Crisis in Russia. Free Market Failure

Russia stands at the parting of the ways. The strategists of capital are facing a completely different situation from that which they had expected when the old Stalinist regime collapsed. They thought there would be a smooth transition to capitalism. That is not what they are getting. Ted Grant and Alan Woods provide a socialist analysis of why and what is the way forward.

Russia stands at the parting of the ways. The strategists of capital are facing a completely different situation from that which they had expected when the old Stalinist regime collapsed. They thought there would be a smooth transition to capitalism. That is not what they are getting. The West has burnt its fingers. The collapse in "confidence" is expressed in the eloquent language of hard cash. They will not invest. Their policy is: No money for Russia unless you stick to the programme of reforms. President Clinton goes to Moscow to inform the Russian people that they must not choose the "easy way"--that is, going back to a nationalised planned economy--but must choose the hard way instead: the road of "market reform". That is, he told the Russian people that they must, in the respectful opinion of the West, have more of the same. They must pursue exactly the same policies that produced the present catastrophe in the first place.

The reason for the alarm in the boardrooms and cabinets of the West is clear. The bourgeois can see that, with the collapse of the attempt to move towards capitalism, the possibility arises of going back to some form of nationalised, centrally planned economy. Such a prospect fills them with dread, not only because of what it would mean for Russia, but because of its impact on a world scale, beginning with the so-called emerging (or rather, submerging) economies. The world crisis of capitalism is expressed in the dominoes-like effect of the economic crisis that began in Asia, spread to Russia and now threatens all of Latin America. Certain governments (Malaysia) are attempting to protect themselves by introducing measures of state control and protectionism that go against the "free market" policies imposed by imperialism through the IMF. This is only an anticipation of the inevitable reaction against the "free market" (i.e. capitalism), that will develop as the crisis unfolds. The strategists of capital see this as a mortal threat to their system, and they are not mistaken.

The pessimism of the Western bourgeois leaps out from the pages of all their most serious journals. The Financial Times (18/8/98) moaned: "Russia has suffered a defeat that could turn into a disaster, not just for Russia, but for the world."

The Marxists warned

Pursuing their own brand of sophistry, the Jesuits of the Western school of political economy argue that what failed in Russia (and Indonesia, Malaysia, South Korea, and all the others which had been held up as glowing success stories of the "market") was not capitalism, but only a defective model of capitalism. But the Marxists explained from the outset that the only sort of capitalism that could develop in Russia was Mafia, or "crony" capitalism. Capitalism in Russia, and all the other so-called emerging countries of Asia and Latin America, has come on the scene of history too late to play a progressive role. As Peter Struve pointed out a hundred years ago, the further East you go, the more rotten, corrupt and degenerate the bourgeoisie becomes. Though formally independent, these countries are under the heel of the USA, Japan and the EU. Through the mechanism of the world market, they are entirely subordinate to, and dominated by, imperialism.

The rotten nascent bourgeoisie that came to the top after the collapse of Stalinism is similar in many ways to the comprador bourgeoisie in ex-colonial countries--corrupt, parasitic, and dependent on imperialism. Under this regime, what little investment there has been from the West was mainly in raw materials oil, gas, nickel and other metals in which Russia is fabulously rich and which, in a rational state of affairs, should make her a prosperous country. But Russian nascent capitalism immediately displayed its bankruptcy, in the literal sense of the word. These crony capitalists had no perspective of developing the Russian economy as a whole. Their perspective was one of transforming Russia into a purveyor of raw materials, for the purpose of enriching the ruling oligarchy. They did not develop the means of production, as the bourgeoisie did historically in the West, and even, to some extent in South East Asia until the recent collapse. They behaved like Asiatic conquerors, plundering the state and the people, and then either squandering their wealth on luxury, or sending it abroad.

The final outcome of this would have been to reduce Russia to the status of a semi-colonial country, something that would inevitably provoke the resistance, not only of the masses, but of a sizeable layer of the old bureaucracy--including the armed forces and the Military Industrial Complex and the regional bureaucracies--which have gained nothing and lost a lot from the movement towards capitalism. For the last seven years, when every other tendency talked about the supposed "final victory" of capitalism in Russia, we alone pointed out that the process was by no means finished, that different outcomes were possible, that many serious contradiction existed, and that, under conditions of world economic crisis it could even be reversed, especially in the event of a movement of the Russian working class. Now these predictions are coming true before our very eyes.

Economic and financial collapse

Thus crony capitalism in Russia has proved totally incapable of developing the productive forces. This is the key to understanding the present situation. Marx and Engels explained that the viability of any regime depends on its ability to develop the productive forces. For the last six years we have seen a massive fall in production. There has been a fall of over 60 per cent. That is unlike any similar collapse in history, far greater than the 30 per cent fall in America after 1929. It can only be compared to a catastrophic defeat, or rather two defeats, in war. The West dispatched its economic witch doctors to practice their vicious experiments on the Russian people. They promised that all the pain (pain for the masses, not for them or their Russian cronies) would be rewarded in the end by unheard of prosperity. Now all these promises have turned to ashes in their mouths.

The whole attempt to introduce capitalism has backfired. Seven years after the beginning of "reform", we are witnessing the total collapse of the Russian economy. Lenin pointed out that politics is concentrated economics. The economic collapse is now accelerating the whole process. We are at a fundamental turning point where quantity is being transformed into quality and everything is unravelling in the opposite direction.

One of the main problems facing the Russian government was its inability to raise cash. Naturally. The payment of taxes has never been the strong point of the Mafia. The so-called new Russians refused to pay their taxes. This is merely a secondary manifestation of the parasitism of the nascent Russian bourgeoisie, which is concerned neither with productive activity nor the fate of the Russian state and people. Their horizon was, and is, limited to the business of getting rich while the going was good and siphoning off their profits to the West. In the last seven years more capital has left Russia for the West than has come in the form of investments. The total annual outflow of capital is at least $20 billion. This would mean a conservative estimate of $140 billion--more than enough to have re-furbished and modernised Russian industry, if it had been put to productive use.

The parasitism and rottenness of the nascent bourgeoisie, its total inability to develop the productive forces, inevitably expressed itself as a financial crisis and a crisis of the Russian state. The Soviet Union, with all its faults and defects, previously produced most of the food and basic goods necessary for its people. Now the entire relation of Russia with the rest of the world has changed. Russia now imports more than half its food. In the case of Moscow the figure is nearer 80 per cent. Under such circumstances, the collapse of the rouble spells dire consequences for the people of Russia.

In addition to wrecking productive industry and agriculture, and making Russia heavily dependent on the West, this has also led to a severe crisis of state finances and colossal indebtedness. To make up for the lack of income from taxation the government was forced to finance its expenditure with what are known as GKOs--government bonds--in effect state-backed IOUs. These short-term bonds were offering yields of 60 per cent or more. On such a basis it was only a matter of time before the state inevitably bankrupted itself. It was simply paying off today's expenditure by piling up huge debts for the future. When the government could no longer find the money to pay the interest on these bonds, it inevitably found itself in a huge financial crisis. Russia's debts have now reached the incredible figure of $194bn, and it is in no position to pay them back. This situation has effectively forced Russia to default. This has caused a howl of protest from foreign investors, who can now expect to receive just 15 to 30 cents for every dollar invested. The result is obvious. The foreign investors who, like bloated leeches, grew fat by battening on Russia's debt, will now avoid Russia like the plague. Even the pathetic figures of foreign investment that existed before will dry up, plunging Russia still deeper into crisis.

We have underlined repeatedly that the key element in the whole situation in Russia was the passivity of the working class. When Stalinism collapsed the workers were disoriented. The experience of decades of Stalinism produced confusion. In the absence of a real Communist Party. they were leaderless and could see no other alternative. In some cases, such as the miners, they actually went along with the idea of moving towards capitalism. But the working class learns through experience. The experience of the delights of the market over the past seven years has shown them what capitalism really means. Huge wage arrears have been accumulating for months, and even years, and the government cannot pay them.

As the economy collapses, primitive barter has made its reappearance, as factories pay workers in the goods they produce, or themselves receive in payment. Workers are obliged to stand on street corners selling Bulgarian pickled cucumbers, socks, or anything else to feed their families. Larry Elliott, economics editor of The Guardian, explained to the Tribune (4/9/98): "Output is about half what it was when communism collapsed. Things are much worse in rural areas and large chunks of the economy are operating on the basis of barter." For a country which succeeded in building a powerful economy, to be reduced to such a level is traumatic. But out of trauma and bitterness is born anger and the realisation of the need to struggle. Here too the events of the last few months and weeks mark a decisive turning-point.

Crisis of the regime

Zyuganov, no doubt attempting to frighten the West and the Russian bourgeois into making concessions, has compared the situation to that which existed in January 1917, on the eve of the overthrow of the tsar. In making this comparison, he is saying more than he intended. There are indeed striking parallels with the Rasputin regime and the present regime in the Kremlin. The crisis of government is a further symptom of the developing revolutionary crisis. A study of history shows that revolution does not start at the bottom but at the top of society. The ruling stratum feels that society is in an impasse and looks for a way out. The crisis reveals itself in the first place in a series of splits at the top, as the clash between "conservatives" and "reformers", that is to say, a clash between one section that favours continuing in the old way, and another which wants to carry out reforms and concessions from the top to prevent revolution from below. This accurately describes the present situation in Russia. We might add that Alexis de Tocqueville pointed out that the most dangerous moment for an autocratic regime is precisely when it begins to change course.

Like tsar Nicholas (whom he seems to admire) and King Louis of France, Yeltsin displays a fatal combination of stubbornness and blindness, mixed up with a dose of low animal cunning in defence of his own interests. Yeltsin was always an unpredictable element in the equation. As the Financial Times (9/9/98), commented: "Then there is the biggest wild card of all--Mr Yeltsin himself. All the backroom lobbying, public analysis and parliamentary speeches are ultimately beside the point. What really counts is the will of the president, and over the past five months Mr Yeltsin has provided ample demonstration of just how mercurial it can be." The impasse of the bourgeoisie is revealed in these few lines. One individual, clearly suffering from advanced senile dementia and years of alcohol abuse, standing at the head of the Russian state could precipitate the situation in just a few days. His unpredictability is not an accident. It is a reflection of the impasse of the regime.

In the early stages of the present crisis, Yeltsin seemed to be prepared to concede some of his powers. Then he went back on his word. His twists and turns are not entirely accidental. He is clinging to power in order to save his own skin and the substantial interests of his family. Yeltsin is frightened of being impeached because his family has plundered the economy in the same way as the Suharto family in Indonesia. He is terrified of the prospect and that explains why he is not prepared to yield his constitutional powers. Thus the interests of one man could plunge Russia into further chaos. Already his hard-headedness has forced the CP leadership, in spite of itself, into opposing Chernomyrdin.

The desperate swings of Yeltsin in the past months cannot be explained purely in terms of personal instability, although that undoubtedly enters as a factor that aggravates and complicates the situation from the point of view of the West. It is an expression of the profound crisis of the regime, which is in a total impasse. The sudden removal of Chernomyrdin and his replacement by Kiriyenko in the Spring took everyone by surprise. Then, in a desperate attempt to hold the situation, Yeltsin attempted to bring back Chernomyrdin, but he was the worst candidate he could have chosen, because of his past. He was the leader of the government for five years. Opinion polls show that 95% of the population detested Chernomyrdin. He is seen as being responsible for the economic collapse. The fall of Chernomyrdin, Yeltsin's candidate, after his rejection by the Duma was a clear indication that something fundamental had changed; that what was involved was not just an accidental incident, but a crisis of the regime itself.

Centrifugal tendencies in the regions

The economic breakdown and collapse of productive investment has had its most ruinous consequences in the regions. The high degree of autonomy which the various regional leaders have managed to wrest from the centre has not led to any improvement. On the contrary, the provinces, which gained nothing from the movement towards capitalism over the past seven years, are now faced with complete collapse and actual starvation this winter. These regional leaders have their own interests, which are in conflict with those of the people in power in Moscow. The lion's share of the investment from the West (not very considerable, in any case) has been channelled to Moscow and, to some extent, Petersburg, where it has been squandered on services and the parasitic finance sector--both of which are now faced with collapse. The profits from these investments were siphoned off to the West. But Russia's industrial hinterland has been completely starved of investment. This produces all kinds of new contradictions, creating an explosive situation.

These contradictions fall most heavily on the shoulders of the working class in the regions, but also affect that layer of the bureaucracy which was left out in the cold, which gained nothing from the introduction of the market. This has created new conflicts within the oligarchy itself. In the present crisis the regional bureaucrats, terrified of an explosion, have been taking measures which, they hope, will calm the population. The governor of Kaliningrad, Leonid Gorbenko, has declared a "state of emergency" although he does not legally have the powers to do so. By doing so he aims to build up reserves of food and fuel to keep down prices, and to guarantee that essential supplies get to the schools and hospitals. In Siberia, newly-elected governor Lebed has frozen the prices of gas, petrol, electricity, and local transport. He has also declared that the prices of locally produced goods and essential foodstuffs will be controlled by decree. He himself explained that these measures placed him on the brink of violating the law, "but I am determined to prevent starvation in the region. Businessmen should understand that I am acting in their interests to prevent a situation in which huge mobs of hungry, angry people take to the streets." (The Guardian, 9/9/98.) Similar measures have been taken in Perm, Novgorod, Smolensk, Omsk and Chuvashia.

If the workers do not succeed in taking power into their own hands and transforming society, there is a danger that Russia might eventually break up into warring local fiefdoms. It is sufficient to recall what happened to Yugoslavia to understand that such a development would be a catastrophe and a nightmare for all the people of Russia. However this is unlikely to take place, because once the working class begins to move everything will change. It is possible that the revolution could begin in the provinces, and not, as in the past, in Moscow and Petersburg. After all, in Albania, the movement began in the south and only reached Tirana later. However, the fact that the economic collapse has now spread to Moscow and Petersburg will mean that they will soon catch up with the rest of Russia.

The army and the danger of Bonapartism

Some commentators have speculated about the possibility of a strong man taking over and cutting across this process. What they are talking about is a Bonapartist solution, some kind of coup. True, there is no shortage of candidates for the job of dictator. But it is not a question of the subjective will of an individual. The laws of counter-revolution are similar to those of revolution. It cannot be carried out at any time and under any circumstances. It depends on the class balance of forces in society. Above all, it depends on the inner situation of the army. But this does not exist in a vacuum. The army always reflects society in general, and the Russian army reflects Russian society. Where society is divided into extreme contradictions, as is the case in Russia, this has a profound effect on the army, which tends to divide on class lines.

There have already been reports of mutinies in the Black Sea fleet, and the Financial Times (2/9/98) reported that, "Underpaid and sometimes underfed, individual soldiers have taken to shooting their commanding officers." This is a clear symptom of a developing revolutionary crisis. If the soldiers are shooting their commanding officers how can such an army be used against the working class? It would be useless as a weapon of Bonapartist reaction, which normally occurs when the workers are demoralised and passive as a result of a series of severe defeats. This may occur in the future, if the workers fail to take power into their hands and transform society on socialist lines. Before such a nightmare scenario develops, however, the working class will move many times. Therefore, the Bonapartist perspective is postponed, because they cannot rely on the troops.

Alexander Lebed, now governor of Siberia, and an ex-general, is one of the most obvious candidates for the job of dictator of Russia. Like most military men, Lebed's understanding of politics is fairly primitive, but even he understands that the perspective of Bonapartism at this moment is plagued with difficulties. In point of fact, Yeltsin probably considered the possibility of doing away with Parliament and ruling by decree himself. The reason why he did not do this is not that he did not want to, but that he could not. In weighing up the options open to Yeltsin after Chernomyrdin had been voted down by the Duma, The Economist (5/9/98), said: "A fourth, most dangerous, option would be to declare a state of emergency and rule by decree without reference to the Duma. But the president is almost certainly too weak for such a rash plan to succeed. 'The authorities would fall within 24 hours,' says Mr Lebed."

The perspective before Russia is not Bonapartist reaction, but revolutionary movements of the working class. This is what terrifies the bourgeoisie both in Russia and the West. The one scenario that they had all written off, but which we have counted on all the time, is now being taken very seriously by the strategists of capital. The same article in The Economist points out that, "The question is now whether even more wretched social and political consequences can be avoided; whether serious unrest might finally erupt among the poor, perhaps even among the army"

And again: "So far the soldiers, the security forces and key workers, such as miners and train-drivers, have held back. Unrest on the streets, spontaneous or organised, is yet to break out. If it did, the choice of a new prime minister could become irrelevant." (The Economist, 5/9/98.)

The army is affected in all revolutions. But here we are not facing a classical bourgeois army. Such an army usually splits along class lines with the troops going over to the workers. What happened in Albania is useful in understanding what could happen in Russia. In the face of the mass uprising in Albania last year, it was not just the ordinary rank and file soldiers that sided with the revolution, but also significant layers, probably the majority, of the officer caste. When the Albanian masses stormed the barracks, there was no resistance. The doors were opened and the soldiers distributed the arms to the population. Many officers helped to train the insurgents in the use of arms, especially in the south where the movement went furthest.

In the case of Russia, the officer caste is divided, as is the whole of Russian society. It is not simply a division between the workers and the ruling elite. The old bureaucracy is not one homogeneous mass. It too is divided. There are those who have gained a lot from the transition to capitalism, like the Chernomyrdins, but there is also the bulk of the bureaucracy, especially the Military Industrial Complex, and the regions outside Moscow and Petersburg, that have gained very little. This division is reflected in the army and the state as a whole, a state which the bourgeois still have not managed to mould into a reliable instrument of class rule. As The Economist (5/9/98) says: "Seven years later the Russian state consists of a few shallowly rooted institutions--a presidency, a parliament, a central bank and so on--which have yet to earn public trust, and which are dwarfed by an impenetrable and antique hinterland of cynicism, incompetence, racketeering and bureaucratic dead-weight."

Going back?

Faced with the dramatic collapse of Russia's economy, the strategists of capital, having firmly denied any such possibility in the past, now talk openly of the possibility of Russia "going back" to some form of centrally planned economy. Such a possibility, as we explained long ago, is implicit in the whole situation. Certainly many Russians would now welcome a return to the "good old days" under Brezhnev, with some reforms to make it more democratic--or even without them! Despite the bureaucracy and the totalitarian regime, the nationalised planned economy guaranteed a job, a pension, health care and education, and nobody went hungry. Compared with the horrors of capitalism, it must seem like a golden age.

However this is not the perspective of Zyuganov and certainly not of Yeltsin and the other representatives of the oligarchy. These gentlemen have been raising the spectre of going back for the sake of the West; as a way of getting more money from them. In reality they want to continue with the process of moving towards capitalism. The problem is that they cannot. Russia needs a lot of money. The money the West has offered so far is a tiny amount compared to what is needed. It has been calculated that Russia would need $50 billion a year for 10 years in order to develop its economy on a capitalist basis but this amount of money will not be forthcoming. In visit to Moscow, Clinton told the Russians that they should take the "hard option" of capitalism and, if they did so, maybe they would be rewarded with help from the West. But the Russians have heard it all before, and know that all the earlier promises of Western help led to nothing. They have become sceptical, and their scepticism will not have been lessened by the fact that Clinton did not mention any sum of money.

The depth of the economic collapse, and the lack of any real prospect of serious investment or aid from the West clearly raises the prospect of the return to some kind of Stalinist regime, i.e. a nationalised planned economy but without the democratic control and management of the working class. The present regime is riven with splits in all directions. The bureaucracy is interested above all in saving itself. Apart from the crony capitalists around Chernomyrdin and Yeltsin, the rest got next to nothing. Faced with a slump in the West and the collapse of the "market reforms" in Russia, the idea that the "old regime" was more stable and guaranteed their privileges must be making headway among this layer of the bureaucracy. In the face of a further deepening of the crisis, and threatened with revolution from below, the bureaucracy and the state could split. The armed bodies of men cannot be relied on. The possibility of a turning back is not at all ruled out, especially in the event of a world slump.

Such a regime would temporarily have the effect of pushing the economy forward, but at a later stage all the evils of the previous Stalinist regime--bureaucratism, inefficiency, corruption and nepotism--would re-emerge. As we have said in the past, this would be a weak regime precisely because the Russian working class is not the small, weak, illiterate working class of the 1920s, but the decisive force in society. It would not tolerate such a regime for long, but would rapidly sweep it away to install a real regime of workers' democracy.

The prospect of a neo-Stalinist take-over in Russia fills the West with dread. It would mean that Russia would soon move to take back the Baltic states and most of the ex-Soviet Republics, most of which are all in a deep crisis, and would probably return voluntarily to the fold. The Baltic states have taken the market road, but they will be affected because a large amount of their exports go to Russia. Belarus has hardly advanced down the capitalist road, and is in serious difficulties, with an annual rate of inflation of 60 per cent and a collapsing currency, the Belarussian rouble, which has fallen from 60,000 to 100,000 to the dollar in one month, while the Ukraine is not much better. The Ukraine could shortly be forced to default on its debt. It has reserves of $800 million, only enough to pay for one month's imports. If Russia goes, the Ukraine, which, if anything, is in an even worse position than Russia, goes with it. The Ukrainians have a proverb: "If it's raining in Moscow, it will soon be raining here." That is certainly true, the collapse of capitalism in Russia would quickly produce the same outcome in the Ukraine. Already the Ukrainians are looking nervously at Russia and drawing their conclusions: "They equate the Russian crisis with reform [i.e. capitalism]," says a western banker based in Kiev, "so the knee-jerk reaction is--we mustn't have reforms here." (The Economist, 5/9/98.)

Eastern Europe, also facing a growing crisis, would probably follow suit, starting with the weaker countries like Bulgaria and Rumania. Even countries like Poland, Hungary and the Czech Republic would face serious difficulties. Despite the fact that the process of capitalist restoration has gone further in these countries, which are more closely linked to the West, the future of capitalism would be in doubt there too, especially as they are hit by the world crisis of capitalism. There will be big movements of the working class. At a certain moment, there will be crises and splits in the Communist parties, placing revolutionary developments on the order of the day.

The imperialists are terrified of such a perspective, which would have tremendous repercussions in the West. That is why they are exerting tremendous pressure on Moscow to stick to capitalism. But they realise that their leverage is now very limited. The faction of the nascent bourgeoisie that backed them (Chubais, Nemtsov, Kiriyenko) has been shattered and driven from power. They have, in effect, lost control over events. In any case, their advice was disastrous in the past and is even more disastrous now. The haughty insistence that Russia must not defend itself against the West by high tariff barriers and measures of state control, including nationalisation of the banks (an essential measure to prevent the collapse of the financial system) conflicts with the interests of the oligarchy. Reluctantly, the imperialists are compelled to accept a coalition government headed by the ex-Stalinist and friend of Saddam Hussein, Primakov, in which the participation of the Communists seems to be the most likely outcome inspite of the pressures of imperialists.

What can a coalition government do?

A coalition, with the possible inclusion of the CP now seems the most likely perspective, although under pressure from below Zyuganov may delay entry for a time, supporting the government from outside. But what could such a government provide? It would not solve any of the burning problems facing the working class. A coalition including the CP could temporarily slow the process of economic disintegration. But this would be only a very short-lived respite for the regime, possibly lasting only a few months. The options are extremely limited. The only alternative to the old policy of deflation--still stubbornly advocated by the West--is one of printing huge quantities of paper money in a desperate attempt to plug the gaping holes in the public finances. Instead of deflation, there will be massive inflation.

Faced with this situation one wing of the bureaucracy and the military are proposing the printing of money, going against all the advice of Western economic "experts". As Mikhail Berger, the editor of Sevodnya, a Russian daily, stated, "The only way for the government to get money is by issuing credits or printing roubles. I've always been an enemy of inflation, but I now think there is no alternative. The government has no other source of money." The bureaucracy have learnt nothing and forgotten everything. Trotsky explained that inflation is the syphilis of a planned economy. It is also the syphilis of a capitalist economy. In the long run it will undermine investment and lead to chaos. Joseph Piradashvili, the manager of a gas exploration company explained that "Soft credits are now unavoidable. I realise that would create inflation, but right now that is the lesser evil."

The fact that the West is not willing to step in with more money leaves the Russian regime with the option of printing money, i.e. inflation. This is not a solution at all. Whatever the bourgeoisie does will be wrong. If they do not print roubles they will not be able to pay workers their wages in the face of spiralling inflation. If they do print roubles inflation will reduce the value of the wages to nothing. They hope to get away with this trick without the workers realising what they are doing. But the workers will soon discover that it is a fraud. They know the meaning of inflation. Already the prices of imported goods have doubled, and the prices of Russian goods are also going up. This explains why the demand for index-linked wage arrears is now being raised by the miners and other workers. So the printing of roubles can only be a very short term solution. It will lead to a crunch in the economy at a later stage with an even deeper collapse, which will lead to an explosion by the working class.

The rouble is sliding further. It has lost two thirds of its value in three weeks. This is much worse than what took place with the Indonesian currency, which took a year to drop 84%. The shops are now empty, due to panic buying. There is also the problem that the wholesalers are not delivering goods to the retailers because they don't know what price to charge. The people are desperate. British TV showed shops with empty shelves. One old woman was interviewed saying how in the "old days" there was always food, but now there is nothing. She added, "I may as well go home and hang myself." Zyuganov is comparing the situation to 1917. This reflects the mood developing among the masses.

Once the masses realise the meaning of this policy--and it will not take long for the effects to be seen--there will be an explosion of the class struggle. Everything points to revolutionary developments within a few months, if not weeks or days. The masses will not be satisfied with a few paper concessions which are not real concessions at all. What is the use of wages being paid if they are immediately rendered useless by price rises? Already, the workers have been putting forward political slogans, calling for Yeltsin to go and relinquish his powers. This pressure from below explains why Zyuganov was so insistent in his opposition to Chernomyrdin and Yeltsin. However, the West want Yeltsin to stay, frightened by what could replace him. They advised him to drop Chernomyrdin and present a candidate more acceptable to the Duma. Some of the more astute bourgeois observers are coming round to the conclusion that a coalition including the CP was the only alternative to ensure stability.

They understood that if Yeltsin had insisted on a conflict over this issue there would have been two possible outcomes. The first would have been the dissolving of the Duma and early elections which would have had to be held in three months' time. The most likely result of such elections would be an outright majority for the CP and thus Zyuganov would have had to govern on his own. Such a government would come under enormous pressure from the masses. Zyuganov would not have the excuse of being in a minority and the workers would pressurise him to sort out the mess that the capitalists have created. The other possibility was that Yeltsin could have done away with the Duma and ruled by decree. There is a presidential, that is, Bonapartist Constitution that he could use to do this. But the correlation of class forces and the state of the army rules this out. It would be seen as a provocation by the masses who would then move from below, producing a revolutionary situation immediately.

These scenarios terrorised the bourgeoisie, both in the West and in Russia. That explains why some of them have come to the conclusion that the lesser evil would be to bring the CP into the government now. The British journal, The Economist, has already reached this conclusion. "Better, perhaps, if a government of national unity could be cobbled together, including the Communists, so that an all-but-neutered Mr. Yeltsin and it is to be hoped a more responsible parliament could stagger on. Russians, however, may think otherwise; and one could hardly blame them." (5/9/98)

Under present conditions, a coalition government is the best option from a bourgeois point of view. But, in the first place, it would be a government of crisis, and probably short-lived. And secondly, it would not necessarily be to the liking of the bourgeoisie. Even such a coalition government could be forced to renationalise some sectors of the economy and carry out some measures to alleviate the situation for the working class. This would bring it into conflict with the IMF, the World Bank and the western bourgeoisie in general. Primakov himself is an unpredictable element. While it is true that he declares himself a supporter of the market "reforms" the West does not trust him. They do not know which way he would swing in the face of further crises and turmoil.

The bourgeois are clearly worried about this. The editorial comment of the Financial Times of 3rd September is a typical example: "A majority in the Duma, led by the rump of the old Communist party, would like to go back to the past. They are convinced that the reforms have led to today's collapse..." The editorial even played with the idea that Yeltsin should have proposed a Communist as Prime minister to break the deadlock. It says that this "would be a desperate move, and a step backwards. But at present there looks to be no other way forward." They consoled themselves with the idea that an attempt to turn the clock back would fail and that this would "remind the Russians that nostalgia is no answer to their problems."

Before the second world war, Leon Trotsky predicted that, under certain circumstances, the reformist leaders in government could be forced to go further than they intend. What pushed Zyuganov into opposition to Chernomyrdin, despite himself, was the enormous pressure building up from below among the mass of workers. This is what terrifies the West and Zyuganov more than anything else. In spite of the comments of The Economist, the position of the bourgeoisie as a whole remains deeply suspicious of the CP. Most of them are still terrified by "Communism". They do not trust Zyuganov, despite all his protestations of loyalty to capitalism. It is not a question of Zyuganov, but the pressure from the working class that he will be under. That is what alarms them.

The 'Communist' Party

In the absence of strong traditional mass organisation of the working class in Russia, the vacuum is being filled by the "Communist" Party led by Zyuganov. But Zyuganov has publicly declared his allegiance to the "market" and all its works. He has all along played the role of the "responsible statesman". Above all, he does not want to do anything that would rouse the masses. Precisely because of these two reasons, the CP has an important role to play from the point of view of the bourgeoisie. In the initial negotiations it seems that the CP had reached an agreement with Yeltsin and Chernomyrdin: there were to be partial state intervention, some nationalisations and some amelioration for the living conditions of the masses, and above all a reduction of Yeltsin's powers. Zyuganov modestly asked for three ministers and would have been willing to compromise just for three ministerial portfolios. At a time when the masses are facing hunger and chaos, the leader of the CPRF is obsessed with parliamentary manoeuvres and the search for positions in a coalition with the bourgeoisie--the exact opposite of everything that Lenin ever stood for.

The problem for Zyuganov is that things are developing down below. He will be under enormous pressure from the masses. Not one of the basic problems of the working class can be solved on a capitalist basis. The crisis will go from bad to worse, no matter which policy they adopt. And if, as is probable, Zyuganov enters a coalition government under Primakov, he will have accepted responsibility for all the calamities that befall the Russian people. The conclusion is inescapable: there will be a Hot Autumn with explosive movements of the working class. In this situation, the CP needs something to offer the masses. That explains why they have been talking of nationalisations. It also explains why the CP was pushed into opposing Chernomyrdin's candidature once the latter had gone back on his proposals. The regime simply could not give Zyuganov what he wanted.

Marxists are not indifferent to parliament. We are not anarchists. But parliament should be used, as the Bolsheviks used it, as part of a campaign to mobilise, arouse and organise the masses outside parliament for the revolutionary struggle to change society. But the parliamentary faction of the CPRF show all the symptoms of the incurable disease that Marx called "parliamentary cretinism". Far from using their position in the Duma, where, in effect, they have the majority, to rouse the working class outside parliament, they confine themselves to manoeuvres and palace intrigues. Since they were elected, the CP leaders have shown their complete spinelessness. On every previous occasion, when the government has been in crisis (and there have been several such occasions) Zyuganov has limited himself to blowing hot and cold, of first putting up a show of opposition and then buckling under at the last minute. The CP deputies, after all, enjoy a series of privileges as a result of their Duma seats, good salaries which, unlike those of the workers, are always paid on time, lavish expenses, flats in Moscow, etc., etc. A single phone call from Yeltsin threatening to dissolve the Duma and call parliamentary elections was always enough to have these ladies and gentlemen scurrying to the negotiation table to sign a deal that meant surrender.

However, this time things were somewhat different. At first, we seemed to be back in the old routine. Just consider the conduct of Zyuganov after the second vote in the Duma on the question of Chernomyrdin's candidature. He had to put up a show of opposition to Chernomyrdin, but then he immediately came out with a compromise proposal. Zyuganov stated that there was a shortlist of five candidates which he could support, Luzhkov, the mayor of Moscow, Yavlinsky, leader of the liberal Yabloko party, Primakov, the acting foreign minister, Stroyev, the speaker of the Federation Council, and Oryol, the governor of a central Russian region. In the end, Yeltsin had no alternative but to put forward Primakov as his new candidate for prime minister. If Zyuganov had stood firm, Yeltsin would have been compelled to dissolve the Duma and call elections in which the CPRF would have won a big majority, in spite of itself. The masses would have taken the opportunity to inflict a devastating vote of no confidence in those politicians who have deceived them and ruined the country. Even if there was not much enthusiasm for Zyuganov, he would necessarily have been the main beneficiary of the people's anger. But such a prospect fills the leader of the CPRF with dread. An election campaign under these conditions would bring the masses to their feet and put pressure on the CP to act like Communists--the last thing they want to do. More than anything else Zyuganov fears winning elections with a big majority which would compel him to show what he can do, and place him under the scrutiny of an aroused and critical working class. Zyuganov fears the masses as much as Yeltsin. He would prefer to be a minority in a coalition government in which the bourgeois parties would have a majority, thus acting as a fig-leaf and an excuse.

The British communist daily, the Morning Star stated on 9th September, "Mr. Zyuganov wants the president to hold broad consultations to find a compromise candidate who will be acceptable to all branches of power. He declined to say who he would prefer as prime minister, but he singled out Moscow mayor Yuri Luzhkov for praise." This is published without comment in a so-called communist journal. It shows to what level they have fallen. They print Zyuganov's statements without any criticism, from which it can only be presumed that the Communist parties of the West support Zyuganov's proposals, which are a complete abandonment of any pretence to act in the interest of the working class and socialism. None of the candidates put forward by the CP were members of the Communist party. In other words the CP leaders, even now, are prepared to be embroiled in the process of transition to capitalism.

While the "Communist" press maintains a discrete silence, the bourgeois commentators speak with malicious irony of the Russian CP leaders' latest surrender. The Guardian (10/9/98) comments: "Last night the Communists, the largest single party in parliament, declared in an 'appeal to the Russian people' that they were ready to form a government. The appeal--a reprise of their 1996 election programme, promising jobs for all, cheap loans and affordable housing--sounded odd after their leader, Gennady Zyuganov, said earlier in the day that he did not want to lead a government. 'There's no time for learning on the job,' he had said. 'We need someone who understands the market'."

This amounts to an admission of total political and ideological bankruptcy on the part of the CP leadership. Shortly after Yeltsin's nomination of Primakov, the Speaker of the Duma, Gennady Seleznyov, and a member of the Communist Party, said, "It is the most reasonable decision and Primakov, of course, will win the support of the State Duma." (Reuters, 10/9/98.) This indicates that the CP leadership around Zyuganov would be prepared to enter a coalition government, if not immediately, at least in the coming period. If Zyuganov enters the government with the idea of heading off the movement of the working class, this will not mean that the workers will not move, but only that the conditions will be created for an explosive movement from below. We must be prepared for sudden changes in the situation. All this explains why Zyuganov is so desperate. The problem is that the entry of the CP leaders into the government would solve nothing, for a very simple reason: they have nothing to offer the masses. It will open up a new and convulsive stage, with big movements of the working class, leading to crises and splits in the Communist organisations everywhere.

The Albanian revolution

The situation in Russia can be compared to what happened in Albania when the Pyramid schemes collapsed, or to Germany in 1923. The working class could have taken power in Albania. Although Albania had gone quite far down the road of capitalist restoration, and almost everything had been privatised, once it became clear that a huge section of the population had been swindled and had lost all its savings, revolution was on the order of the day. At the time we were the only ones to explain that what was happening in Albania was a revolution. We predicted the possibility of a Paris Commune situation in Russia. This is precisely what occurred in Albania. The Albanian workers were leaderless as in Russia, but that did not stop them from moving decisively once the situation reached the critical stage. Faced with such a movement, the army went over to the masses and the police force dissolved. The same process will be seen in Russia, but on a much higher level because of the strength of the working class.

In our article "Albania, the Paris Commune, and the February Revolution" published on the 23rd of June, 1997, we wrote:

"There are many parallels between the Albanian revolution and the Paris Commune. The insurrection in Paris occurred as a result of a whole series of unbearable contradictions which had matured over a long period. France, like Albania, was in the hands of a gang of brigands, who looted the country to enrich themselves. The situation arose out of the disastrous Franco-Prussian War, when the ruling clique in effect was more concerned to fight the working class of Paris than the Prussian army. The contradictions came to a head when the government, in a clear act of provocation, tried to seize the artillery of the Paris National Guard, which was met by a spontaneous uprising. In the words of Marx, the workers of Paris 'stormed heaven'. The collapse of the pyramid schemes in Albania, like the incident of the seizure of the artillery in Paris, was only an accidental phenomenon--the spark that ignited an explosion, but not the real cause. This must be sought in the accumulated discontent that had been building up in society over decades--the privations of the masses, the bankruptcy of the middle classes, the hatred of a corrupt and inefficient government of crooks, adventurers and swindlers. Although the concrete circumstances were different, the essence of the situation remains the same."

Similar developments are possible in Russia. In Albania the revolution started with the collapse of the Pyramid schemes, in Russia it could be a combination of factors, hyperinflation, food shortages, etc. Tragically the Albanian revolution was derailed thanks to the leadership of the ex-CP. In the ensuing elections, 65% of the population voted for the ex-Communist Party which then went on to form the government, but then continued with a bourgeois programme and disillusioned the masses. Russia, however is different from Albania. Albania is one of the most underdeveloped countries in Europe with a large rural population. Whereas in Russia the working class is the decisive force in society. It also has the traditions of 1917 to draw on. The working class will not tolerate the situation and will move to take power into its hands.

The working class

If the situation in Russia is not pre-revolutionary, then it is clearly moving in that direction. Above all, the situation in the provinces is explosive. If the working class takes power in one city it would transform the whole situation. What is new in the situation is that the workers are beginning to move. The miners' struggle, the Moscow picket, and above all the incorporation of new elements, shows that the movement has reached a new stage. The Financial Times (2/9/98) reports: "Russian workers, unpaid for months, had begun to take direct action even before the crisis. This spring, irate coal miners repeatedly blocked railway lines to protest over wage arrears. In depressed cities such as the far-eastern port of Vladivostok, strikes and demonstrations by public sector workers, ranging from teachers to ambulance staff, have become a weekly event. Underpaid and sometimes underfed, individual soldiers have taken to shooting their commanding officers.

"The ranks of this mob of unpaid workers and angry conscripts have now been swollen by a middle class whose savings were eradicated by last month's rouble devaluation and banking crisis."

New and even bigger movements are inevitable. But the key to the entire situation-- the subjective factor-- is missing. There is a crying contradiction between the objective situation, which is rapidly moving in a revolutionary direction, and the chronic weakness of the revolutionary leadership. Future success or failure depends on the ability of the Russian Marxists to resolve this contradiction in the shortest possible space of time.

In the last analysis, everything depends on the movement of the Russian working class. This has already begun, but will intensify over the next period. At the moment the movement that began around the miners seems to have died down. This is inevitable. There is an element of tiredness and, above all, it is due to the fact that the working class is leaderless. However, this temporary truce will not last long. At this initial stage the workers would tend to wait and see what results would be forthcoming from a coalition government--whether things are going to change, above all, whether wages will be paid. But once it becomes clear that such a government is not going to offer any solutions to their problems, the movement will erupt once more with redoubled violence. The whole process will be accelerated. In all likelihood we can expect new movements in the Autumn.

All this will put enormous pressure on the CP and the trade unions. This will provoke new crises and convulsions in the CP. There have already been splits in the CP in a number of areas (Kaliningrad, Kemerovo), but these are nothing compared to what we will see in the future. If the CP were to enter the government, at a certain stage the discontent with the present leadership would grow rapidly, leading to big splits.

The nascent bourgeoisie displayed a cynical indifference to the sufferings of the masses, as long as they were quiescent. The imperialists, in the person of the IMF, were equally complacent when they demanded further deep cuts as a condition for loans. These Christian gentlemen (to whom we must now add Tony Blair) invented a whole new vocabulary, strangely reminiscent of George Orwell's Newspeak, to cover up the economic genocide their policies were causing in Russia: "a dose of austerity", "market discipline", "shock therapy" and so on. In place of scientific analysis, they resorted to the old clap-trap about the supposed peculiarities of the Russian people--their patience and alleged ability to put up with suffering, etc. The same nonsense was frequently expressed by left wing intellectuals in Moscow to cover up for their demoralisation and lack of faith in the working class.

The perspective for Russia may be summed up very simply: either the working class takes power, or there is a danger of chaos and even the break-up of Russia over a period of time, with terrible consequences for the masses. It recalls the scenario described by Lenin in "The Impending Catastrophe and How to Fight It." Similar conditions demand similar measures. Through their experience the Russian workers will come to understand the need for a genuine revolutionary policy. The traditions of Bolshevism and October have not been entirely obliterated by the decades of Stalinism. Above all, the idea of Soviets, of workers' councils, will grow as the struggle develops. Beginning with the most advanced elements, the workers will begin to demand a return to the policies of Lenin in 1917. Starting with the advanced layers, as Lenin did in February 1917, the Russian Marxists must work out a programme of transitional demands that are capable of getting an echo in the masses.

Naturally, the Marxists will energetically participate in all the strikes and demonstrations, they will support every struggle of the workers, and back the movement for Soviets, calling for the establishment of action committees, or "Salvation Committees", as the central demand. Such committees have already appeared at different times in the last few years. The task must be to develop them everywhere, and to link them up, locally, regionally, and nationally. However, the development of a spontaneous movement from below, even if it is expressed in the formation of Soviets, in itself does not solve the problem any more than it did in February 1917. Only the seizure of power can do that. For this, a revolutionary party is needed. But at the moment, this does not exist. The masses do not understand small organisations, even if these have a correct programme and policies. The workers will say: "We agree with your ideas, but you are too small." We must see things through the eyes of the masses, not through our own eyes. The workers look to the CPRF, not because they support the policies of Zyuganov, but because, at this stage, they see no alternative.

With the CP in the government some of the more advanced elements would tend to split away. Marxists will need to orientate to these advanced layers and win them. The Communist movement in Russia is already split, with some of the more advanced layers disgusted with the politics of Zyuganov. This is natural and represents a step forward in consciousness. However, these advanced layers are a small minority. If they are not to be cut off from the mass, they must understand that, given the present vacuum caused by the extreme weakness of the subjective factor, the masses will inevitably look towards the CP in the initial stage of the revolution. The opinion polls are already showing this. The genuine Communists in Russia should go back to Lenin and study his tactics. His classical work "Left-wing Communism, an Infantile Disorder" should be read, and studied, and applied to the Russia of today.

In such a situation Marxists would put demands on the CP leaders, calling for "the expropriation of the billionaires". They would call on Zyuganov to take power, to nationalise the economy and return to Lenin. The Communist Party must break the coalition. Break with the bourgeois ministers and take power. They will not do it? So much the worse for them! The Mensheviks and SRs also refused to take the power, which was what Lenin and the Bolsheviks insistently demanded. That meant that they were exposed before the masses, and the Bolsheviks passed from a tiny minority to a decisive majority in the Soviets. All our fire should be directed against the main enemy--the bourgeoisie and its political representatives. Nationalise what has been privatised. Expropriate the oligarchs. Wages must be index linked to keep pace with inflation. Institute workers' control in order to halt the sabotage of the bourgeois and organise production and the distribution of food and other basic necessities, control prices and deal with speculators. But all this cannot be sustained unless power passes into the hands of the proletariat. Transform society along the lines indicated by Lenin! This would get a response from the masses.

Towards world revolution

What is the effect of the crisis in Russia on world developments? Russia is not a big player in the world economy. But the crisis in Russia has already had an effect on the emerging economies. One after the other, the emerging economies are falling like dominoes, as investors withdraw from them. As the Tribune (9/9/98), explained, "The Washington-based Institute of International Finance says that if Russia defaulted on all repayments then overseas investors would 'lose' $200 billion." The same article quoted Larry Elliott, economic editor of The Guardian as saying "Those banks are going to take a big hit on their profits. They're now going to say we'll be much more careful about lending to emerging markets, like the Brazils and Venezuelas, and they'll also be less keen on lending in their own countries. And so you get a thirties-style credit crunch." The crisis will spread to the whole of Latin America. We can already see it in Brazil and Venezuela. Colombia has already been forced to devalue its currency in anticipation of a financial crisis in neighbouring Venezuela.

The pessimism of the bourgeois refers not just to Russia, but to the entire world situation. It is reflected in the ups and downs of the stock exchanges. These are a symptom of the uneasiness of the bourgeois. On a world level, the USA and Western Europe are still the key. The most optimistic perspective of the bourgeois is to "hope" that the present crisis does not become a full blown slump. In this sense it is worth remembering the situation prior to the 1929 crash when the crisis started in the peripheral countries and only later reached the heart. The present crisis started in South East Asia. It is seriously affecting Japan. It has now spread to Russia, and it will not stop there. The bourgeois in the West will not be able to hold the situation once the recession sets in.

Bourgeois commentators try to comfort themselves by asserting that Germany will not be affected, because only a small fraction of its exports go to Russia. However it does have strong links with countries such as Poland and Hungary. Overall Germany sends about 15% of its exports to Eastern Europe. So if the crisis in Russia spreads to Eastern Europe it could hit Germany's exports, just at a time when it seemed that Germany was facing a slight upturn. This, in turn, could affect growth in Western Europe. Already there are reports of a slowdown in the German economy. In the second quarter of this year the year-on-year rate of growth slowed to 1.7%, after having reached 4.3% in the first quarter.

The Economist (5/9/98) expresses the gloomy outlook facing world capitalism: "At the annual meeting of the Federal Reserve Bank of Kansas City in Jackson Hole, Wyoming, over the weekend, some central bankers were privately admitting that these are the worst global economic conditions they have seen in their lifetime.

"The economic casualty-list makes depressing reading. Japan and most of the rest of East Asia is in deep recession. GDP is expected to fall as much as 15% in Indonesia this year, and by 6-7% in South Korea and Thailand. Russia's government has, in effect, defaulted on its debt; its economic predicament worsens by the day. China may yet respond to the sharp slowdown in its economy by devaluing its exchange rate, and the Hong Kong dollar is under severe pressure. Latin America still teeters on the brink.

"Even some developed economies, such as Britain's and Canada's, are slowing. And Wall Street has fallen sharply from its peak. Indeed, tumbling share prices have wiped almost $4 trillion off the world's financial wealth over the past two months - the equivalent of Japan's GDP.

"Economies that account for two-fifths of world output, measured at purchasing-power parity, are already in recession or stuttering."

Instead of being a huge new avenue for foreign investment, Russia has become a new and convulsive element in the instability of world capitalism. So much for the economic effects. But even more dramatic will be the political effects, once the Russian workers get on the move. A revolution in Russia would have an electrifying effect, first of all on Eastern Europe, China and on the colonial countries, especially with the prospect of a coming slump. The fact that the Chinese bureaucracy has been prepared to give money to Russia, $500 million, shows that they fear the effects of the Russian crisis on China. These are the beginnings of world revolution. Once capitalism begins to collapse at its weakest links, the effects could rapidly spread to the advanced countries. Japanese capitalism is in deep crisis. The advance of the Communist Party of Japan in the recent elections, despite the reformist policies of the leadership, is a symptom of a growing social and political crisis. In Western Europe there have been one movement after another of the workers in the last period. Even in America there is the beginning of an upturn in the strike movement. The coming world slump will cause a general questioning of the capitalist system. In Russia this process has already begun. There is a general rejection of the capitalist system and all its works. This phenomenon will become world-wide as the crisis develops.

Marxism is the only answer

The whole process in Russia is one of a movement towards revolution. The working class is beginning to move. This is reflected in the strikes and demonstrations throughout the country. It is also shown by the move towards the CP on the electoral front. The tragedy of the situation is the lack of a genuinely Leninist party. The Russian workers, in spite of everything, have not lost their revolutionary traditions of 1905 and 1917. Whenever there is a serious movement they throw up their own democratically elected committees, Soviets. These will spread like wildfire once the movement develops. The key to the whole situation now lies in the leadership of the working class. Either the working class succeeds in carrying through the revolution and transforming society, or in the long run Russia will face the prospect of a military police dictatorship. Which way such a military regime would go is another question.

The important thing is that the workers in Russia have begun to move. They have an opportunity to show the workers of the world what a genuine socialist regime could be like. The Russian working class is no longer numerically weak as it was in 1917. It is now the overwhelming majority of the population. A successful revolution, leading to the conquest of power by the Russian working class with the programme of Lenin and Trotsky would have earth-shattering effects. It would turn the tide throughout the whole of Eastern Europe. The grip of the right wing reformist leaders over the Labour organisations would be swiftly broken. What could they say under such circumstances? Long live the market? But the market is rapidly reaching a point on a world scale where it will come tumbling about their ears. The same kind of scenes we have witnessed on the streets of Moscow will tomorrow be reproduced in London, Paris, Tokyo and New York. A new wave of socialist revolutions would be on the order of the day in one country after another, as the coming world economic crisis begins to bite. The conditions are being prepared for a decisive show-down between the classes. The only solution to the problems of working people, in Russia and everywhere else, consists in a radical break with capitalism--that diseased and decaying system that threatens the very future of humanity--and its replacement with a new social order, based on a rational and democratic system of planning, that is the real condition for the emancipation of the human race: WORLD SOCIALISM.

London, 11th of September 1998.