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
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.
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.
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