Moscow banks, amid the decay and promiscuous auction of
productive assets. The irony is that none of this would have been possible
without the constant injections of politically motivated cash made by Western
governments and banks. Because of their fantasies about Russia degenerating
into uncontrollable chaos-fantasies which say more about insecurity in
the West than the real situation in the East-they have sustained an expanded,
degenerate administration that has helped bring the country to the brink
Tracey Brown is a sociologist working in Russian social research
'Sell, sell, sell'
Reproduced from LM issue 114, October 1998