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Sea changes on the Caspian coast

One year on from the coup that led to its collapse, what's changed in the former Soviet Union? Rob Matthews reports from Baku in Azerbaijan

As Boris Yeltsin's empty-handed departure from the G7 summit in July confirmed, the former Soviet republics tend to get short shrift in the West. Until things really start to change, say the Western capitalist leaders, no cash will be forthcoming to ease the transition to the market.

Walking round the Azerbaijani capital, Baku, it does indeed seem as if nothing has changed. Everything looks pretty much the same as it always did. But that impression is only surface deep. Azerbaijan may not have been sold off to the highest bidder, but, behind the scenes, it's all change on the Caspian coast.

Most production still happens in state-owned enterprises, but that doesn't alter the fact that at least 50 per cent of Baku's industrial capacity has been shut down. The state may still control the price of bread but it is, nonetheless, 10 times more expensive than it was six months ago. The big shops may still be in state hands, but they supply less and less of the population's needs. Roubles may still be legal tender, but there is a shortage of cash which means some state employees have not been paid for months.

Back in business

All the same, the factories still belong to the state, so you can't have capitalism...or can you? In Baku they've found a way. The Montin plant produces equipment for oil extraction. The state still owns it and pays all the bills, but private enterprise is back in business inside the plant. A small enterprise has been set up by some managers, and has taken over production of the most modern component produced by Montin: valves which are cast in stainless steel and suitable for production in the giant Tengiz oilfield in neighbouring Kazakhstan. The new enterprise intends to produce about 30 000 units, worth several million roubles.

The new workforce is made up of skilled workers who already work for Montin. The machinery they use belongs to the plant and so does the electricity. The small enterprise's taxable income will be close to zero, thanks to the accounting methods developed by Montin, which mean that the new firm's existence will be concealed in Montin's financial returns. Montin is using its contacts to supply raw materials to the small enterprise. In return, the small enterprise will turn over half of its production to Montin. The rest it will probably sell through one of the many new commodity exchanges which now operate across the former Soviet Union.

Inside out

From outside the Montin plant no changes are visible, but inside everything has been transformed. The same thing has happened at the radio and computer plants, which are still officially state enterprises, but where private enterprise has taken over production, and changed the product. Since they were military plants, their inputs were fairly sophisticated, and came from outside of Azerbaijan, normally from Russia. Now those components are unavailable or unaffordable, so the radio plant is turning out egg incubators instead of military hardware.

Other private enterprises are more independent. I visited a brick-making plant which had been set up by three academics. They were paying three workers by the brick, made by hand with a crude press. All their raw materials are supplied by state enterprises, mostly at fairly low fixed prices. Their biggest customers are also state-owned.

As in industry, so in agriculture. In rural Azerbaijan the land still belongs to the state, and produce from collective farms is still centralised to Baku. In the past, some of it disappeared on to the black market; now most of it disappears. So what's changed? In the past, shops were stocked with food produced in Azerbaijan because that's what the plan demanded. Now the shops are empty because the plan has been abolished and farm managers are using their control over resources to exploit the demand for food in areas outside Azerbaijan where prices are higher. Meat from Azerbaijan is more likely to be on sale in Moscow than in Baku.

Public and private

Demands for the land to be handed out to the rural population have so far gone unanswered. In the long run there seems little doubt that it will be handed out. But just as the best plants in industry have a head start in making it under the market, those state farms which pulled the right strings to get resources or produced valuable crops like tobacco are more likely to survive than new private entrepreneurs.

Although the tiny private agricultural sector was always far more productive than the state sector, it did well only because it got its inputs from the state on the cheap. Now that the state no longer funds inefficient farms, the private farmers will find the going tougher. The bigger, more efficient former state farms, with access to large stocks of machinery and big tracts of land, are likely to mop up.

What about the people of Azerbaijan? People in Baku still look the same as they did before the Soviet Union collapsed. But if the collapse of the state sector continues as it is, it may not be all that long before some people start to look a bit scruffier. Families with several incomes have so far coped with rising prices, although some have stopped buying clothes so that they can continue eating normally.

Bombay beggars

Many people who live in self-built areas of Baku, named Shanghai or Bombay after third world shanty towns, used to survive on the unofficial incomes available in the shadier sections of the old system. That was all very well while it was still running. But now hunger is rife in Baku and women with children are begging in subways.

This all points to the growing importance of what used to be subsidiary incomes. The old men tending their six sheep in a Baku housing complex have always depended on the extra income to subsidise their derisory pensions. Now a monthly pension will buy less than a kilo of mutton and owning a sheep has become a life and death matter for some elderly Baku residents.

In the past, food grown on your private plot was a bonus. It meant you had some vegetables or fruit, which the state system couldn't provide. Now food grown on the same plot means you have something to sell on a street corner. Workers often used to double their incomes by growing fruit and veg for sale. If industry continues to close down it may be the only income left for too many in Baku.

Earning nine Kopeks (about 0.045 pence) per hand-made brick, 17-year old Misha will soon be a millionaire
Reproduced from Living Marxism issue 46, August 1992

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