After the economic collapse of August 1998, the situation in Russia was grim indeed. The high hopes of the market reformers had been dashed. The extreme unpopularity of capitalism was partially reflected in a big increase in support for the CPRF, but the pro-capitalist policies of Zyuganov and the CPRF leaders rapidly led to disenchantment. The strikes and demonstrations that shook the government in the first half of 1998 gave way to a sullen acquiescence. The regime was in a state of complete prostration, but the workers could see no alternative.

In September 1999, a series of devastating bombings in working class districts of Moscow and other Russian cities killed three hundred people and wounded hundreds of others. The bombings were blamed on Chechen rebels and used as a pretext for a bloody second war against Chechnya, a republic in the Russian Federation. They also were crucial for promoting Vladimir Putin’s takeover of the Russian presidency as Yeltsin’s anointed successor.

There can be no doubt that these bloody atrocities were the work of elements inside the regime or the State Security forces themselves, or any other combination of the same elements. The slaughter of innocent people caused a wave of fury that was cleverly manipulated by the media and the government to whip up war fever. This is not the first time in Russian history that a regime in crisis has attempted to save itself through a ‘victorious little war’.

But nothing could save the regime. By the spring of 1999, the health of Boris Yeltsin – a chronic alcoholic – was declining rapidly. His popularity had declined even more rapidly and there was a strong possibility that his political front Yedinstvo (‘Unity’) would lose the parliamentary and presidential elections. His entourage (including his daughter Tatyana Dyachenko, Yeltsin adviser Valentin Yumashev – who later married Tatyana – the oligarch Boris Berezovsky, and Aleksandr Voloshin, head of the presidential administration) was in crisis. Yeltsin and his two daughters were accused of accumulating large amounts of money in secret bank accounts abroad through illegal transactions with a Swiss construction firm called Mabetex. Berezovsky was under investigation for embezzlement when he had been running Aeroflot.

Finally, the Yeltsin regime fell like an overripe apple full of maggots. Yeltsin was persuaded to step down in favour of Vladimir Putin, a former chief of the KGB (now renamed the FSB) in exchange for immunity from corruption charges and a more than comfortable retirement. On Sunday 7 May, Putin was inaugurated as President of Russia with all the pomp and ceremony of a tsar. Nothing was missing: a twenty-one-gun salute, goose-stepping soldiers with uniforms that seemed to have been borrowed from a Hollywood musical, and even the Patriarch of the Russian Orthodox Church.

The contrast between the sharp-suited, energetic and (relatively) coherent newcomer and the bumbling old alcoholic he replaced could hardly be greater. For the time being, moreover, Putin enjoyed the luxury of being an unknown quantity. The mass media – now firmly in the hands of the Oligarchy – launched a deafening campaign to boost the personal image of the new President. He was shown practising martial arts in the gym – and always flooring a bigger opponent, or reviewing the troops in battledress at the front.

However, the main reason for the success of Vladimir Putin was the improvement of the economy following the crisis. No economy can continue to fall forever. Sooner or later, production begins to recover and that is what occurred in Russia, particularly after the crisis and the devaluation of the rouble in 1998. Lenin explained long ago that capitalism can recover from even the deepest crisis. Unless and until it is overthrown by the conscious movement of the working class, that prediction retains all its validity. The leaders of the so-called Communist Party of the Russian Federation betrayed the movement of the working class and therefore laid the basis for the recovery of Russian capitalism.

This recovery, paradoxically, was assisted by the crisis itself. The sharp depreciation of the rouble, which continued to fall in 1999, making foreign goods inaccessible to most Russians, created a huge demand for home-produced products, thus stimulating the growth of Russian industry. Domestic industries such as food processing benefited from the devaluation. This, together with an increase of international oil prices, created the conditions for a recovery of the Russian economy, which grew by 6.4% in 1999, 10% in 2000 and 5.3% in 2001.

After that, Russia’s economy continued to improve right through to the 2008 world financial crisis, in great measure because of the boom in world capitalism at that time and the consequent demand for Russian oil and gas. Russia ran a large trade surplus in 1999 and 2000. Inflation fell from 85.7% in 1999 to 20.8% in 2000 and 21.5% in 2001. The unemployment rate, which was 13% in 1998 and 1999, decreased to 9% in 2001.

Since Russia’s economy was operating to such a large extent on barter and other non-monetary instruments of exchange, the financial collapse had less of an impact on many producers than it would have had the economy been dependent on a banking system. Finally, the economy was helped by an infusion of cash. As enterprises were able to pay off debts in back wages and taxes, in turn consumer demand for goods and services produced by Russian industry began to enter an upward spiral.

In the period 1993-99 disposable income of the average Russian had gone down by twenty-five per cent in real terms. Now the government trumpeted success. GDP was growing again after ten years of decline – with industry growing by as much as eight per cent in one year. Even allowing for official exaggeration, some improvement had undoubtedly taken place and wage arrears had been reduced. A report published in June 2009, Russia’s Economic Performance and Policies and Their Implications for the United States sums up the position very well. Its author, William H. Cooper, is a specialist in international trade and finance:

Russia experienced strong economic growth over the last 10 years (1999-2008), during which time its real GDP has increased 6.9% on average per year in contrast to an average annual decline in GDP of 6.8% during the previous seven years (1992-1998). The positive GDP trends are reflected in other measurements that point to an improved Russian standard of living throughout the period. Average real wages in Russia increased 10.5% per year from 1999-2008. In addition, real disposable income (the income that the average Russian resident has available from all sources after taxes) grew 7.9% from 1999 to 2008.

This economic recovery gave people for the first time some degree of hope for the future. It was a very important element in the equation. It was undoubtedly a factor of no small importance in shaping the attitude of many workers who adopted a ‘wait-and-see’ mentality. The worker is always a realist. If nobody offers any alternative, and things are not too bad, why not wait to see if anything comes of all the promises? People would say: maybe things are not too good but they are certainly better than before. At least wages and pensions are being paid now. Maybe some good will come of the new man in the Kremlin…

Of course, Putin did not and does not represent the interests of the Russian people and least of all the working class. He represents one wing of the Russian oligarchy that displaced another wing. However, the shift of power from one wing of the oligarchy to the other had a great significance, nationally and internationally.