Russian capitalism in crisis

This article has been reproduced from the Socialist Standard (August 1998), the monthly journal of the Socialist Party of Great Britain

Russia is in trouble; and its economy is in dead crisis. According to many commentators, the country is facing its biggest test since “the collapse of communism”. By the end of June, the Russian stock-market had dramatically fallen; and, at one point, the MT50 index of the top 50 companies was down 37 percent over the previous month. Yeltsin was forced to raise interest rates to 150 percent, in an attempt to stop speculators from transferring their roubles into American dollars.

Russia’s crisis is not unexpected; nor is it surprising considering the slump affecting Japan, Indonesia, Malaysia, Korea and other economies of the so-called Pacific Rim. That a weak economy such as that of Russia should be affected by the downturn to the east was inevitable. To state, as have socialists for decades, that capitalism is global, is no more than the bare truth.

The former Soviet Union, of which the Russian Federation was the central core, has indeed collapsed. The former border republics, such as the Baltic States, Belarus, Ukraine and Kazakhstan have all become independent or at least quasi-independent of Moscow; and, in the main, no longer supply Russia with many of its raw materials at less-than-cost. The so-called Commonwealth of the former Soviet Union is a farce. Russia is largely dependent on loans from the International Monetary Fund.

However, what collapsed was not communism (or socialism), but a Russian-dominated empire, misnamed the Union of Soviet Socialist Republics, ruled by a one-party dictatorship and an economy which was over 90 percent state-controlled and owned: a bureaucratic state capitalism in which a relatively small elite (the apparatchiks) creamed off the surplus wealth produced by the workers and peasants of the country. The Soviet empire, and economy, collapsed due to a number of factors: state-run capitalism in the Soviet Union was grossly inefficient and had outlived its usefulness; the Soviet state could no longer carry the weight of the cost of enormous military expenditure, and large sections of the population were no longer prepared to support, or even tacitly accept, a one-party form of government. Moreover, nationalist movements in such areas as the Baltic states and Western Ukraine had become increasingly bold and active.

The change has not, however, benefited the Russian working class or peasantry. Far from it. Throughout the existence of the Soviet Union, they had existed in poverty and degradation, particularly during the first 50 years of the “primitive accumulation” of state capital; and, throughout the period of the collectivisation and “liquidation of the kulaks”, and the purges of the 1930s, together with the forced labour of the Gulag, life for the majority had been insecure and brutal.

But at least, throughout much of the Soviet era, Russian wage-slaves regularly received their monthly wages and, although unemployment always existed to some extent throughout the Soviet period (but denied by so-called Communists), today many Russian workers, still creating surplus value for their new masters, have not been paid for months-“either because the company has no funds available or they have been allocated elsewhere. Last month, coal-miners who had not been paid for up to 10 months blockaded the Trans-Siberian Railway” (Guardian, 16 June).

Other workers, including coal-miners in Southern Russia, have gone on strike, although this has been of little use to them: they still were not paid. The only way in which many unpaid workers have been able to exist is by growing food on small plots of land and gardens. Unemployment is rife, and the actual number unknown.

Not surprisingly, Russian society is dominated by corruption. At the top are the rich haute bourgeoisie, capitalists, of whom many were previously Soviet apparatchiks. Again, the Guardian:

Many analysts believe they have played a significant part in Russia’s crisis. Far from stepping in to bale out the economy, they have been actively enjoying the collapse by trying to weaken the rouble. They then hoped to make huge financial rewards by selling oil and other goods for US dollars.

Organised crime, run by local mafias, is also rife; and there is now an enormous black market, in which millions of Russians take part; but which, naturally, largely benefits the rich.

Taxes are the life-blood of the state; they provide the finance for both the administrative and repressive agencies (including the police and armed forces) with cash. However, the Russian government has, over the years since the collapse of the Soviet Union, failed to collect billions and billions of roubles in unpaid taxes, mainly due to corruption and inefficiency. In 1997, the Russian government collected just 50 percent of the taxes it was owed. Many-probably most-of the largest debtors are prominent capitalists who have done well out of Russia’s semi-privatisation (many large industrial complexes and companies are, in fact, still state-owned). Lukoil, possibly the largest of Russia’s oil companies, owes the state millions of dollars. Yeltsin has promised to reform the tax system. Not that that will make any difference to the poverty of the average Russian worker.

What of the future? The Russian economy may ultimately pick up; corruption may be tackled; most workers may even get paid their salaries on time, but whatever happens, whilst capitalism remains in any form, state or private, or some of each, the workers will still be exploited and repressed, and live in comparative poverty compared to their masters. Looking back to a non-existent “communist” paradise in the former Soviet Union, as have a few mainly older workers, is as much a waste of time as looking forward to prosperity and security in a capitalist, “free-market” Russia.

Author: Peter E. Newell

Please email your comments about this article to

Back to the Global Economy Index

Back to the World Socialist Movement home page