In one of the most spectacular financial explosions in history, on 17
August, in the space of one day, Russia's entire financial system collapsed.
Stock markets around the world were sent reeling, not because of Russia's
weight in the world economy, nor the big losses incurred by western
banks speculating on the Russian bond market, but because Russian capitalism
had run into a dead-end from which there appeared to be no way out.
What really rattled the markets was the possibility that, faced with
destitution this winter, the Russian people might call a halt to the
re-introduction of capitalism which having already resulted in the
greatest peacetime industrial collapse in history, now promises worse.
As one commentator said, it began to dawn on the markets that capitalism's
victory over socialism might turn out to be only a short episode at
the end of the 20th century. Even the financial press, and people like
George Soros, echoed this sentiment.
In the course of seven years Russia's economic output had been halved, its manufacturing
industry and agriculture decimated, its welfare state destroyed, its population
reduced by rising death rates and falling birth rates and its assets stolen by
a gang of oligarchs backed to the hilt by the west. Many people in Russia and
elsewhere in the former Soviet Union thought that, with wages and pensions going
unpaid for months and having lost their life savings, things could not get worse.
They were wrong.
The financial melt-down in August triggered a vast, new spiral downward
of the Russian economy - tens of millions of Russians, and entire regions
of the country, simply can't afford the food, fuel and clothing necessary
to get them through the winter.
The financial collapse was the inevitable, and predicted, result of
the capitalist economic course imposed upon the country after 1991. Yeltsin
promised three months of pain followed by rising living standards in
a consumer society. In reality the consumer goods and food producing
sectors of the domestic economy have been all but eliminated. As the
IMF and World Bank envisaged in their three volume study of the Soviet
economy published in 1990, capitalism has reduced the country to an exporter
of raw materials. It now depends on western imports for 60 per cent of
its cities' food and consumer goods.
The resulting collapse of output is the underlying cause of the financial
crisis. With output halved, companies cannot pay wages and taxes and
the government can't pay pensions, the army or public sector workers.
For a time the inevitable financial collapse was staved off by a combination
of high energy prices during the upswing of the world economy, western
loans and the growing pyramid of government debt at astronomical interest
rates.
But the impact of the economic crisis in Asia brought the entire edifice
crashing down. What had always been an historical dead-end - regression
from a manufacturing economy to a supplier of raw materials - became
immediately unsustainable as commodity prices plummeted. The balance
of payments surplus disappeared and, with a flight of capital from emerging
markets, devaluation of the rouble became unavoidable. The last act of
the Kiryenko government was, by devaluing and effectively defaulting
on domestic banks' foreign debt, to rob both the Russian population and
foreign creditors, to try to save the criminal network of Russian banks
which stands behind Yeltsin's regime.
But the result of the devaluation was the complete collapse of the banking
system - with all banks technically bankrupt, deposits frozen and prices
of imported food and consumer goods trebling in the space of days. People
already on the edge of hunger, were tipped over the abyss. Whole regions
faced running out of food and fuel. Hospitals ran out of blood.
The back of the Yeltsin regime was broken. As regions moved to introduce
state control of prices and set up commissions to monitor their implementation,
it became clear that having dissolved the Soviet Union, Yeltsin had now
taken Russia to the point of break up. This is indeed what capitalism
will mean for Russia - an unending spiral downwards until it literally
ceases to exist. Western strategists are already discussing this. Former
US National Security Advisor Zbigniew Brzezinski, spelled out this perspective
in an interview with US-funded Radio Free Europe on 15 September. He
said: 'Russia's chances of development would be greater if Russia were
organised as a confederation of three main units: European Russia, Central
Russia and Siberia; and Far-Eastern Russia. Under this confederate arrangement
each region would be far better placed to develop regional trade alliances
with neighbouring trading zones than the present system.' In other words
the country would be divided into German, US and Japanese spheres of
influence.
It is the fact that capitalism will mean still greater catastrophes
for the Russian people up to and including the disappearance of their
country which calls forth such reservoirs of resistance. The working
class came to power in Russia in 1917 because there was no capitalist
way forward for the country. Without the October revolution Russia would
have been broken up into a series of semi-colonies like the Middle East.
Hitler's 1941 invasion confronted the Russian working class with similar
choices, resolved with still greater sacrifices than in 1918-21. Today
the same alternatives are posed - with the peculiarity that, on the one
hand, the Kremlin itself has fallen to capital, but, on the other, unlike
in 1918 or 1941, the possession of nuclear weapons precludes the direct
military invasions from the west.
It is because the choices are on such an immense historical scale for
the Russian people - combining the eradication of virtually everything
they have built up in the twentieth century in terms of social infrastructure
with the very existence of their country - that the current battle (since
the end of 1991) between the Russian working class and international
imperialism has been so protracted.
The situation after 17 August this year is that the credibility of President
Yeltsin's regime has been shattered. Two thirds of Russian voters say
he should resign. In these circumstances, when the Communist-led parliament
rejected his nomination of Victor Chernomyrdin as Prime Minister, Yeltsin
had just three options. One, to dissolve parliament and call elections
- but all polls showed these would result in the electoral slaughter
of his supporters and a more hostile parliament. Two, to organise a coup
as in October 1993 - but polling in the army indicated that 97 per cent
of soldiers and officers would disobey orders to fire upon the population.
Or, three, to give in, which Yeltsin did, but with the result that the
balance of power swung massively towards the Communist Party-dominated
parliament which had stood up to the President and won.
An indication of the balance of forces was given shortly after parliament
had endorsed the new Prime Minister Yevgeny Primakov, when Yeltsin's
first prime minister and initiator of the capitalist economic reforms,
Yegor Gaidar, called a 'mass' demonstration in Moscow against what he
called 'the creeping communist coup' - 200 supporters turned up! Miners'
leaders who helped Yeltsin to power in 1989 and who, along with other
trade unionists and the Communists, are planning mass demonstrations
on 7 October under the slogan that Yeltsin must resign, told the Financial
Times in reference to the 1989 strikes: 'if we had known what would happen
we might have thought twice about it. The 1989 protest was to correct
one or two things, not bring down the whole system.' (7 Sept 1998)
As we go to press the economic programme of the new government has not
been announced, but the re-appointment of Victor Gerashenko, who as chair
of the Central Bank protected industry from the first onslaught of capitalist
economic reform after 1991, has spooked western governments. His description
as 'the worst central banker in the world' is high praise indeed, coming
as it does from Jeffrey Sachs one of the Harvard professors who advised
on the destruction of the Russian economy.
The reality is that, if a government in Russia wished to overturn capitalism,
there is no capitalist force within the country capable of stopping it
and no state outside could militarily intervene. If capitalism is not
overturned the country will continue to spiral downwards because it is
impossible to reverse the economic decline without decisive action by
the state.
The consumer goods and agricultural sectors of the economy, which must
be massively expanded to feed and clothe the cities and secure popular
support, can only be developed if the prices of energy and raw materials
fall relative to the products of light industry. The only way such a
shift can be enforced is by re-nationalising the giant energy monopolies.
Secondly, the country's investment resources have to be channelled into
the consumer goods sector and that is impossible if the banking system
remains in the hands of the mafiocracy. So to rebuild the economy, stop
the flight of capital, and allow society to direct where its resources
are invested, the banking system must also be taken into public ownership.
On the other hand, the small businesses in agriculture, consumer production,
services and the retail sector, and the markets for their goods, which
have been crushed for the last seven years, must be stimulated as in
China, to create the network of hundreds of thousands of small enterprises
necessary to supply high quality consumer goods.
No capitalist party in Russia is capable of winning even 10 per cent
of the vote without massive state backing and even then no capitalist
party can equal the Communist Party's support. That party has been enormously
strengthened by recent events. The decisions it takes over the next period
of time will decide the fate of the country. The majority of its members
stand for workers' power and a planned economy. A minority of its MPs,
on the other hand, are pro-capitalist social democrats. The party chair,
Gennady Zyuganov, has occupied a centrist position, constructing the
patriotic alliance which established the Communists as the leading party
in the country, but seeking compromises with what is, in reality, a virtually
non-existent 'patriotic national bourgeoisie'. Under the last Chernomydin
government that policy allowed bourgeois demagogues like the mayor of
Moscow Yuri Lushkov and, the pro-American, General Alexander Lebed, to
gain support at the expense of the Communists. Learning from this, the
left wing of the Communist Party has strengthened itself - and aided
by the mood in the population, is pushing the whole party to the left.
The Communists have refused to back the Primakov government before seeing
its programme. They are right. Russia faces mutually exclusive alternatives
- return to the policies of the IMF or nationalisation of the banks and
energy industry to regain social control of the economy. There is no
third way.
In its battle with international capitalism and its criminalised domestic representatives, the Russian working class has taken a giant step forward since the middle of August. Its victory is entirely possible and that would change the entire balance of forces between capital and labour, between imperialism and the oppressed majority of the world, for the better. The working class of the entire world has a direct interest in doing everything it can to assist it in that struggle.