SocialismToday           Socialist Party magazine

Socialism Today 133 - November 2009

From perestroika to capitalist restoration

Gorbachev set out in 1985 to ‘restructure’ the floundering Stalinist state and economy, aiming to avert a terminal crisis and head off movements from below. Within six years, the Soviet Union had collapsed and the planned economy was cleared away by Yeltsin’s sweeping privatisation measures. Mass workers’ struggles erupted, but the winners were a new class of gangster capitalists. ROB JONES explains the processes.

BETWEEN 1982 AND 1985, three general secretaries of the Communist Party of the Soviet Union (CPSU), Leonid Brezhnev, Yuri Andropov and Konstantin Chernenko, died in quick succession.

Mikhail Gorbachev was elected to succeed them. Just six years later, the Soviet Union collapsed, leaving a wreckage of 15 ‘independent’ republics, each ravaged by economic catastrophe in which GDP dropped by over 50%. Russia, Moldova and Georgia experienced serious conflicts with their national minorities. Azerbaijan and Armenia went to war against each other. Tajikistan spent most of the 1990s in a state of open civil war. Only the three small Baltic states have managed to establish some form of stable democracy, but they are now bearing the worst of the world economic crisis. Russia and Belarus are far from democratic. The states of Central Asian, in particular Turkmenistan and Uzbekistan, are feudal authoritarian fiefdoms.

The selection of Gorbachev marked the victory within the Soviet ruling bureaucracy of a layer of reformers who understood that changes needed to be made if the elite were to maintain power. Andropov was from this reform wing although he was a henchman of the ruling elite. As ambassador to Hungary in 1956, he saw how angry workers strung up the hated secret police from lampposts and realised that Soviet rule was just as fragile. Returning to Moscow as head of the KGB, he fiercely advocated military measures against Czechoslovakia’s Prague Spring reformers in 1968. He suppressed the dissident movement and fervently supported the invasion of Afghanistan in 1979. But, in power, he took the first tentative steps to curtail the worst excesses of corruption and incompetence, which would later be expanded by Gorbachev. KGB agents planted in each workplace and residential area reported on the huge discontent building up in society at the bureaucracy’s misrule.

Following the October 1917 revolution, the first steps in establishing a socialist society were taken. The main industries were nationalised and integrated into a planned economy with, at least in the early years, large elements of workers’ control and management. This laid the basis for a remarkable economic development of the country. Notwithstanding the fact that prerevolutionary Russia was one of the most economically backward countries in Europe, and despite the economic destruction caused by the first world war (1914-18), the civil war (1918-20) and second world war (1939-45), by the 1960s and 70s the Soviet Union had become an industrial powerhouse, whose economy was not subject to the chaotic booms and slumps of capitalism.

By the mid-1920s, however, a bureaucratic elite had begun to crystallise, resting on the backwardness of Russian society, the tiredness of the working class, and the failure of the revolution in other more developed countries such as Germany. The working class was pushed out of political power as the bureaucracy, headed by Stalin, extended its dictatorial tendons into every aspect of life. This bureaucratic elite, 20 million strong by 1970, was like a huge parasite sucking the lifeblood out of the planned economy, draining it of energy. Bureaucratic mismanagement created huge waste. This led to the period that Russians call ‘the stagnation’. Everybody had a job, somewhere to live, and a modest wage, but life was drab, the quality of products and services very low, and huge resources were wasted or spent on arms or other unnecessary items. Increasingly, the mismanagement of the economy led to massive shortages, often of essential products.

Sometimes the arbitrary and repressive nature of the bureaucracy spilt out into open conflict. In 1962, for example, an instruction was sent from Moscow raising the price of meat and other stable foodstuffs. This coincided with the decision to reduce wage rates at a metalworking factory in the city of Novocherkassk. Workers walked out on strike. They were met by armed troops and tanks. Hundreds were shot and killed, so fearful was the regime of workers from other areas coming out to support them.

Leon Trotsky had analysed the situation in the Soviet Union after the bureaucracy seized power. He argued that the working class should organise a supplementary revolution and sweep the bureaucracy away, allowing for a genuine democratic workers’ state to be put in its place. If, however, the workers did not do that, there would be a time when the bureaucratic elite would attempt to legalise its privileges and the plundering of state property. In the long run, wrote Trotsky, in The Revolution Betrayed (1936), this could "lead to a complete liquidation of the social conquests of the proletarian revolution". Under Stalin, the bureaucracy defended the planned economy as the basis of its power and privileges, but it did so "in such a way as to prepare an explosion of the whole system which may completely sweep out the results of the revolution".

Experimental reforms

EVENTS SUCH AS those at Novocherkassk, Hungary, Czechoslovakia and Poland frightened the bureaucracy. While, at least in the early stages, the majority believed the most effective way of maintaining control was repression, a section began to reason that new mechanisms to reduce mismanagement and corruption should be sought. In the mid-1960s a group of economists began to form under the leadership of Abel Aganbegyan in the Novosibirsk Academy. They began to analyse issues such as the rift between agricultural production and the demands of the population. Their work, written in the stunted style of Soviet ‘Marxism’, was in essence moving towards the reintroduction of market mechanisms, at least in agriculture. Their ideas were discussed by an important layer of the ruling elite. Aganbegyan later became Gorbachev’s chief economic advisor.

However, the ruling elite were not yet ready to go down this road. The source of their privileged lifestyle was, after all, the planned economy and, notwithstanding their parasitic incompetence, it was still moving ahead compared to the major capitalist economies. In 1973, the oil crisis hit the world. This helped push the west into recession but actually helped the Soviet Union as a result of extra revenue from oil exports. But this only delayed the process.

Growing discontent in Eastern Europe pushed governments, such as that of Poland, to start taking large loans from the capitalist world. These credits fuelled inflation and made the bureaucratic system of planning even more unmanageable. The costs of the cold war arms race and Afghanistan only exacerbated the problems. So, when Brezhnev died in 1982, a section of the ruling politburo seemed ready to begin experimenting. Andropov, seen as a reformer, was elected to office, only to die 15 months later. He had expressed a wish that he should be replaced by Gorbachev, but the hardliners were not yet ready for that. Chernenko, although already gravely ill, was elected as a stopgap candidate, the politburo clearly understanding that in a few more months they would vote again. This time Gorbachev won.

He did not set out to reintroduce capitalism. He wanted reforms from the top to prevent an explosion of revolution from below. But he set in motion a process that became unstoppable mainly because, by lifting the repression and to some degree encouraging ordinary people to play a more active, if limited, role in their own affairs, he opened the floodgates to allow the discontent that had built up over decades to come out into the open.

Dissidents and opposition

THINGS, OF COURSE, could have happened differently. In his masterpiece, The Revolution Betrayed, Trotsky argued that "if the Soviet bureaucracy is overthrown by a revolutionary party having all the attributes of the old Bolshevism, enriched moreover by the world experience of the recent period, such a party would begin with the restoration of democracy in the trade unions and the soviets. It would be able to, and would have to, restore freedom of Soviet parties. Together with the masses, and at their head, it would carry out a ruthless purgation of the state apparatus. It would abolish ranks and decorations, all kinds of privileges, and would limit inequality in the payment of labour to the life necessities of the economy and the state apparatus. It would give the youth free opportunity to think independently, learn, criticise and grow.

"It would introduce profound changes in the distribution of the national income in correspondence with the interests and will of the worker and peasant masses. But so far as concerns property relations, the new power would not have to resort to revolutionary measures. It would retain and further develop the experiment of planned economy. After the political revolution – that is, the deposing of the bureaucracy – the proletariat would have to introduce in the economy a series of very important reforms, but not another social revolution".

This was written in 1936, when the mass of workers still had clear memories of what the Bolshevik revolution, led by Vladimir Lenin and Trotsky, was really intended to achieve. It was the fear of workers organising a new revolution that led Stalin to wage his vicious campaign of terror against the remaining Bolsheviks. The terror campaign was so ruthless that, despite heroic resistance by the Trotskyists in the prison camps, the thread of Bolshevism was eventually broken. Reading the works of Trotsky in the Soviet Union was practically impossible right up until 1990.

This did not mean that there was no opposition to the ruling bureaucracy. The western media highlighted the dissidents, who were mainly intellectuals inspired to some degree or other by western liberal democracy, such as Andrei Sakharov, a nuclear physicist, who worked on the Soviet atomic bomb. Some figures from the party and army, people such as the Medvedev brothers, Roy and Zhores, and Pyotr Grigoryenko spoke openly as anti-Stalinists from the left. In 1963, the latter even formed the Union of Struggle for the Restoration of Leninism. For all their courage, however, they were in essence dissident bureaucrats. Far more numerous were young working-class opponents who formed study groups, Leninist circles and even parties, with names such as the Neo-communist Party, Party of New Communists or, later, even the Party of the Dictatorship of the Proletariat. Unfortunately, a combination of repression and the lack of a clear understanding of what needed to be done left these groups unable to develop when conditions ripened.

The limits of perestroika

IN THE END, it was moves initiated by the bureaucracy itself that led to the demise of the Soviet Union. Gorbachev launched his policies of glasnost and perestroika (openness and restructuring). On the one hand, the political system was opened up to allow some criticism. Naturally, the reformers wanted that criticism to be directed against their hardline opponents without going too far. Multi-candidate elections would be allowed, but all the candidates were still members of the Communist Party.

Gorbachev was initially more cautious with the economy, speaking about uskoreniye (acceleration) and the modification of central planning. The biggest reform was to make factories and enterprises ‘self-financing’. This meant that, although they had to meet their production commitments for the plan, directors could sell any surplus produced and, naturally, use the profits as they wished. Workforces were given the right to elect and de-elect factory directors, and in some cases did so. In 1987, a law was passed allowing foreigners to invest in the Soviet Union by forming joint enterprises, usually with ministries or state companies. In 1988, private ownership in the form of cooperatives was allowed in the manufacturing, service and foreign trade sectors.

None of these reforms had the desired effect. As censorship was relaxed, and the representatives of the bureaucracy began to argue more openly, people grew inspired by the new ‘openness’. When the Supreme Soviet debates were broadcast live on TV, people stopped work to crowd around the nearest set, crowds on the streets watched through shop windows. But they wanted more choice than just between candidates from the same party. Elections in May 1989 to the Supreme Soviet saw voters throughout the country crossing all the names off their ballot papers to protest the lack of an alternative. Soon, the more radical reformist deputies around Boris Yeltsin were raising the need to abolish Article Six of the constitution, which stated that the CPSU had the right to control all institutions in the country.

Perestroika proved disastrous, at least from the point of view of the workers. The reforms were, as is said in Russian, neither flesh nor fowl. By loosening the rules of the plan, resources began to be sidetracked by company directors away from core production. Organisations began to experience difficulty in getting basic supplies. And, while directors were now allowed to sell production above the plan to whoever would buy it, there was still no free market to enable this. This created real difficulties. For example, the cost of coal production was significantly higher than the price paid by the state, leaving many mines without money to cover wages.

Due to the incompetence of the ruling elite, the Soviet economy had long suffered from shortages. But, by 1989, the situation had become catastrophic. Miners could not even get soap for their showers. In Moscow, always used to privileged food supplies, the rationing of basic foodstuffs was introduced.

Losing control

THE POLICY OF perestroika was collapsing in crisis. It did little to reduce the suffocating role of the bureaucracy but lifted the lid off the huge discontent boiling under the surface. Events began to escalate out of control.

Early in 1986, the Chernobyl nuclear power station in Ukraine blew up. While the authorities attempted to cover up the scale of the disaster, volunteers flocked in their thousands to put out the blaze, defended by no more than a bottle of vodka which, doctors claimed, would protect them from radiation. Once again, it appeared, Soviet society was based on huge sacrifices by the people, while the bureaucracy continued to bungle and steal. In 1988, an earthquake shook parts of Armenia killing 25,000 people as substandard buildings collapsed, leaving the town of Leninakan devastated. This fuelled the national question in the Caucasus.

In late 1986, the first signs that new social forces were being released began to appear. The city of Alma-Ata was shaken by a two-day student riot. The immediate cause was the sacking of Dinmukhamed Konayev, head of the Kazakhstan Communist Party (a Kazakh by nationality). The party had been racked by a struggle between Konayev and his deputy (also a Kazakh), who accused him of holding back reforms. Gorbachev decided not to support either side, appointing an outsider, a Russian, instead. Upset at the decision, Konayev’s deputy whipped up the students, mainly Kazakhs, into protesting. When they were met by riot troops, they rioted. Konayev’s deputy eventually took over as party chief in 1989 and, two years later, during the 1991 coup attempt, banned the Communist Party, before becoming president of Kazakhstan. His name – Nursultan Nazarbaev, still today Kazakhstan’s authoritarian president.

The escalating economic crisis, splits in the ruling elite, and natural and technological disasters, fuelled discontent. National tensions escalated within months. The region of Nagorno-Karabakh (arbitrarily handed to Azerbaijan by Stalin in 1921) became the next hotspot. Mass protests by the majority Armenian population, who demanded a return to Armenia, were met with savage repression by the Azeri regime. Open war broke out between Armenia and Azerbaijan in 1991.

In the three Baltic states – Latvia, Lithuania and Estonia – there was huge resentment against their inclusion in the Soviet Union, as a result of the Hitler/Stalin pact. (Lenin and Trotsky had always supported the right of the Baltic states to self-determination.) This resentment, combined with the growing economic and social crisis, fuelled mass movements demanding the speeding up of reforms and independence. By early 1990, all three had declared formal independence.

If a mass left-wing workers’ party had existed at the time, it could have unified these protests against the Soviet bureaucracy and presented a real option to ensure that a genuine socialist state could be established in the Soviet Union. A mass workers’ movement did develop. Unfortunately, it was not armed with a clear programme that could resolve these crises.

The oligarchs move in

THE MASS MOVEMENTS spreading through Eastern Europe, the growing independence movements as well as the failed policies of perestroika, were making the economic situation worse. Tax revenues were plummeting, the number of factories requiring subsidies was growing. Inflation was setting in. Meanwhile, a section of the ruling elite was jumping ship. A new law allowing the formation of cooperatives was presented as providing the right to set up cafés and small service outputs. The bureaucracy, however, used the law to set up cooperatives linked to ministries and factories to openly expropriate state property.

One of Russia’s most notorious oligarchs, Boris Berezovskii, provides an example of how the process worked. In 1989 he made a deal with the management of Russia’s Lada car plant. Instead of selling all its output through state retailers, it would sell its cars to him at a reduced price. He would then sell them on, at a higher price of course. Within three years, Berezovskii had a turnover of $250 million in this business alone. Workers soon learned to hate these ‘entrepreneurs’.

In March 1989, the first signs of an immanent strike wave appeared in the Polar Vorkuta coalfield. The 9th brigade of the Severnaya pit struck, demanding wages paid at a decent rate and lower production norms. Echoing the reformers in Moscow, they demanded the reduction in management staff by 40% and the re-election of the technical director. Concessions were quickly made, but this small strike opened the floodgates. By July, the whole country was gripped by a half-million strong miners’ strike.

In Vorkuta, Novokuznetsk, Prokopievsk and Mezhdurechensk strike committees effectively took over the running of the towns. The sale of spirits was banned and organisations set up to maintain public order. The miners were mainly concerned with their work and social conditions, including bad transport and housing, low wages, poor food and the lack of soap in the pithead showers. From the beginning, the mass meetings and strike committees insisted the strikes were non-political. But, because the miners had no political programme of their own, it was inevitable that other forces would use their movement. In Mezhdurechensk, the mine directors ‘supported’ the strike, complaining only that some of the demands were unachievable as long as the mines were centrally controlled. The demand for mines to be given full economic independence with the right to sell coal on the free market was soon added to the list of miners’ demands.

The miners established organisations on the hoof, but proved to be politically unprepared. The only way they could have resolved the problems of the late Soviet period would be to organise to overthrow the bureaucracy and ruling elite, while maintaining state ownership and the planned economy on the basis of democratic workers’ control and management. But there was no political organisation offering such an alternative in the coalfields. Instead, the very bureaucracy that was the cause of the crisis moved in on the organisations set up by the miners to promote its own political agenda. Strike committee members were taken for long negotiations, the day-to-day demands were linked to more explicit demands in the interests of the mine administrations and even the coal ministry. In many cases, individual strike leaders were encouraged to set up businesses (using the new law) which, naturally, were closely controlled by the structures of the state.

500 days to capitalism

IN THE SUMMER of 1989, the first opposition bloc in the Soviet Congress, the Interregional group, was formed, headed by Yeltsin. With events unfolding at a dramatic rate, the miners’ strikes gave confidence to workers that they could fight. Meanwhile, the Baltic states declared independence. Another vicious inter-ethnic conflict broke out between Georgia and South Ossetia. In November 1989, the Berlin wall was torn down. In December, the brutal dictator Nikolai Ceausescu and his wife, Elena, were executed publically during the uprising in Romania. These events scared the ruling elite but, as is said in Russian, the train had left the station and there was now no stopping it.

The Interregional group openly opposed Gorbachev, who found himself squeezed between Yeltsin’s supporters and the hardline conservatives. Among the latter were figures such as the notorious black colonels who were arguing for a ‘Pinochet solution.

The Interregional group had a small left wing but consisted mainly of reformers, whose agenda included market reforms and western-style democracy, even if this was not yet clearly formulated in its programme. It is a reflection of the resistance to capitalism that, even at this late stage, reformers rarely called openly for its restoration. Among the miners and other workers, this call would have met with resistance, even though some of their demands had become inherently pro-market. The mood of the miners was that they really had no desire to live in a capitalist society. Nevertheless, they had lost faith that socialism was a viable system.

The Interregional group concentrated on removing the CPSU monopoly of power. Massive demonstrations were organised in Moscow and other cities demanding the repeal of Article Six, which was eventually abolished in the spring of 1990. In elections in the different republics, nationalist and pro-liberal candidates won the largest votes. In May, Yeltsin was elected chairman of the Supreme Soviet and, in June, in an attempt to force Gorbachev’s hand, the Russian Congress of People’s Deputies declared Russia’s sovereignty. The ‘war of laws started with republics struggling for supremacy against the Soviet Union government.

In August 1990, the Russian government adopted the 500-day programme. This called for the creation of "the groundwork for a modern market economy in 500 days", based on "mass privatisation, prices determined by the market, integration with the world economic system, a large transfer of power from the Union government to the republics". As the editorial in the first edition of the CWI’s Russian paper at the time said: "We will die of hunger after 500 days!" In June 1991, Yeltsin stood in the election for Russian president and won 57% of the vote. He criticised the dictatorship of the centre, but said nothing about the introduction of capitalism. He even promised to put his head across a railway track if prices increased. Of course, he never did, even though, in 1992, prices increased by 2,500%.

A half-hearted coup

THE CONSERVATIVE OPPOSITION were not defending socialism, at least not as we know it. They were defending a strong centralised state. Most of all they were angry that the republics were moving to break away from the Soviet Union and that, as a result of the new openness, people were criticising their rule. By the 1990-91 new year holiday, Moscow was buzzing with rumours of a military coup. The hardliners held off even though the Soviet Union was collapsing about them.

In March 1991, a referendum was held in which the question was posed: "Do you consider necessary the preservation of the Union of Soviet Socialist Republics as a renewed federation of equally sovereign republics in which the rights and freedom of an individual of any nationality will be fully guaranteed?" The referendum was boycotted by the Baltic states, and by Georgia, Armenia and Moldova. But 70% of the voters in the other nine republics voted yes. Finding agreement of the exact form, however, proved difficult. A New Union Treaty was drawn up. Eight republics agreed with the conditions while Ukraine held out. Russia, Kazakhstan and Belarus signed it in August 1991.

On 19 August 1991, Muscovites woke to the sound of tanks driving down the street. The hardliners had launched their long awaited coup. Gorbachev, who was actually on holiday, was said to be "too tired and ill to carry on". The Gang of Eight declared that they were introducing martial law, a curfew and restoring order with the aim of "fighting the black economy, corruption, theft, speculation and economic incompetence". They were doing this, they said, to "create favorable conditions to improve the real contribution of all types of entrepreneurial activity conducted within the law". They finished with an appeal to "all political and social organisations, work collectives and citizens" to demonstrate their "patriotic preparedness to participate in the great friendship in the unified family of fraternal peoples and the revival of the fatherland".

Victor Hugo said that ‘all the forces in the world are not so powerful as an idea whose time has come’. This putsch proved that the opposite is also true: the greatest military machine cannot save a regime whose time has passed! Even the tankists and paratroopers of the Soviet crack divisions sent to Moscow had no heart for a fight. The tanks were stopping at red traffic lights. One trolleybus driver stopped his vehicle at the entrance to Red Square and the tanks moved no further! A few minutes later, the news came to those already protesting that Yeltsin was calling a general strike (a call he quickly rescinded) and asking people to rally outside the White House, the seat of the Russian government. Within hours, hundreds of thousands had turned out. The whole country had begun to rise up against the coup. The putchists turned tail. One of them shot himself. Another left politics to become a rich banker. Gorbachev returned to Moscow to find the country he once ruled was no more.

Formally, the Soviet Union was disbanded in December 1991. But this was no more than recognising reality. Following the coup, all 15 republics had announced their independence. The speed of the process of capitalist restoration differed in each republic but the direction was the same. The barriers to the restoration of capitalism that had existed before were removed. In Russia’s case, the Yeltsin regime banned the CPSU, moved to break up the old state structure, even going so far as to promise Russia’s internal republics, such as Chechnya and Tatarstan, "as much sovereignty as they could handle". Economic shock therapy was introduced with the liberalisation of prices, mass privatisation, increases in taxation, cutbacks in subsidies to industry, and cuts in social spending.

Western advisers openly warned the Yeltsin government that they should gain the support of the former beneficiaries of Soviet rule, that is the former party chiefs, factory directors and KGB operatives by transferring ownership in the new capitalist society to them so they would not resist. Even the period of hyperinflation, which brought untold misery for the masses, was used by the ruling elite to concentrate wealth in their own hands. It is from this period on that the oligarchs gained their obscene wealth. In the Russian media, this was openly called the "process of the primitive accumulation of capital".

The Soviet people were conned. They were told that by introducing market reforms they could have living standards as in Western Europe. Rather than telling the population that the intention was to introduce capitalism, they were told that this was a struggle for ‘democracy’. Almost 20 years later, living standards for the vast majority of the population are significantly lower than at the end of the Soviet period. Democracy is practically non-existent and the old ruling elite, who ruined the planned economy, are now living in luxury on the benefits of capitalist exploitation. This helps to explain why, across the former Soviet Union workers are beginning to turn back to left ideas. Only next time, they will have the experience necessary to establish a genuine socialist society, with a planned economy, workers’ control and management, and self-determination in a voluntary federation of socialist states and internationalism.


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