--------------70BA345050C73EDE8062BDCE
SYSTEM ERROR
-----
The banks have run out of money and the
shops have run out of goods. This time it is
the Russian elite who have lost everything
and the IMF has only limited prospects of
bailing them out. Boris Kagarlitsky assesses
what the future holds (Red Pepper, October 1998)
The ruble collapsed on a Monday morning. The weather in Moscow was
unusually good, not too hot and not too cold. Thousands of residents
could walk about the city observing the fall of the national currency.
Best of all was to stroll about the currency exchange booths. First the
rate fell from 6.2 rubles to the dollar to 6.5.
By midday the American dollar cost 7.5 rubles; by 1.30pm the price had
reached 8.5. After 2pm, it was 9 or 9.5 rubles. By 3pm the banks had run
out of money. The currency exchange booths closed one after another 'for
technical reasons'. Strangest of all was what happened to the sale price
of the dollar. For people wanting to get rid of their rubles, the dollar
became more and more expensive, but those who wanted to change hard
currency into rubles were staggered to find that their dollars were
still worth only 6.2 rubles.
The reason for this strange behaviour by the banks and exchange offices
was simple: the authorities insisted on the official rate, which did not
exceed 6.4 rubles to the dollar. Citizens recalled in turn that it was
possible to do without the services of the official establishments
altogether, and began changing money with one another. The black market
in hard currency was reborn.
No one knew how much a dollar was really worth. Since many enterprises
keep their accounts in dollars, but use the ruble for cash transactions,
all commercial operations came to a halt. Worst off were those whose
wages were denominated in dollars, but who were paid in rubles.
Entrepreneurs immediately became staunch patriots, and agreed to pay
wages only at the official rate.
Only a few days earlier, the government had assured the people that the
ruble exchange rate was stronger than ever. In Novgorod on the previous
Friday, Yeltsin had solemnly declared that there would be no devaluation
(by this time people had already begun buying up hard currency on the
street, offering as much as 7 rubles to the dollar). Asked whether he
intended to cut short his holiday and return to the Kremlin, he said:
not under any circumstances; if the president were to interrupt his
holiday, people might think there was a crisis in the country.
By Monday evening the devaluation was a reality; the president was back
in the Kremlin. State officials appeared endlessly on the television
screens, explaining that nothing drastic had occurred. For some reason
they did not utter the word 'devaluation', perferring the Orwellian
'exchange rate correction' and 'new boundaries of the ruble corridor'.
By Tuesday evening Prime Minister Sergey Kiriyenko even had some good
news for the population. Life with the new, cheap ruble would be even
better, since Russian products would become more competitive on the
domestic and world markets. People were left wondering why, if
devaluation was so positive, the authorities had not carried it out
earlier instead of waiting for the ruble to collapse.
Not only had the ruble collapsed. The pyramid of Russian state debt,
built up on the same principles as the private pyramids in Russia and
Albania, had also crumbled. Dumbfounded bankers learned that the
government would not pay out on its bonds. Instead of money, it would
give the banks new state securities that were supposed to be even more
valuable. Payments on the private foreign debts of Russian firms were
frozen for 90 days. Immediately, the Russian banking system also
collapsed: hundreds of thousands of people tried to get their money out
but the banks simply announced that they had no cash. SBS-Agro Bank
where the Presidential administration kept its money was among the first
to go under. Its owner disappeared after receiving $100,000,000 credit
from the government to save the bank.
The government issued an optimistic statement, stressing that the bitter
truth was better than unrealistic promises, which, however, it would
'not repudiate'! And the television carried one reassuring report after
another.
In contrast, the commercial press was in hysterics, speaking of national
catastrophe and maintaining that we had 'woken up in another country'
(curiously, neither the shelling of the parliament, nor the bombing of
Chechnya, nor the impoverishing of workers in Siberia had aroused such
emotions in them). Unlike the bankers, most of the population did not
succumb to panic at first. On the contrary, people on the streets did
not hide their malicious joy whenever they saw a new price appear on the
boards outside the exchange offices.
Unlike earlier financial crashes, the present crisis has particularly
affected the rich. Those at the bottom of the social ladder have already
been hit so hard that they have no money at all. They live from day to
day, more often bartering than buying. In any case their wages are not
paid for months at a time. As for the middle classes, they have long
since abandoned the ruble, and keep their savings in dollars stuffed
into their biscuit jars.
Compared to 1992, when savings that had been accumulated over decades
vanished in an instant, or 1994, when 'pyramid schemes' collapsed and
buried the hopes of the middle classes for 'market success', ordinary
people, while realising that the effects for them would not be pleasant,
could not help feeling pleased that life would also now be difficult for
the people driving about in fast cars.
Neither the collapse of the economy, nor the impoverishment of the
population, nor the drawn out slide in production have posed serious
problems for the Russian elite. They have been preoccupied with other
matters. The richest resources have been seized and divided up, and the
demands of western financial institutions have been satisfied. But in
the long run, it has proved impossible to continue down this path. The
banking system is becoming ungovernable, demonstrating the truth of the
Marxist thesis that the state of production determines the state of
finances, not the other way round. Seized with foreboding, western
investors are rushing to scoop up their money and quit the country.
Yeltsin is hastily reorganising the security forces, which are starting
to bear an increasing resemblance to the Soviet KGB. Newspapers are
reporting on new tasks that have been placed before the defenders of the
constitutional order: investigating labour militants and opposition. A
federal guard is being established.
On 16 September, prime minister Kiriyenko was sacked and Viktor
Chernomyrdin reappointed. Though the old boss was supposed to calm down
the markets, the opposite happened. The ruble collapsed once again.
Unable to control the situation and unwilling to accept the real state
of things the Central Bank simply closed the currency exchange. People
started shopping hysterically, expecting huge price increases. Once
again there were queues and shortages like those of the late Soviet
years. No supplies were imported.
Most of the support for the Yeltsin regime has been 'external', from G7
and the International Monetary Fund (IMF). The West supported him, gave
him money, and dictated his economic policies. When Yeltsin's regime
falls, will there be anyone to pay back those debts?
The IMF, however, has only recently given Russia new credit ­ in
order to stave off devaluation. And even after the crash of the ruble,
it seems, the IMF will continue to hand over money. It simply has no
other choice. But the IMF first has to get money from somewhere in order
to lend it. The directors of the fund have already passed the hat
around, seeking additional contributions from donor countries, above all
the US. Meanwhile, isolationist-minded Republicans in the American
congress are threatening to block the appropriations.
The directors of the IMF are in the same trap as the Russian government:
they are the hostages of earlier decisions and, above all, the hostages
of neoliberalism. As a result, the IMF and the World Bank have begun to
play a similar role on a global scale to that the Central Committee of
the Communist Party of the Soviet Union once played for the 'communist
bloc'. IMF and World Bank experts decide what to do with the coal
industry in Russia, how to reorganise companies in South Korea, and how
to manage enterprises in Mexico. Regardless of the 'free market', world
practice has never before known such centralisation.
Even western governments are forced to reckon with this parallel
authority. But this approach has given birth to spectacular problems
that are inherent to any hypercentralised system. The point is not that
the neoliberal model of capitalism dooms most of humanity to hopeless
poverty, nor the dependency the countries on the 'periphery' on those at
the 'centre'. Such 'moral' and 'ideological' issues do not disturb
'serious people'.
The trouble is that the price of mistakes is becoming unbelievably high.
The huge resources at the disposal of the IMF make it possible to
'stabilise' the situation should Russia collapse. But the neoliberal
model of capitalism is unstable in principle. Rejecting the criticisms
of both Marx and Keynes, and destroying the structures established under
the influence of their ideas, the new world economic order has returned
us to the rules of 'classical' capitalism ­ including
overproduction, financial catastrophe (the downside of 'victory' over
inflation), and, ultimately, revolutions. The IMF is now working
simultaneously as an ideological centre and a 'fire brigade' ­
except that the 'firefighters' themselves are dropping their cigarette
butts in the forest.
Ideologues exist in order to ignore the real state of affairs. But how
long can this continue? In most countries where neoliberal 'reforms'
have been 'successfully'conducted, similar problems have arisen. Russia
is not unique; the difference is only in the scale and severity of the
problems. This is no accident, since monetarist programmes of such scope
have not been implemented with such enthusiasm anywhere else. The result
has been predictable: the bankruptcy of the state.
Like their Soviet predecessors, the ideologues of neoliberalism call for
an orientation towards 'advanced experience' and 'positive examples'. As
in the Soviet Union, all problems are ascribed to errors of particular
officials while achievements are explained as the result of wise,
consistent policies. A few years back, the Czech Republic was proclaimed
an example of the consistent and successful implementation of reforms.
Today that country is in profound crisis and, of course, seeking
'rescue' credits. The ideologues now tell us that the bureaucrats in
Prague did not carry out 'genuine privatisation', that they sabotaged
reforms, and so on.
This is partly true ­ which explains the relative stability the
Czech Republic enjoyed in the first half of the 1990s. Like their Soviet
comrades years ago, the IMF officials have a single set of remedies for
any ailment, and these remedies are to be applied everywhere from
tropical Africa to the Russian tundra. While saving Russia from
bankruptcy (again), they are advising the Czechs to implement measures
that have already failed in our case. If similar reforms are
'successfully' applied in South Korea, within five or six ye ars the IMF
will have to cope with a new Asian crisis, compared to which the present
one will seem like a petty inconvenience.
Neoliberalism is not responsible for all the problems of the world
economy. We inherited inefficient industries from the Soviet system. But
along with credits, the countries undergoing hard times are offered a
package of measures that not only fail to solve the real causes of the
crisis, but create new sources of instability. The result is that the
IMF, the World Bank and other global financial institutions strengthen
their control over the world economy, but cannot overcome the inertia of
their own structures or their sole 'correct' ideology.
In sum, nothing remains but to continue along the chosen path, trying to
suppress the 'resistance of the material'. Russia, like Mexico earlier,
is being given loans not to solve its problems, but so that it can hold
on for a time without solving these problems. Russian patriots sincerely
think that the West sets out deliberately to play foul tricks on us.
There are very few 'Westernisers' left, who think that the countries of
the West want to help us.
As in the early years of the century, Russia has again become 'the weak
link of world capitalism.' The Russian soul, mystical 'collectivism' and
other national peculiarities count for nothing here. Our country has
come to occupy a particular place in the world system, and the economic
collapse here could serve as the prelude to global shocks. The IMF set
out to incorporate Russia, with its corrupt authorities and debauched
lumpen bourgeoisie, into the world system ­ at any price. The
international banks got what they were looking for. As in the Brezhnev
era, their key question is that of 'irreversibility'.
The directors of the IMF are aware that the situation in Eastern Europe
can be kept under control so long as the people there believe in the
prospect of 'integration' with the western European 'centre'. But the
situation for the IMF is worse in Russia, Mexico and Brazil, which have
a certain potential for independent development and which might draw
other countries along with them. Finally, we have become not merely a
source of cheap resources, but also an important market for the
industries of the 'centre'. Our crisis has the potential to destabilise
other countries. Hence the persistence with which the IMF directors and
G7 leaders continue to support corrupt authoritarian regimes in Russia
and Mexico.
A year ago the western press was full of prophesies of success for
Russia. One economist even published a book entitled The Coming Russian
Boom. Such forecasts are like aspirins: they have no long term effect
but do bring immediate pain relief.
Perhaps defending 'weak positions' on the periphery results in the loss
of something important in the 'centre'. Europe has its own potential for
social explosion; it is enough to look at the eastern l?nder of Germany.
The growing difficulties of the IMF inevitably arouse a certain
malicious joy among Russians.
But the situation will not make things easier for us. To escape from the
present dead end, we have to recognise our position in the modern world,
our possibilities and our global responsibility. We have to learn to
take decisions ­ even painful ones ­ independently.
Democratic socialists have put forward a political project which
includes not only nationalisation of the gas, oil and electricity
companies, the metal industry, the largest banks and producers of vodka,
but also the development of a new public sector ­
decentralised, owned and controlled by provincial bodies and local
communities. Indeed, this public sector has already started to be formed
spontaneously by local governments renationalising failing private
companies. Thus we may end up with a new model of decentralised planning
co-ordinated through interregional networks, oriented not towards the
orders of the central bodies but to the needs of communities
The Communist Party (CPRF), in contrast, is reticent about making
concrete proposals. The 'old left' not only lacks a vision for the
future but also lacks the courage to fight for measures which come from
their own tradition.
Most hopeful are the groups which have transitional positions between
the 'old' and 'new' left. Most important of them is The Youth Communist
League (Russian Komsomol) which has broken with the CP leadership, and
has one deputy in the state Duma. The Komsomol's central committee
recently passed a resolution criticising the opportunistic policies of
the 'old' party and asking its members to be prepared to go underground
in case of repression.
On 4 September Viktor Chernomyrdin presented his plan to the Duma. It
included a promise to print more rubles to pay wage and pension arrears,
possible renationalisation of failing companies, a flat 20 per cent
income tax (most workers currently pay 12 per cent). He also promised to
let the ruble float, giving up all efforts to control its rate against
the dollar. After some time, according to Chernomyrdin, the ruble will
be pegged to the rate it has reached as well as to the Central Bank's
gold and currency reserves ­ possibly by surrendering control of the
money supply to a board of outside experts, 'as in Argentina'. Former
Argentinian finance minister, Domingo Cavallo, was parachuted to Moscow
where, after two days of talks with executives who had already destroyed
their country's economy, he presented a salvation plan that was adopted
by Chernomyrdin. Even commentators sympathetic to the government saw the
inconsistency of this plan. TV opinion polls showed that no more then 7
per cent of the population had confidence in the prime minister. The
president's popularity was even lower. A popular TV show asked viewers:
'What would you like to change?' The most popular answer was 'the
president'. The second was 'If the president is going to stay, I want to
move to another country.' On 7 September Chernomyrdin tried to present
his plan to the Duma but he looked weak and tired. Before the vote there
were rumors about deputies being offered bribes to vote for the
government but not many deputies accepted the offer and even fewer
carried out the promise because it was decided that the vote should be
open and its results published. That ended up as a smashing defeat for
the prime minister and a blow for Yeltsin. The deputies knew, though,
that their voters would never excuse them for compromising with the
hated regime.
The only thing we need from the West now is for it to leave us in peace:
to stop imposing ruinous economic policies on us under the pretext of
aid; and to cease prolonging the death agony of the Yeltsin regime. The
money that has been spent on supporting Yeltsin could have been used to
create jobs in Europe and America, to help the poorest countries and to
solve environmental problems. But international bankers don't give money
for these purposes.
Even neoliberal economists in Russia now accept that after the virtual
bankruptcy of the Russian bourgeoisie, massive nationalisations are
inevitable and that there is no way out of the financial mess without
printing money. Communists are in strategic economic ministries.
Yeltsin's alliance between the oligarchs and international capital is
ending. Primakov's appointment means that for the first time there is a
possibility that economic policy will be concerned with the welfare of
the Russian people and stimulating the domestic economy. But radical
ideas are needed to form a new model of the public sector ­ dynamic,
decentralised and democratic.
Claims which might be presented to the IMF following the devaluation of
the ruble are nothing compared to the accounts which Russia's own
population will set before the authorities and the oligarchic elite. The
people at the top are demoralised, and those at the bottom are
embittered. Lenin described such a situation as revolutionary. Of course
the ruling elites are still capable of using repressive forces. But we
should remember the aphorism from the time of Napoleon: you can do many
things with bayonets, but you cannot sit on them. Not for long, anyway.
Boris Kagarlitsky is giving evidence to the US congress about the IMF's
policies towards Russia.
--
Gregory Schwartz
Department of Political Science
York University
4700 Keele St.
Toronto, Ontario
M3J 1P3
Canada
tel: (416) 736-5265
fax: (416) 736-5686
mail: [EMAIL PROTECTED]
web: http://www.yorku.ca/dept/polisci
--------------70BA345050C73EDE8062BDCE
<HTML>
<CENTER>SYSTEM ERROR</CENTER>
<CENTER>-----</CENTER>
<CENTER>The banks have run out of money and the</CENTER>
<CENTER>shops have run out of goods. This time it is</CENTER>
<CENTER>the Russian elite who have lost everything</CENTER>
<CENTER>and the IMF has only limited prospects of</CENTER>
<CENTER>bailing them out. Boris Kagarlitsky assesses</CENTER>
<CENTER>what the future holds (Red Pepper, October 1998)</CENTER>
<P>The ruble collapsed on a Monday morning. The weather in Moscow was unusually
good, not too hot and not too cold. Thousands of residents could walk about
the city observing the fall of the national currency. Best of all was to
stroll about the currency exchange booths. First the rate fell from 6.2
rubles to the dollar to 6.5.
<BR>By midday the American dollar cost 7.5 rubles; by 1.30pm the price
had reached 8.5. After 2pm, it was 9 or 9.5 rubles. By 3pm the banks had
run out of money. The currency exchange booths closed one after another
'for technical reasons'. Strangest of all was what happened to the sale
price of the dollar. For people wanting to get rid of their rubles, the
dollar became more and more expensive, but those who wanted to change hard
currency into rubles were staggered to find that their dollars were still
worth only 6.2 rubles.
<P>The reason for this strange behaviour by the banks and exchange offices
was simple: the authorities insisted on the official rate, which did not
exceed 6.4 rubles to the dollar. Citizens recalled in turn that it was
possible to do without the services of the official establishments altogether,
and began changing money with one another. The black market in hard currency
was reborn.
<P>No one knew how much a dollar was really worth. Since many enterprises
keep their accounts in dollars, but use the ruble for cash transactions,
all commercial operations came to a halt. Worst off were those whose wages
were denominated in dollars, but who were paid in rubles. Entrepreneurs
immediately became staunch patriots, and agreed to pay wages only at the
official rate.
<P>Only a few days earlier, the government had assured the people that
the ruble exchange rate was stronger than ever. In Novgorod on the previous
Friday, Yeltsin had solemnly declared that there would be no devaluation
(by this time people had already begun buying up hard currency on the street,
offering as much as 7 rubles to the dollar). Asked whether he intended
to cut short his holiday and return to the Kremlin, he said: not under
any circumstances; if the president were to interrupt his holiday, people
might think there was a crisis in the country.
<P>By Monday evening the devaluation was a reality; the president was back
in the Kremlin. State officials appeared endlessly on the television screens,
explaining that nothing drastic had occurred. For some reason they did
not utter the word 'devaluation', perferring the Orwellian 'exchange rate
correction' and 'new boundaries of the ruble corridor'.
<BR>By Tuesday evening Prime Minister Sergey Kiriyenko even had some good
news for the population. Life with the new, cheap ruble would be even better,
since Russian products would become more competitive on the domestic and
world markets. People were left wondering why, if devaluation was so positive,
the authorities had not carried it out earlier instead of waiting for the
ruble to collapse.
<P>Not only had the ruble collapsed. The pyramid of Russian state debt,
built up on the same principles as the private pyramids in Russia and Albania,
had also crumbled. Dumbfounded bankers learned that the government would
not pay out on its bonds. Instead of money, it would give the banks new
state securities that were supposed to be even more valuable. Payments
on the private foreign debts of Russian firms were frozen for 90 days.
Immediately, the Russian banking system also collapsed: hundreds of thousands
of people tried to get their money out but the banks simply announced that
they had no cash. SBS-Agro Bank where the Presidential administration kept
its money was among the first to go under. Its owner disappeared after
receiving $100,000,000 credit from the government to save the bank.
<P>The government issued an optimistic statement, stressing that the bitter
truth was better than unrealistic promises, which, however, it would 'not
repudiate'! And the television carried one reassuring report after another.
<P>In contrast, the commercial press was in hysterics, speaking of national
catastrophe and maintaining that we had 'woken up in another country' (curiously,
neither the shelling of the parliament, nor the bombing of Chechnya, nor
the impoverishing of workers in Siberia had aroused such emotions in them).
Unlike the bankers, most of the population did not succumb to panic at
first. On the contrary, people on the streets did not hide their malicious
joy whenever they saw a new price appear on the boards outside the exchange
offices.
<P>Unlike earlier financial crashes, the present crisis has particularly
affected the rich. Those at the bottom of the social ladder have already
been hit so hard that they have no money at all. They live from day to
day, more often bartering than buying. In any case their wages are not
paid for months at a time. As for the middle classes, they have long since
abandoned the ruble, and keep their savings in dollars stuffed into their
biscuit jars.
<BR>Compared to 1992, when savings that had been accumulated over decades
vanished in an instant, or 1994, when 'pyramid schemes' collapsed and buried
the hopes of the middle classes for 'market success', ordinary people,
while realising that the effects for them would not be pleasant, could
not help feeling pleased that life would also now be difficult for the
people driving about in fast cars.
<P>Neither the collapse of the economy, nor the impoverishment of the population,
nor the drawn out slide in production have posed serious problems for the
Russian elite. They have been preoccupied with other matters. The richest
resources have been seized and divided up, and the demands of western financial
institutions have been satisfied. But in the long run, it has proved impossible
to continue down this path. The banking system is becoming ungovernable,
demonstrating the truth of the Marxist thesis that the state of production
determines the state of finances, not the other way round. Seized with
foreboding, western investors are rushing to scoop up their money and quit
the country. Yeltsin is hastily reorganising the security forces, which
are starting to bear an increasing resemblance to the Soviet KGB. Newspapers
are reporting on new tasks that have been placed before the defenders of
the constitutional order: investigating labour militants and opposition.
A federal guard is being established.
<P>On 16 September, prime minister Kiriyenko was sacked and Viktor Chernomyrdin
reappointed. Though the old boss was supposed to calm down the markets,
the opposite happened. The ruble collapsed once again. Unable to control
the situation and unwilling to accept the real state of things the Central
Bank simply closed the currency exchange. People started shopping hysterically,
expecting huge price increases. Once again there were queues and shortages
like those of the late Soviet years. No supplies were imported.
<P>Most of the support for the Yeltsin regime has been 'external', from
G7 and the International Monetary Fund (IMF). The West supported him, gave
him money, and dictated his economic policies. When Yeltsin's regime falls,
will there be anyone to pay back those debts?
<P>The IMF, however, has only recently given Russia new credit &shy;
in order to stave off devaluation. And even after the crash of the ruble,
it seems, the IMF will continue to hand over money. It simply has no other
choice. But the IMF first has to get money from somewhere in order to lend
it. The directors of the fund have already passed the hat around, seeking
additional contributions from donor countries, above all the US. Meanwhile,
isolationist-minded Republicans in the American congress are threatening
to block the appropriations.
<P>The directors of the IMF are in the same trap as the Russian government:
they are the hostages of earlier decisions and, above all, the hostages
of neoliberalism. As a result, the IMF and the World Bank have begun to
play a similar role on a global scale to that the Central Committee of
the Communist Party of the Soviet Union once played for the 'communist
bloc'. IMF and World Bank experts decide what to do with the coal industry
in Russia, how to reorganise companies in South Korea, and how to manage
enterprises in Mexico. Regardless of the 'free market', world practice
has never before known such centralisation.
<P>Even western governments are forced to reckon with this parallel authority.
But this approach has given birth to spectacular problems that are inherent
to any hypercentralised system. The point is not that the neoliberal model
of capitalism dooms most of humanity to hopeless poverty, nor the dependency
the countries on the 'periphery' on those at the 'centre'. Such 'moral'
and 'ideological' issues do not disturb 'serious people'.
<BR>The trouble is that the price of mistakes is becoming unbelievably
high. The huge resources at the disposal of the IMF make it possible to
'stabilise' the situation should Russia collapse. But the neoliberal model
of capitalism is unstable in principle. Rejecting the criticisms of both
Marx and Keynes, and destroying the structures established under the influence
of their ideas, the new world economic order has returned us to the rules
of 'classical' capitalism &shy; including overproduction, financial
catastrophe (the downside of 'victory' over inflation), and, ultimately,
revolutions. The IMF is now working simultaneously as an ideological centre
and a 'fire brigade' &shy; except that the 'firefighters' themselves
are dropping their cigarette butts in the forest.
<BR>Ideologues exist in order to ignore the real state of affairs. But
how long can this continue? In most countries where neoliberal 'reforms'
have been 'successfully'conducted, similar problems have arisen. Russia
is not unique; the difference is only in the scale and severity of the
problems. This is no accident, since monetarist programmes of such scope
have not been implemented with such enthusiasm anywhere else. The result
has been predictable: the bankruptcy of the state.
<P>Like their Soviet predecessors, the ideologues of neoliberalism call
for an orientation towards 'advanced experience' and 'positive examples'.
As in the Soviet Union, all problems are ascribed to errors of particular
officials while achievements are explained as the result of wise, consistent
policies. A few years back, the Czech Republic was proclaimed an example
of the consistent and successful implementation of reforms. Today that
country is in profound crisis and, of course, seeking 'rescue' credits.
The ideologues now tell us that the bureaucrats in Prague did not carry
out 'genuine privatisation', that they sabotaged reforms, and so on.
<P>This is partly true &shy; which explains the relative stability
the Czech Republic enjoyed in the first half of the 1990s. Like their Soviet
comrades years ago, the IMF officials have a single set of remedies for
any ailment, and these remedies are to be applied everywhere from tropical
Africa to the Russian tundra. While saving Russia from bankruptcy (again),
they are advising the Czechs to implement measures that have already failed
in our case. If similar reforms are 'successfully' applied in South Korea,
within five or six ye ars the IMF will have to cope with a new Asian crisis,
compared to which the present one will seem like a petty inconvenience.
<P>Neoliberalism is not responsible for all the problems of the world economy.
We inherited inefficient industries from the Soviet system. But along with
credits, the countries undergoing hard times are offered a package of measures
that not only fail to solve the real causes of the crisis, but create new
sources of instability. The result is that the IMF, the World Bank and
other global financial institutions strengthen their control over the world
economy, but cannot overcome the inertia of their own structures or their
sole 'correct' ideology.
<P>In sum, nothing remains but to continue along the chosen path, trying
to suppress the 'resistance of the material'. Russia, like Mexico earlier,
is being given loans not to solve its problems, but so that it can hold
on for a time without solving these problems. Russian patriots sincerely
think that the West sets out deliberately to play foul tricks on us. There
are very few 'Westernisers' left, who think that the countries of the West
want to help us.
<BR>As in the early years of the century, Russia has again become 'the
weak link of world capitalism.' The Russian soul, mystical 'collectivism'
and other national peculiarities count for nothing here. Our country has
come to occupy a particular place in the world system, and the economic
collapse here could serve as the prelude to global shocks. The IMF set
out to incorporate Russia, with its corrupt authorities and debauched lumpen
bourgeoisie, into the world system &shy; at any price. The international
banks got what they were looking for. As in the Brezhnev era, their key
question is that of 'irreversibility'.
<P>The directors of the IMF are aware that the situation in Eastern Europe
can be kept under control so long as the people there believe in the prospect
of 'integration' with the western European 'centre'. But the situation
for the IMF is worse in Russia, Mexico and Brazil, which have a certain
potential for independent development and which might draw other countries
along with them. Finally, we have become not merely a source of cheap resources,
but also an important market for the industries of the 'centre'. Our crisis
has the potential to destabilise other countries. Hence the persistence
with which the IMF directors and G7 leaders continue to support corrupt
authoritarian regimes in Russia and Mexico.
<P>A year ago the western press was full of prophesies of success for Russia.
One economist even published a book entitled The Coming Russian Boom. Such
forecasts are like aspirins: they have no long term effect but do bring
immediate pain relief.
<P>Perhaps defending 'weak positions' on the periphery results in the loss
of something important in the 'centre'. Europe has its own potential for
social explosion; it is enough to look at the eastern l?nder of Germany.
The growing difficulties of the IMF inevitably arouse a certain malicious
joy among Russians.
<P>But the situation will not make things easier for us. To escape from
the present dead end, we have to recognise our position in the modern world,
our possibilities and our global responsibility. We have to learn to take
decisions &shy; even painful ones &shy; independently.
<P>Democratic socialists have put forward a political project which includes
not only nationalisation of the gas, oil and electricity companies, the
metal industry, the largest banks and producers of vodka, but also the
development of a new public sector &shy;
<BR>decentralised, owned and controlled by provincial bodies and local
communities. Indeed, this public sector has already started to be formed
spontaneously by local governments renationalising failing private companies.
Thus we may end up with a new model of decentralised planning co-ordinated
through interregional networks, oriented not towards the orders of the
central bodies but to the needs of communities
<P>The Communist Party (CPRF), in contrast, is reticent about making concrete
proposals. The 'old left' not only lacks a vision for the future but also
lacks the courage to fight for measures which come from their own tradition.
<P>Most hopeful are the groups which have transitional positions between
the 'old' and 'new' left. Most important of them is The Youth Communist
League (Russian Komsomol) which has broken with the CP leadership, and
has one deputy in the state Duma. The Komsomol's central committee recently
passed a resolution criticising the opportunistic policies of the 'old'
party and asking its members to be prepared to go underground in case of
repression.
<P>On 4 September Viktor Chernomyrdin presented his plan to the Duma. It
included a promise to print more rubles to pay wage and pension arrears,
possible renationalisation of failing companies, a flat 20 per cent income
tax (most workers currently pay 12 per cent). He also promised to let the
ruble float, giving up all efforts to control its rate against the dollar.
After some time, according to Chernomyrdin, the ruble will be pegged to
the rate it has reached as well as to the Central Bank's gold and currency
reserves &shy; possibly by surrendering control of the money supply
to a board of outside experts, 'as in Argentina'. Former Argentinian finance
minister, Domingo Cavallo, was parachuted to Moscow where, after two days
of talks with executives who had already destroyed their country's economy,
he presented a salvation plan that was adopted by Chernomyrdin. Even commentators
sympathetic to the government saw the inconsistency of this plan. TV opinion
polls showed that no more then 7 per cent of the population had confidence
in the prime minister. The president's popularity was even lower. A popular
TV show asked viewers: 'What would you like to change?' The most popular
answer was 'the president'. The second was 'If the president is going to
stay, I want to move to another country.' On 7 September Chernomyrdin tried
to present his plan to the Duma but he looked weak and tired. Before the
vote there were rumors about deputies being offered bribes to vote for
the government but not many deputies accepted the offer and even fewer
carried out the promise because it was decided that the vote should be
open and its results published. That ended up as a smashing defeat for
the prime minister and a blow for Yeltsin. The deputies knew, though, that
their voters would never excuse them for compromising with the hated regime.
<P>The only thing we need from the West now is for it to leave us in peace:
to stop imposing ruinous economic policies on us under the pretext of aid;
and to cease prolonging the death agony of the Yeltsin regime. The money
that has been spent on supporting Yeltsin could have been used to create
jobs in Europe and America, to help the poorest countries and to solve
environmental problems. But international bankers don't give money for
these purposes.
<P>Even neoliberal economists in Russia now accept that after the virtual
bankruptcy of the Russian bourgeoisie, massive nationalisations are inevitable
and that there is no way out of the financial mess without printing money.
Communists are in strategic economic ministries. Yeltsin's alliance between
the oligarchs and international capital is ending. Primakov's appointment
means that for the first time there is a possibility that economic policy
will be concerned with the welfare of the Russian people and stimulating
the domestic economy. But radical ideas are needed to form a new model
of the public sector &shy; dynamic, decentralised and democratic.
<P>Claims which might be presented to the IMF following the devaluation
of the ruble are nothing compared to the accounts which Russia's own population
will set before the authorities and the oligarchic elite. The people at
the top are demoralised, and those at the bottom are embittered. Lenin
described such a situation as revolutionary. Of course the ruling elites
are still capable of using repressive forces. But we should remember the
aphorism from the time of Napoleon: you can do many things with bayonets,
but you cannot sit on them. Not for long, anyway.
<P>Boris Kagarlitsky is giving evidence to the US congress about the IMF's
policies towards Russia.
<BR>
<P>--
<BR>Gregory Schwartz
<BR>Department of Political Science
<BR>York University
<BR>4700 Keele St.
<BR>Toronto, Ontario
<BR>M3J 1P3
<BR>Canada
<P>tel: (416) 736-5265
<BR>fax: (416) 736-5686
<BR>mail: [EMAIL PROTECTED]
<BR>web: <A
HREF="http://www.yorku.ca/dept/polisci">http://www.yorku.ca/dept/polisci</A>
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