Western politicians deluded themselves that a capitalist Russia would be weak and divided, and easily dominated by the West. But the idea that a capitalist Russia would be a semi-colony was always a piece of crass stupidity. Ted Grant explained that if the movement towards capitalism in Russia were to be completed, it would not end in a weak, semi-colonial regime, but in an aggressive and powerful imperialism, with a sizeable industrial base and a mighty army. Subsequent events have completely confirmed that prediction.
In the short-term, however, under the rule of Yeltsin, Kiriyenko, Chubais and Nemtsov, Russia became reduced to the role of an auxiliary of the West. The ruling clique of so-called reformers had been desperately attempting to push forward, following the dictates of the IMF and World Bank. But as the crisis developed, a split opened up between different wings of the Russian oligarchy. The Russian capitalists, who owned the banks and big monopolies, had their own interests, which did not necessarily coincide with those of the West.
These former bureaucrats, who turned themselves into tycoons and billionaires by plundering state assets, were just as reactionary, corrupt and degenerate as the other gang. But they did not want Russia to be transformed into a semi-colony of US imperialism and did not want to accept the dictates of the IMF which, among other things, demanded the closure of uneconomic banks, restrictions on ‘crony capitalism’ and a tax regime in which the big monopolies would be forced to pay money to the state.
The introduction of capitalism led to the collapse of Russia’s productive base. With the exception of the speculative boom in finance and services in Moscow and, to some extent, St. Petersburg, the rest of Russia was in a state of collapse. Investment had collapsed and the haemorrhage of capital continued, with the annual outflow of at least $20 billion to the West. The rouble, which had already effectively been devalued by fifty per cent, was to fall still further.
This was a matter of indifference to the voracious Russian businessmen, who were only interested in enriching themselves at the expense of the Russian people, and did not care about production. The only productive investment that continued to some extent was in extractive industries, such as oil and nickel, which the West was interested in.
Russia was now firmly tied to the world market. Lack of investment in agriculture and the consequent fall in production meant that at least twenty-five per cent of Russia’s food was imported from the West. The collapse in production expressed itself in a severe dependence on imports, not just of manufactured goods, but of food and other basic items of consumption. The markets were full of Western goods: German beer, Dutch soap, French perfume, Swiss watches, and Polish sausages.
But the steep fall of the value of the rouble in such a situation led automatically to a sharp increase in the price of foreign imported goods. We had reports of what this meant for the ordinary Russian worker. An article in The Guardian (19/8/98) was quite revealing:
For ordinary Russians, sausages are one of the most revealing measures of post-Soviet decline. Ask a miner how much his standard of living has fallen since Boris Yeltsin moved into the Kremlin seven years ago, and he tells you how many sausages his family ate per week before and how few they eat now.
The Soviet sausage, he says, was full of home-grown meat, but its Russian successor contains Western gristle and fat. The sausage was also a salutary lesson in basic economics delivered yesterday by Mikhail Abramian, a Moscow butcher, as he gave customers the bad news, “I’ve had to raise the price of my sausages because they’re all made from imported meat. It’s not my fault,” he said. “Russia doesn’t produce meat any more. We buy sausage ingredients from abroad and have to buy in dollars”.
As The Guardian commentator said:
Flirtation with the West, its food and financial habits, is ending in tears. A conservative estimate, assuming no further rouble collapse, has Russian inflation rising from seven per cent to twenty per cent this year.
“People can’t and won’t pay thirty per cent more for their food,” said Henryk Kasparian, a food importer. “There will be upheaval. There has to be”.
The falling rouble also meant a huge increase in the cost of repayment of debts. This not only increased the indebtedness of the Russian state, which was already spending a great part of the budget paying off the interest on foreign loans, but also threatened to bankrupt a large number of Russian banks.
On Monday 24 August, the dollar rate for the rouble was seven to one. Two days later its value was almost halved. Long queues were forming outside the banks as Russians started to withdraw their savings and change them into foreign currency as soon as possible. This collapse of confidence threatened to produce a general collapse of the financial system.
The strategists of capital were drawing very pessimistic conclusions. “The market is dead,” said Al Breach, a liberal young British economist in Moscow who had watched the havoc wreaked by the Asian fallout on Russia in the past year. These were troubling words, coming from an admirer of Margaret Thatcher. Breach did not mean the stock market, he meant that the very notion of market mechanisms triumphing over adversity, central to the conclaves of Western advisers and Russian reformers over seven years, no longer applied. “Once you get to this stage it’s impossible to bring it back by market means,” said Breach.
The Russian bourgeoisie itself had little confidence in the future at that time. Andrew Ipkendanz of the Credit Suisse First Boston bank, according to the Financial Times (27.8.98), has admitted: “Russian elites have plundered the country’s capital and funnelled most of the proceeds offshore.”