The Yeltsin wing represented the interests of the nascent Russian bourgeoisie – the spivs, black marketeers, Mafiosi, speculators and crooks – which had risen to the surface on the basis of the move towards capitalism. They were also the agents of imperialism, unscrupulous elements who did not mind sacrificing the interests of Russia in order to feather their own nests. The other wing broadly represented the interests of the old bureaucracy, the hundreds of thousands of officials whose power, privileges and income depended upon their control of the large-scale nationalised enterprises and collective farms. The latter was, in turn, subdivided into different factions, reflecting the different layers of the bureaucracy, and constituted an extremely large and heterogeneous social grouping.
The government now embarked upon a programme of mass privatisation by means of the issue of privatisation vouchers. It was hoped that twenty-five per cent of state industries would be sold by the end of 1992. Land would also be privatised. Nevertheless, the pressure of the military-industrial complex forced concessions from the government in the form of increased subsidies. Extra funds were given to agricultural production, food subsidies, and housing for the armed forces. Against the opposition of Yeltsin and Gaidar, the Russian parliament voted Rbs200,000 billion worth of credits to industry.
The money supply was effectively out of control and inflation was turning into hyper-inflation. On 2 January 1992, the government abolished the state control of prices which resulted in many goods rising between three-fold and thirty-fold. In practice, prices actually rose in the region of 300-350 per cent. Fares on the Moscow metro rose from fifteen kopecks to fifty kopecks. The other ten members of the CIS were compelled to follow suit and increase their prices, since Russians would otherwise simply buy up goods at controlled prices from neighbouring republics. In March, the price of bread, milk and other staples were increased.
The reaction was intense. Mass demonstrations now took place outside the White House, the Russian Supreme Soviet building, against these massive price rises. To contain the mood of protest, the government was forced to increase the minimum wage by 100 per cent and also raise pensions. These ‘free market’ policies solved nothing, and simply deepened the crisis. Food supplies reached a critical level, with no more than twenty to forty days of stocks left.
The old guard attempted to oppose Yeltsin and his government in defence of their own interests. As The Economist (20/6/92) commented:
After six months of economic ‘shock-therapy,’ Russia’s industrial managers have found their political voice. Alarmed at the speed and direction of the Russian government’s economic reforms under President Boris Yeltsin, Russia’s industrial managers are demanding a greater say in how the country is run.
A new anti-Yeltsin alliance between the ex-Stalinists and nationalists was formed in the parliament called Russian Unity.
In April 1992, the struggle was so intense that Yeltsin was forced to beat a partial retreat. The attempt to effect a swift transition to the ‘market’ and ‘sound economics’ foundered. The Congress of Peoples’ Deputies demanded the resignation of Yegor Gaidar the finance minister and one of the foremost bourgeois ‘reformers’. Yeltsin was forced to dismiss Gaidar but still kept him on as one of his deputies. Yeltsin also announced there would be a softening of the ‘reforms’ and extra credits to cash-starved industries. The Congress pushed harder and demanded higher social provision. Strikes by teachers and hospital workers over wages led to further concessions from the government.
Yeltsin appealed to the West for aid and investment, but the aid given by them was pathetically low: $6 billion to help stabilise the rouble and a loan of $24 billion from the IMF. Yet according to Western financial experts, the amount of funding to give Yeltsin’s reform programme a chance of succeeding would amount to between $76 billion and $167 billion each year for about 15 years. And this figure did not include either the money for supporting rouble convertibility (estimated at $7-10 billion) or the increased cost of cleaning up the environment, itself a pressing task.
Russia ended up with the worst of all worlds – all the disadvantages of bureaucratic bungling and mismanagement and all the disadvantages of corrupt crony capitalism. Thousands of enterprises were continuing to churn out huge quantities of shoddy useless goods which nobody wanted. These were either stockpiled or given away to the workers, instead of wages. Other enterprises were idle, starved of raw materials and resources, where workers turned up, did no work, and only received promises of wages. The result was a colossal rise in wage arrears and inter-enterprise debt.
Throughout 1992, the contradictions between Yeltsin and parliament assumed an increasingly bitter character. In this period, an intense power struggle centred on the proposed new constitution. Deputies were incensed by Yeltsin’s increasing reliance on government by decree. The conflict increasingly revolved around the parameters of executive and legislative authority. But this was merely a reflection of the struggle of underlying material interests. Yeltsin had been hamstrung by the old constitution introduced in 1991. If he was to follow the dictates of Western imperialism, he would need to dispense with the parliament and assume far greater presidential Bonapartist powers.
In 1992 there was intense toing and froing of drafts and re-drafts of revised constitutions, each side attempting to jockey for supremacy. After the four-day extraordinary session of the Russian parliament, Yeltsin faced humiliating defeat. The old guard and its allies in the congress voted to reduce still further the president’s powers, overruling his attempt to introduce rule by decree, sacking his representatives in the provinces, and demanding the formation of a new government of ‘national accord’. Yeltsin hoped to finally break this deadlock through a referendum on his proposals which he scheduled for April 1993. His idea was to use the referendum as a vote of confidence – for or against Yeltsin. This was the method of the plebiscite – the classical method of Bonapartist politicians bidding for absolute power.