The French nineteenth century socialist Proudhon invented the celebrated phrase “All property is theft”. From a strictly scientific point of view that is incorrect, but in present day Russia it comes close to the truth. One Western financial strategist, returning from Moscow, confessed that he was “saddened by the pervasive sordidness and decay, the rampant corruption masquerading as capitalism… I left with a palpable sense of foreboding”, adding “that sinister events are waiting to happen”. This was a matter of months before Yeltsin’s bloody assault on the White House and the crushing of parliament in November 1993.
Moscow today is a metropolis in the grip of gangsters, drug pushers and pimps. A society where the state once ruled by fear and commerce was a crime, has been replaced by a jungle in which commerce is ruled by fear and anyone who indicts crime is blown away by a shotgun-wielding hit-man on his doorstep… Meanwhile, the wages of sin are good enough for the new rich of Russia; on a late mid-week evening in the Teatro Grill… sharp young men in designer sports jackets brandishing mobile phones like the fly-whisks of oriental despots are ordering Canadian lobster and French champagne… They share their table with burly minders in leather jackets. The moll is there too… The cynical view is that not only has Russia’s moral and social switchback ride made the mafia inevitable, but also in the medium term, it may even be necessary. Its single-minded dedication to the individual profit motive makes it an armed and lethal force against those who would restore state collectivism. (The Sunday Times, 8/5/94.)
The restoration of capitalism brought with it all the worst features of bourgeois society: destitution, homelessness, unemployment, violent crime and increased alcoholism, while destroying the welfare services. The savage cuts in funding left the health service reeling from one crisis to another. Along with the growth of deprivation came illness and disease. Alcoholism, which was a scourge under the old regime, became an epidemic. Vodka consumption rose steeply since drinking curbs were eased in 1991 and the subsequent liberalisation of trade.
During the period of ‘reform’, real wages in Russia fell by half. Millions of Russians faced malnutrition, if not actual hunger. According to the State Statistics Committee’s annual report, almost 32 million people were receiving less than the government-defined minimum subsistence income of about US$75 a month at the end of 1996. The vast majority were spending every waking hour trying to scrape a living just to survive.
A harrowing picture of Russian life was vividly portrayed in an article by journalist Neil MacKay:
In the winter of 1993, more than 1,000 homeless people were lucky. The government actually acknowledged their existence – when they cleaned their frozen dead bodies off the sidewalks… The breakup of the Soviet empire shook Russia to its foundations, the social welfare net collapsed and the ensuing chaos created the ‘new poor’… Thousands of former prisoners drift into homelessness on their release from ‘the zones’ – Russian penal colonies – and find themselves in a twilight world of numbing degradation. Ex-convicts can be seen shivering on street corners, drinking pints of vodka with refugees of the Afghan war, runaway children and the insane and infirm. (The Big Issue in Scotland, 8-21/12/95.)
But this was only one side of the picture. The desperate position of the masses presented a sharp contrast to the ostentatious wealth of the nascent bourgeoisie and its hangers-on. The move towards the market economy created an elite of super-rich capitalists, recruited from the old Communist nomenklatura, who grew rich through corruption, extortion, and the plunder of state industries. The fleets of cream-coloured Mercedes, the glittering fashion houses stood in insulting contrast to the majority struggling to survive.
According to a World Bank report, one-third of the population was living below the poverty line, while income distribution was as unequal as in Argentina and the Philippines. The 43 per cent fall in real wages between 1991 and 1993, combined with price liberalisation meant increasing numbers of people could not afford the minimum subsistence basket, estimated in November 1994 at about $30 a month.
The new class of Russian capitalists was eager to consolidate its hold on power, privileges and income by such means as death threats and assassination to eliminate business rivals.
At the top end of the market, glitzy supermarkets sell live lobster and expensive champagnes for the country’s new rich. There are ready buyers for $2,000 dresses in Russia’s shiny new fashion boutiques, and the latest Mercedes cars and stretch limousines now cruise Moscow’s streets. (Financial Times, 7-8/10/95)
The consequences of this were not lost on the more intelligent Western observers:
The growing distance between rich and poor is also more shocking to Russian eyes than to Western ones because it has replaced a communist order in which the currency of social status was a political power rather than money and the elites were careful to mask their privileges with paeans to the virtues of the working class.
For these reasons, the increasingly deep divide between the winners and losers created over the past three years by Russia’s traumatic economic and political transformation is emerging as the most important underlying factor in the country’s struggle to determine how to move forward. (Financial Times, 10/4/95.)
The Russian government estimated that apart from the foreign bank accounts and property, there may have been as much as $20 billion in US dollar bills stashed away. Reflecting this new bourgeois culture, Moscow now has the highest concentration of gambling casinos in Europe.
In 1996, GDP fell by a further six per cent. Industrial output was down by five per cent and agricultural output by seven per cent. Output in light manufacturing plunged by twenty-eight per cent and in the construction materials industry by twenty-five percent. Chemical and petrochemical production declined by eleven per cent and new housing construction by ten per cent. Russia’s 1996 grain harvest was the third smallest in thirty years. Nor was Russia’s decline the worst case. In the five years to 1994, the economies of the ex-republics of the Soviet Union plummeted by up to, in the case of Georgia, an astonishing eighty-three per cent. Subsequently there were further falls.
Anthony Robinson wrote in the Financial Times (11/11/94): “The pain has been greater than originally imagined.” Nevertheless, that had not prevented this organ of finance capital demanding far greater pain in its editorial a month earlier (7/10/94): “There is no middle way – only a choice between a Big Bang stabilisation and social economic collapse… Sooner or later, they would have to demand the kind of sacrifices from their people which they have not so far had to make.”
The magazine Newsweek (17/6/96) admitted:
The harshness of the transition has produced fury. In the coal-mining regions of northern Russia, men in the pits went months without getting paid earlier this year. Many pension payments have also been late. If capitalism doesn’t stand for a decent day’s pay for a decent day’s work – or a commitment to make good on obligations to retirees – “then what does it stand for?” asks a bitter Lyudmila Sakharova.
The economic crisis was accompanied by a frightful collapse in living standards. A large proportion of the population was reduced to living in conditions of poverty not seen since the war. Wages were not paid for months on end as a result of the huge debts accumulated by state-owned enterprises and the collapse of the central plan.
Not since the Dark Ages, after the collapse of the Roman Empire, has Europe seen such an economic catastrophe in peacetime. The collapse of production in Russia resembled the effects of a massive defeat in war, or, more correctly, in two wars. It has no parallel in modern history. From 1990 to 1995 production plummeted by around 60 per cent. It could only be described as a historic wipe-out of productive technique and industry. The steep fall in American production of 30 per cent in the Great Depression of 1929-33 was relatively minor by comparison. Each year of life in Russia was equivalent to the deepest depression ever experienced in the West.