W orld socialism was a subsystem of the worldsystem and as such could not
run deeper than the system of which it was a part. Had Lenin realized the
workings of the world economic system, he would have concluded that Russia
had no chance whatsoever to build an antisystemic economy in the midst of an
overpowering world capitalist system. In his earlier writings, Lenin had a
glimpse of that reality, hoping that another socialist revolution would
break out in Germany, bailing out the Russian one. Instead, as his dream
failed to materialize he began a desperate enterprise: socialism in one
country. In retrospective, I venture to say that the pervasive power of the
worldsystem expressed itself in the fact that Lenin and Stalin,
unconsciously, conceived both socialist society, as well as the future
communist society, within the limits of the industrial system, which
historically belongs to the capitalist epoch. This began when Stalin
presented industrialization as the goal of socialism (industrialization
being essentially a capitalist operation), and ended with Lenin�s defi
nition of communism �Soviets plus electrifi cation,�and Stalin�s threshold
to communism expressed in terms of millions of tons of pig iron, steel, coal
and oil B both indicating the limit of their historical perspective within
the industrial system. Never did they formulate a new type of productive
forces that would usher in the formation of a postcapitalist society,
remaining intellectual prisoners of the industrial system. West in order to
service this debt. Stated bluntly, the claims by Western governments to have
helped East Europeans establish a market economy is a big hoax. In 1995,
while visiting London, I was invited by a ViceMinister to the Foreign Offi
ce. When he asked me what the West could do to help us improve the economic
situation, I answered: �Stop milking us!� He was astounded, so I gave him
some data. The foreign debt of the emerging democracies has skyrocketed to
such an extent that the money needed to service this debt is much higher
than all the economic aid coming from the West. In fi gures, the Russian
Federation and Eastern Europe owed more than $150 billion, which means they
were paying annually about $20 billions as principal and interest. In
comparison, the actual grants they got from the West never surpassed $5
billion annually. The trade picture did not look better. The average score
of the 1990�s in the EastWest trade is $7 billion in exports to $12 billion
in imports. In brief, the main cash fl ow in Europe has been from the poor
East to the rich West, and not viceversa.
THE KEY OF SUCCESS TO MARKET REFORM: THE MIDDLE CLASS
The evaluation of progress in postcommunist societies is usually made in
terms of political and economic achievements. Seldom are changes in the
social sphere taken into account, although these affect society much more
profoundly and are more indicative of both present stability and the future
of these nations. Examining the social stratifi cation of these societies,
we fi nd at the top the common phenomenon of the rapid enrichment of the new
capitalists, involving in most cases enterprising members of the communist
nomenklatura. However, as we move down, an obvious discrepancy appears
between the Central European nations and Russia: the middle class. To better
understand the genesis and dynamics of the middle class in the region, we
must go back to the precommunist era. In Central Europe, the motive force of
social development was capitalistindustrial growth, while in Russia, rigid
feudal structures with millions of illiterate peasants were dominant.
Apparently, in the Russia of modern times there has always been one class
lagging behind the historical process. In October 1917, when the task was
the socialist revolution, the supposed agent of change, the proletariat was
missing. Today, when the task is the building of a modern market Stalin
tried hopelessly to escape from that theoretical framework. First, he argued
that socialist economies could be insulated from the world system; Secondly,
he maintained that industrialization would make socialist states
independent. Industrialization not only failed to make socialist states
independent, but it instead became the trap whereby socialist nations were
caught in the world economic system. As socialist states industrialized they
only became dependent on world markets, world prices of raw materials and
uptodate technologies. Of course, the Western powers also benefi ted from
socialist industrialization, milking socialist states through unequal
WestEast trade exchanges via the superiority of Western currencies and
growing foreign debt until socialism was ruined and broke. As for the
ideological split of the world market, this was a basic misconception of
Stalin with regard to the workings of the worldsystem. As Samir Amin has
pointed out: the predominance of the capitalist mode of production is
manifest in the fact that, in the worldsystem, both central and peripheral
formations are arranged in a single system, organized and hierarchical. Thus
there are not two worlds markets but only one: the capitalist world market,
in which Eastern Europe participated marginally.1 In the 1980�s, COMECON�s
marginal position in the worldsystem was set by three fi gures: almost 30%
of the world industrial output, but only 11% of the world trade, and merely
9% of the world fi nancial transactions. THE WEST IS MILKING THE EAST With
the downfall of the Soviet bloc, all postcommunist societies began to
institute a market economy, liberalizing their trade and monetary exchanges,
consequently being sucked into the whirlwind of the world economic system.
They opened their gates wide to Western corporations with the hope these
would bring new technologies that might make their factories more
competitive. In fact, Western companies show a taste for laborintensive
industries undergoing privatization. They tend to inject the latest
technologies, maintain a lowcost labor force, and thus produce cheap goods
for world markets. But the real trouble is the growing foreign debt, which
is sending half of the hardearned exports of postcommunist nations to the
economy, it is the middle class that is missing. American historian Richard
Pipes makes a perceptive point: �Russia�s inability to produce a large and
vigorous bourgeoisie is usually seen as a major cause of its deviation from
the political institutions and practices.� Russian historian Yuri Afanasiev
also emphasizes that Russia today lacks a social base for democratic reform,
leading to an oligarchic system. Not so in Central Europe. In
Czechoslovakia, the interwar regime of President Massarick was on par with
Western Europe in terms of capitalistindustrial development and democracy.
Here, a powerful social stratum survived even during the four decades of
communism, enjoying a standard of living characteristic of a middle class
(home and automobile ownership, signifi cant cultural expenditures, holidays
abroad, and the like). For obvious reasons, offi cial statistics never
mentioned that category, but Western sociologists discovered that, in the
1970�s and 1980�s, families with high incomes and a middle class lifestyle
in Czechoslovakia represented about 30% of the active population; in Hungary
the fi gure was 2025%, in Poland, 15%. In retrospect, we now realize that
the Prague Spring and the reformist drive that swept Hungary and Poland
actually refl ected petitbourgeois trends toward liberalization rather than
typical workingclass grievances. Romania was left behind the Central
European countries in this respect. Breviarul Statistic reveals that in the
interwar period, the urban petitbourgeoisie was made up of 128,000 owners,
327,000 store managers, 25,100 liberal professionals, and 19,500 family
members; in total 35% of the active population. Under communism, a study,
published by the Center for Sociological Research in 1988, showed that a
�higher status� in society (in terms of housing comfort, cars, cultural
consumption, and the like) was enjoyed by 5% of the active population. Such
a low percentage was caused by Ceausescu�s statist policy, which stifl ed
any private economic activity. Even private peasants and owners of private
plots were harassed by the militia whenever they tried to sell their
products on the market. In the U.S.S.R., besides the party and state
dignitaries who enjoyed high salaries, only artists, musicians, scientists
and managers in the militaryindustrial complex had a higher income. They
represented no more than 1% of the active population. Sociologist Mikhail
Tchernik considers that this very thin stratum taking shape after Gorbachev�
s opening of perestroika in 1985 had a monthly income of $250 to $2000 per
person, owning usually an apartment, an automobile, a TV set, an imported
lastgeneration refrigerator, a VCR, and a small dacha outside town. As shown
in Table 1 there is an almost direct relationship between the percentage of
potential middle class before 1989, and the progress of the market reform as
of 1995 measured in per capita GDP and average monthly wage. The Czech
Republic, with a 30% middle class has become the postcommunist frontrunner
with more than $4,000 in per capita GDP and an average monthly wage of $300,
whereas Russia, despite its enormous natural riches trails the group with
only 1% middle class. In brief: the middle class is the key to success in
market reform. How was the middle class born in those countries? With
forceps! The market economy could not possibly function with workers and
peasants alone. Merchants and entrepreneurs, businessmen and intermediaries,
salesmen and managers are all a must. Therefore, the formation of a class
made up of such people is both vital and urgent. Eastern Europeans cannot
afford to replicate the slow and gradual process of middle class formation,
a process that took many decades in the West. We witness here instead a
social birth abrupt, painful, forced and accelerated, with contenders
cutting their way through the loopholes of a rudimentary and inadequate
legislation. A savage middle class, I call it. But the most striking social
outcome of the revolution in the East is the making of a host of
millionaires in just fi ve or six years. The novelty of that phenomenon
stems from the peculiar condition of their genesis: the accumulation of
capital was censured and illegal in communist society, so the post1989
capitalists made their fortune at the expense of state property and capital,
grabbing the assets, machinery, real estate�and even the social capital�of
state enterprises or commercial organizations. In the forefront of this
largescale robbery were the former party and state bureaucrats who held
strategic positions that allowed them to operate quickly and with great effi
ciency. A study of one hundred top Russian businessmen, undertaken by the
Institute of Applied Politics in Moscow, found that 60% belong to the former
Nomenklatura. A Polish economist who examined the trajectories of several
hundreds of former party bureaucrats in the period 198893 discovered that
more than half of those became managers in the private sector; in Hungary
the percentage is even higher. Again, Moscow had led the way. Russia, with
its enormous riches and natural resources, was naturally in the vanguard of
this historical plunder, its new capitalists showing an unexpected ingenuity
after seventy years of Bolshevism. Serghey Yegorov, former president of the
U.S.S.R. State Bank, and head of the Financial Section of the C.C. of PCUS,
became the president of Commerce Banking Association, a tycoon worth
hundreds of millions of dollars. Nikolai Rijkov, Gorbechev�s Prime Minister,
took over Tveruniversal Bank, while Piotr Aven, former minister of Commerce,
became president of Alpha Bank. Ranking at the top, Prime Minister Viktor
Cernomyrdin was director of the gigantic gas company Gazprom, which was
secretly privatized through a method that allowed the former boss to take
the lion�s share. In 1995, as Cernomyrdin created a party called Nash Dom
(Our house), Russians used to call it Nash Dom Gazprom. The clan of
proYeltsin magnates is known as the �big eight,� a consortium of major banks
and companies; journalists refer to the group as �The Octopus,� because its
tentacles seem entangled in every big economic venture. Characteristic of
the capital power symbiosis is a breathtakingly bold proposal: in 1995 it
offered a loan of $2 billion to the cashstrapped government in exchange for
shares in state enterprises. Most of these new capitalists own newspapers
and radio or television stations. The cozy partnership of big business and
the Kremlin was once more demonstrated in November, 1996, as the media
mogul, and rakish business tycoon, Boris Berezovski was appointed deputy
chief of the National Security Council. In Table 2 we see a world premier in
the history of capitalism: a small number of big magnates control not only
the major banks and industries of the nation but also the most important
newspapers, radio and television sta tions, occupying all of the strategic
positions in the structures of power and government. Such a concentration of
power in the hands of big business is unprecedented, particularly keeping in
mind it was achieved in less than a decade. The perpetuation of the old
nomenklaturists in leading positions�political and economic�characterizes
the transition period in all Eastern European countries, though the
existence of a rapidly growing middle class makes a divergence from the
Russian picture. The party bureaucrats have passed with unexpected easiness
from the party headquarters onto the boards of big companies or banks. The
remark of a former American diplomat in Budapest turned director of a New
York investment bank is very telling: �Whenever I have a meeting at a big
Hungarian company, I face over the table somebody I had to deal with at the
time when Hungary was communist.� The Polish publication WPROST made a
thorough inquiry of more than two hundred managers of the most important
Polish companies. The inquiry revealed entrepreneurs involved in strategic
arrangements, businessmen closely connected with political leaders,
sometimes acting as their advisers and regular companions in state visits
abroad. In most cases, they were coming from the communist nomenklatura,
having rapidly adapted to the market economy. The man to be found most often
in the presidential airplane is Andrzej Skowronski, General Director of
Elektrim, the largest holding company in Poland which controls more than one
hundred enterprises in electricity, telecommunications, and the agrofood
business. Another prominent fi gure is Gregorz Tuderek, General Director of
Budimex SA (the former Foreign Trade Construction Enterprise), now the
largest construction company in Poland. Tuderek supported President Walesa
in the early 1990�s, but in 1995 he switched to President Kwasniewski,
accompanying him to the Davos World Economic Forum and to Moscow. L�eminence
grise of the new Polish establishment is Sobieslaw Zasada, a friend of all
men in power. As such, he has succeeded in acquiring major government
contracts such as Mercedes motor cars for the Armed Forces. In Romania, I
examined thoroughly the rapid enrichment of the new millionaires. How did
they make it so big in so short a time? I found six ways and means that had
been utilized and described them in detail in a special study. To mention
but one here: Directors of state factories set up a private �shell� fi rm
run by a wife or a son, gradually transferring to this shell fi rm
machinery, raw materials, and even contracts with third parties and bank
credits guaranteed by state assets. Ultimately, the state enterprise would
go bankrupt, while the private fi rm took over its business, becoming
prosperous in the process. As we have seen in Poland, many new magnates have
succeeded in the foreign trade sector. In terms of personnel, this sector
was the best equipped and qualifi ed for the market economy. The staff had
traveled in the West, they were familiar with industrialists, bankers, and
businessmen; they spoke foreign languages fl uently, and knew the ropes of
on world markets. Therefore, small wonder that after 1989 they fi red the
most spectacular �cannons� in the history of Eastern wild capitalism. Petru
Crisan had been the director of RomanoExport. In 1990, he immediately
privatized his enterprise, reaping the lion�s share (55.9%) of the capital.
In only fi ve years, he became the manager and owner of 14 enterprises. With
such a performance, Crisan qualifi ed as Minister of Commerce in the
Vacaroiu government, given the authority to, among other things, approve
export and import licenses. The right man in the right place! Apparently,
the symbiosis between power and capital is a main feature of the transition
period. The fact, so amply demonstrated in this essay, that the formation of
the new capitalist class has been achieved mainly at the expense of the
state in all postcommunist societies leads to the conclusion that the
powercapital symbiosis, far from being accidental, is the result of a social
process both necessary and inevitable. The major industrialists, bankers or
merchants could not possibly make a fortune and assert themselves on the
social plane without the support of those in power. In turn, those who hold
power cannot isolate themselves from the new social milieu that is forming
around them, and they can hardly resist the temptation to get involved more
or less directly in the business profits made under their noses and, in
fact, at their hands.
WHITHER RUSSIA AND EASTERN EUROPE?
A recent public opinion poll regarding the future of Romani revealed that
50% of its citizens did not know where the country was heading, while 40%
were divided: toward capitalism, toward Western socialism and even toward
the restoration of communism. After 1989, political leaders chose to talk
about democracy and the market economy without indicating that these two
historical tasks could only be implemented within the context of a
capitalist social system. After so many decades of demonizing the defects of
capitalism, leaders did not dare to mention it by name. However, Romanian
society, as well as the other Eastern European societies, has gradually
acquired the characteristic features of capitalism, although state ownership
maintains an important place in the economy. Social polarization has become
increasingly visible: at one pole millions of people beset by poverty,
unemployment, illness; at the other pole, the millionaires with their
fabulous profi ts, living in luxury and glamour. In between, the middle
class�the stabilizing factor in modern society�is taking shape rapidly. This
social transition has been strongly stimulated by the external environment
and such institutions as the Council of Europe and the International
Monetary Fund, which are directing and monitoring the transition to
capitalism in Eastern European nations. Actually, the integration into the
EuroAtlantic structures is the supreme strategic objective of all these
countries. Whoever is in power B centerright or centerleft B will follow the
same basic economic policy, enthusiastically or grudgingly. The fact that in
Poland and Hungary leftist governments, composed chiefl y of excommunists,
have carried on with equal determination the march toward capitalism proves
once again that the EuroAtlantic objective, and the political urge to fulfi
ll its requisites, constitute the decisive factor in the evolution of these
societies. Not so in the case of Russia. Apparently, Russia�s way will
depart from that of Eastern Europe. Indeed, while the mechanism of the world
economic system compels Eastern European nations to play by the rules of the
world market, the referee being the International Monetary Fund, the
dynamics of power politics generate in a great power like Russia the will to
resist, and even oppose, the tendency of the Western Powers to assert their
supremacy. To sum up: although the Western model of society will extend
throughout the whole Eastern European area, it will stop short at the
Russian border.
-----------------------
JOURNAL OF WORLD-SYSTEMS RESEARCH, VI, 2, SUMMER/FALL 2000, 444-453
Special Issue: Festchrift for Immanuel Wallerstein � Part I
http://csf.colorado.edu/jwsr
issn 1076-156x
� 2000 Silviu Brucan
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