Perestroika and the redistribution of property in the Soviet Union: political perspectives and historical evidence
Published in: Contemporary Politics, Volume
13, Issue 1 March 2007 , pages 3
It is well known that state property has deep, centuries-old roots in
Russian history. In the late nineteenth and early twentieth centuries,
Kluchevski and Kovaleski, Milyukov and Pavlov-Silvanski, Plekhanov and Lenin,
Mashlov and Trotsky all examined the phenomenon from their own particular
perspectives. Nor can the subject be ignored today.1
Modern historiography2 emphasizes the decisive role
played by state property in the development of Russian industry and
agriculture, from Ivan IV to Stalin via Peter the Great. Of course, if we are
to avoid semantic and simplistic explanations, the 'particular characteristics'
of Russia's development need to be interpreted in relation to changing and
structurally diverse historical conditions. Nevertheless, an examination of
these developmental attributes cannot avoid a brief discussion of some common
It is important to recognize that geo-strategic power needs, resulting from
the acquisition, retention, unification and direction of the vast territories
of the Russian Empire, prescribed an essential role for the state and for state
property. The interest of rulers in the expropriation of the labour of a
population scattered across vast territories tended towards the concentration
of property in the hands of the state. In a parallel development, the novel,
though pre-modern, structure of village communities (obshina) was
consolidated during the reign of Peter the Great, which inspired Marx in
developing his ideas about the future of collectively owned property. The
survival of village communities was dependent on Russia's place on the
semi-periphery of the 'modern global system', for which the industrial states
of the 'centre' allocated Russian agriculture the role of grain supplier in the
European 'division of labour'.
With the advance of modern capitalism, ideas such as 'catching up with the
West' and 'modernization' emerged in Russia. Competition with the West promoted
the power of the state and the concentration of property in the hands of the
state since the economic and military tasks of the state could not be fulfilled
without an exceptional role being played by various forms and structures of
state property. Of course, there were other factors at play too. For example,
in Russia, the original accumulation of capital was not completed and the
bourgeoisie remained weak and subservient to the autocracy - the autocratic
state and the productive-economic functions of the state had to be strong to
'substitute' for the lack of an all-Russian national market.
State property in the Soviet Union was not exceptional, but was assigned a
'primordial' status under Stalin. The 'socialist' state completely eliminated
private capitalist ownership and very few believed that state property could be
transformed into private property within a short period of time (though Trotsky
warned back in 1936 that, if it felt its exalted position to be threatened, the
'class' of privileged state bureaucrats would not hesitate to convert state
property, i.e. the property of the workers, into inheritable private property).
Nevertheless, precisely such a dramatic transformation did actually take place,
the groundwork for which was laid by perestroika. Today there still
remain some forms of state property, but it functions in the same way as
capitalist private property. On 1 January 2000, only 4.8% of factories and
enterprises were owned by the Russian state, through such a rapid changeover in
ownership was not possible in respect of agricultural land due to the strength
of the traditions of the multi-layered peasant community.3
It is, therefore, worth analysing some of the most interesting aspects of
the change of system in the Soviet Union from the perspective of the
relationship between perestroika and state property, which can clearly
demonstrate that the definitive problem of the 'transition' period was the
property question. Uncovering the history of the vigorous debates concerning
state property is not just of significance for the professional historian, but
of relevance for all the social sciences.4
Perestroika's place in Soviet history
During the seven decades of the Soviet Union's existence, the relationship
between power and property underwent a series of changes, though these are not
usually referred to as 'system changes'. These changes always occurred when,
alongside the domestic problems of the Soviet state, there was a need to
respond to changing global conditions. The October Revolution that swept the
ruling class from power did not possess a Russia-specific concept of economic
policy for the post-revolutionary era. The first economic system, War
Communism, emerged largely spontaneously, but was also partly based on a seed
of (directly socialized) self-organization and self-management, that had
developed, both in theory and in practice, before the October Revolution, and
of workers' economic control. The basic operative units of the revolutionary
'system' were the factory/plant councils, which gave organizational form to the
unification of local power and property.
From the start, however, the combination of the external military threat and
domestic political constraints and aspirations quickly indicated the
significance of the organizational capacity of centralized power, the
bureaucratization of 'workers' power'. War Communism was conditioned by the
fact of civil war, a Soviet version of Germany's war economy. From the
beginning of 1919, the emergence of War Communism (the nationalization of the
economy for military purposes) saw financial and market relations reduced to a
minimum and private trade prohibited. At the same time the process began of
developing an ideological basis for the economic system. It seemed that communism,
the creation of a natural economy without money that could produce to directly
satisfy needs, could actually be brought about. This idea was reflected in the
well-known work of Bukharin and Preobrazhensky, the ABC of Communism,
and, for a time, this euphoric mindset influenced even Lenin himself.
Industries that had been suddenly nationalized came under the confused and bureaucratic
direction of administrative departments, trustees and people's councils in a
way that no one had planned, but which bore the hallmarks of an authoritarian
system 'appropriate' to both the conditions of civil war and certain Russian
With the end of the civil war and under pressure from peasant uprisings, War
Communism lost its basis for existence. In order to maintain Soviet power, in
the spring of 1920 the Xth Party Congress restored many features of a
capitalist economy within the framework of the 'New Economic Policy' (NEP).
Private trade, a general market and a monetary economy were revived, and even
the privatization of some state assets was mooted. Not only did private capital
reappear, but there were also changes in the forms taken by state property
(such as rental agreements, concessions, trading by state enterprises and
decentralization in their management). It is another matter that for political
reasons Lenin's policy of granting concessions was not received favourably in the
international arena, and with the abatement of Europe's revolutionary movements
the international isolation of the Soviet Union became unambiguous.
The 'partial restoration' of capitalism did not render the dictatorship of
the Communist Party superfluous to those exercising political authority. On the
contrary, they sought to strengthen their authority. The Bolsheviks were ever
conscious of the threat posed by the new state capitalism, fearing that the
'instinctive power' of the market might sweep them from the places they had
secured for themselves in the structure of the state 'through blood and steel'.
Living as they were in a sea of 25 million peasant smallholdings, Bolsheviks
were most afraid of the 'privatization' of state property, which they regarded
(not without cause) as prone to the spontaneous emergence of capitalist
The Soviet Union's experiment with a 'mixed economy' ended with the 'great
breakthrough' of 1929, which coincided with the start of the global Great
Depression. There were two objectives (determined by political considerations)
to the policy of rapid and concurrent industrialization and collectivization.
The first was to eliminate all traces of any 'spontaneous capitalist
restoration' and its adherents, i.e. to extend and consolidate the power of the
Soviet state in the villages. The other was to extract and accumulate capital
from agriculture to serve the needs of industrial production (original
socialist accumulation). To achieve these aims required the employment of violent
methods and the introduction of a command-based planned state economy.
The result of this well-known process was to establish the dominance of
institutionalized forms of state property and a corresponding social structure.
The approach even towards collective farms (kolkhoz) tended towards
total nationalization. Not only did private property disappear, but also forms
of collective property, including those with deeper historical roots in the
agricultural sector. At the same time, the dictatorship of the Party became
'sublimated' to Stalin's personal dictatorship and ossified into a centralized
bureaucratic polity. Underlying each of these transitions, War Communism, the
NEP and Stalin's industrialization/collectivization, were various facts, fears
and geopolitical challenges stemming from the Soviet Union's international
isolation and the desire to maintain a firm grip on power at both the central
and local levels. Therefore, it comes as no surprise that the most recent
transformation of property in Russia was also contingent on international
events and an operational crisis of the domestic machinery of power.
After Stalin's death (though partly instigated by Stalin himself) a reform
of the state-bureaucratic management of the economy was begun that is usually
associated with Khrushchev. As if returning to the NEP, the debate explored the
possibility of developing a decentralized 'mixed economy' or 'market socialism'
in contrast to the bureaucratic management of the planned economy. However,
bureaucratic resistance and a lack of material incentives eventually proved to
be insurmountable problems. It is significant that even where reforms to a
planned economy were implemented, such as the new economic mechanism introduced
in Hungary in 1968, the question of property was not addressed. In the Soviet
Union, the two main camps, the 'marketers' and the 'planners', reached a
theoretical compromise at the XXIInd Party Congress in 1961. The practical
contradictions between the 'planned' and the 'market' economy were reconciled
by the intellectual device of producer autonomy, a return to the Marxist
theoretical tradition advocated by Lenin. In the struggle over economic policy
- and in the interests of retaining power - the two 'camps' could amicably
coexist while the socialization of property remained simply an intellectual
Following the Great Patriotic War, the military-industrial complex acquired
a powerful economic position and resolutely opposed any serious attempt to
alter the role of the state. Post-war reconstruction using the Soviet Union's
own resources, exclusion from the Marshall Plan, and the onset of the Cold War
conserved an 'imperial' mindset. The western powers' political expectations of
the Soviet Union always exceeded the bounds of comfort for the latter, though
this did not preclude periods of economic and commercial co-operation between
the West and the Soviet Union, occasionally of considerable intensity, such as
during the 'thaw' of the seventies.5 Contrary to popular
belief, the isolation of state socialism from the rest of the world was
not the product of a deliberate decision by the Soviet elite that had been
planned well in advance, but was really an adaptation to circumstances, a means
of survival. During the second half of the twenties the culture of isolation
was created, the ideological expression of which became the concept of
'socialism in one country'.6 The collapse of the Soviet
Union and of the other East European state socialisms must be understood in
terms of the abandonment of this culture.
The extension of the arms race into space appeared the logical consequence
of a bi-polar global order and led to attempts at domestic reform to founder
amid the conditions of the Cold War, while also arousing the opposition of both
the bureaucracy and the workers, most of whom had been socialized during
Stalin's regime. Khrushchev's pragmatic political style meant little could be
achieved in respect of the creation of voluntary productive enterprises,
workers' control of the factories or the socialization of state property. The
command economy system remained intact, with only the slightest nod to
small-scale market adjustments, some bureaucratic reorganization and ad hoc
attempts at decentralization. The Cuban missile crisis and the Sino-Soviet
conflict showed that stability could not be counted on in terms of the easing
of international tensions. In other words, political challenges both at home
and abroad proved far stronger than any aspiration to promote the socialization
of public properly.
Another factor was a gradual advance in living standards that enhanced the
state's position and prestige, even in the eyes of the rural population.
Internal supporters of socialization could not organize themselves, as was
seen, for example, by the suppression of the Novocherkask workers' uprising in
1962. Socialization would have made the majority of state and Party
officials, as well as management bureaucrats, superfluous, and called into
question their privileged social position. The defeat of Khrushchev's 'perestroika'
sounded the death knell for even the possibility of such an attempt.
Henceforth, reform of state property in Eastern Europe was reduced to the
spread of market relations, and the Hungarian workers' councils of 1956 and the
Polish 'workers self-management' of the 1980s were burned in the struggle for
Under Brezhnev, the bureaucracy was strengthened again to accommodate new
conditions for a more expansive foreign policy. Together with the less
favourable international climate, this contributed to the slow-down in economic
growth. Liberman's, and later Kosygin's, attempts at reform by 'supplementing'
state socialism with markets while leaving state property untouched proved a
failure. When Brezhnev came to power in October 1964 the global economy was
still expanding and it was confidently felt that the Soviet Union had every
chance to 'catch up' and narrow the gap in economic and social development with
However, from the mid-seventies the gap began to widen again and with the
economic slow-down the Soviet people experienced the hitherto unknown
phenomenon of 'stagnation', though it was still some time before the root
causes of the problem were identified.
In the second half of the eighties, the crisis of the Soviet regime rendered
unavoidable the utilization of all accumulated experiences. The property
question had not arisen as a serious issue in either the Hungarian or
Czechoslovak economic reforms of 1968, but remained a low-key idea lurking in
the background of every idea of reform throughout the decades. Yet, by the late
eighties the crisis in the Soviet Union had grown to such intensity that the
question of private and public property could no longer be avoided, either
intellectually or in practice. The world had changed a lot since the sixties,
but the foundations of the Soviet state, industry and agriculture, as well as
property relations, had been laid in the thirties amidst completely different
global economic conditions. In contrast to the sixties when the global economy
was growing quickly and the Soviet economy effectively narrowed the
developmental gap with the West, neo-liberal globalization of the eighties
forced the Soviet Union into a downward spiral and any hope of 'catching up'
was lost. The détente of the seventies was based on relative military
parity, but over the following decade the Soviet Union was not able to sustain
this parity, with the result that nothing could remain the same.
Perestroika began in 1985 with the aim of reforming the state
socialist system, and ended with the collapse of the system, indeed of the
Soviet Union itself, and the restoration of capitalism. The initial mood of
euphoria that greeted Gorbachev's initiative did not take account of the fact
that by the late eighties the central (capitalist) countries had completed a
cycle of development started many decades earlier with the creation of the
Keynesian 'welfare state'. At the time few perceived the global significance of
this development, but looking back on the 6-year history of perestroika,
we can see the components, characteristics and causes of its failure ever more
In preparation for the XXVIIth Party Congress, a revised draft of the
Party's programme was published on 26 October 1985, which abandoned the
doctrine 'mature socialism' and called for some sort of return, under the aegis
of perestroika, to the long-term perspective of a 'self-governing
socialism'. It was as if perestroika had found its antecedents in the
Khrushchev era.8 At the outset there was not much
disagreement regarding the legacy of the past. However, over the first 2-3 years
of perestroika two main approaches emerged within the Communist Party of
the Soviet Union (CPSU), though in fact there was much movement within an
increasingly complex constellation of political groupings. One of these could
be called the 'conservatives' (thus, 'right wing'), whose starting point was
the maintenance of state socialism and was starkly opposed to the so-called
'democrats' (and others who were critical of the structure), who were referred
to as 'left-wing' and who advocated radical reform, initially calling for a
democratic self-management based on socialism.9
Over the years considerable changes occurred within both camps. The
'conservatives' moved towards the establishment of a nationalistic, etatist
restoration, while the 'democrats' moved away from the left to advocate a
liberal 'civil society' that included the introduction of a multi-party system
and a plurality of property forms. Some even adopted what can be called a
right-wing position, backing a policy to restore capitalist relations.
Internally, however, the 'two camps' presented a confused picture and
represented a wide range of intellectual and political positions.
The contradictions among those who were against the restoration of
capitalism, i.e. the 'socialist camp', were expressed ideologically. On the one
hand, radical leftists, anarchists, Trotskyites, etc. saw 'Stalinism' as the
primary cause behind the return of capitalism. On the other, in a letter
published in Sovietskaya Rossiya on 13 March 1988, the Nina Andreyeva
group (representing those who wanted to maintain the state socialist system
with minimal modification) argued that it was those who attacked the
bureaucracy and the command system who were the 'agents of capitalism'.
Behind these political disagreements lay many different views about how the
country's economy could be restructured and property relations reordered in a
process full of practical considerations and internal contradictions. Nineteen
eighty-eight became a watershed year when, on 1 January, the new Law on
Companies came into force, placing around 60% of industrial enterprises on a
system of self-accounting (hozraschot). This was followed in June when
the Soviet Union established working relations with the International Monetary
Fund (IMF) and the World Bank. It was perhaps not a coincidence that the same
year also saw the rehabilitation of Bukharin, the father of 'market socialism',
on the 100th anniversary of his birth. However, 1988 was also a low point for
the economy as, according to one CIA study, GNP grew by only by 1.5% and
agricultural production fell by 2.5%.10
In May 1988 the Supreme Soviet approved the Law on Co-operatives, which gave
co-operatives the same rights as those enjoyed by state enterprises. The year
also saw the appearance of an officially endorsed theory of producer
self-management, which allowed for a market economy only to the extent of
income derived from personal labour. In respect of property relations, the idea
was to place representative bodies of workers' collectives into a position of
power vis-à-vis the bureaucracy and technical management. However, in
reality it was private capital that was able to set down roots through the
existence of the shadow economy.
In June 1988, in the interests of strengthening societal control over the
Party apparatus, Gorbachev proposed uniting the offices of party secretary and
president of the Soviet Union. After a gap of 70 years and in the name of
democracy, the old slogan of 'all power to the Soviets' was heard once again.
Yet, in resurrecting the revolutionary past, the one-party system became holed
below the waterline. Over the course of the year the Soviet Union stopped
jamming broadcasts by Radio Free Europe and Freedom Radio. Though 300,000
members left the CPSU, more than 18 million remained.
A situation that appeared to promise everything and nothing obfuscated the
fundamental problem that defined the behaviour of the Soviet leadership: the
output of the economic system was insufficient to sustain the Soviet Union's
global position or to preserve domestic welfare. There was no objective
basis for the realization of any of the promises of reform and the idea of
increased 'democracy' had little appeal for the vast majority of Soviet citizens
in the face of deteriorating economic conditions.
In 1988 it was still unclear whether the national and local political elites
and the manager-bureaucrats would accept the country's integration into the
world economy and the total restoration of a market economy as the way out of
the crisis, as this would mean renouncing superpower status and becoming
subservient to the West. Property itself was now becoming a key issue, though
no official document advocated the privatization of public property. On the
contrary, the main trend was towards converting those assets into social
property. In order to examine further the process of transition and the
domestic cataclysm of the Soviet Union, we must consider the fundamental
political and ideological divisions between the period's two most notable
The Gorbachev-Yeltsin confrontation
At the Soviet Communist Party's XXVIIth congress in late February/early
March 1986, Gorbachev and Yeltsin worked together for the 'renewal of a
socialism for the twenty-first century' and for 'accelerating' the struggle
against 'bureaucratic conservatism', 'privileges' and 'communist arrogance'.
Referring to Lenin, both believed in the possibility of reforming the
bureaucratic edifice of state socialism, but differences of opinion swiftly
surfaced, reflecting a complex relationship based on personal and political
The profound tension between the two men came to national and international
attention following Yeltsin's letter to Gorbachev of 12 September 1987
announcing his resignation as party secretary in Moscow. There were clearly
huge political differences between the two, though neither of the protagonists
was probably fully aware of the precise reasons for their disagreement. In the
name of speeding up perestroika, Yeltsin threw down the gauntlet for a
practical and ideological struggle against the bureaucracy by urging a change
of personnel in the Politburo, notably the removal of Igor Ligachev.
Already that year Yeltsin had sought out Gorbachev's weakest point by
strenuously attacking bureaucratic privileges, thus making the more moderate
Gorbachev appear as the defender of the old nomenclatura. At the plenary
session of the Central Committee in February 1988, Yeltsin proposed his own
definition of socialism through the rhetorical question: 'Where are we
heading?' Yeltsin assured his audience that he was not talking about abandoning
socialism, but, on the contrary, its redefinition, the protection of its
achievements and the extension of workers' democracy. In this he was following
Gorbachev who, in a speech given in the Palace of Congress on 2 November 1987,
had himself claimed that the aim of perestroika was nothing less than a
return to the theory and practice of Lenin's concept of socialism.
During February-March 1989 Yeltsin combined the historical opportunity to
construct a multi-party system with a concept of socialism that would
prevent 'social divisions based on wealth'. In an election speech he also
called for the 'intensification of the struggle for social and ethical
justice'.12 At the first session of the Congress of
Peoples' Deputies on 30 May 1989, Gorbachev again aligned himself with the call
to redefine socialism, but also imposed limits within which socialism could be
understood. Gorbachev referred to 'competition between all forms of property'13 and, at the same time, called for 'all power to the
Soviets'. However, he was silent on the practical question of reconciling
Soviet democracy with the existence of independent economic units operating
different forms of property. By then Yeltsin was singing another tune. As part
of the intensifying struggle for power, over the course of 1989 Yeltsin
gradually abandoned the idea of a self-managing, anti-bureaucratic socialism
for that of an unqualified market economy. Gorbachev continued to label Yeltsin
as 'left-wing', not appearing to notice the radical change in the latter's
position.14 The general secretary was unwilling to
concede to Yeltsin the title of 'radical reformer' that had earned him such
prestige in the West (although not in his own country).
Gorbachev was fighting on 'two fronts', against the conservatives and
against the 'loud mouth leftist' Yeltsin.15 However, he
was increasingly forced on the defensive and attacks upon him from a variety of
different directions became even more intense after 1989. In an interview with The
Guardian on 15 March 1990, Gorbachev (still) insisted he was a Communist
even though he had handed some of the Party's power to the Congress of People's
Deputies, which had responded by raising him to the position of President of
the Soviet Union, a development in which he claimed to see an opportunity for
the revitalization of democracy. Gorbachev's first public acknowledgement of
the severity of the crisis came in May 1990 when he accused Yeltsin's faction
of 'endangering socialism'. Yet, at the same time, he also identified
'conservatism' as the main enemy of 'socialist reforms'.
Clearly Gorbachev did not draw the right conclusion from the political
differences at the heart of the conflict and failed to realize how far the
'left-wing' Yeltsin had moved towards a 'right-wing' market position. Instead,
he preferred to put disagreements down to a straightforward struggle for power.
Gorbachev still seemed unable to assess the situation when, as President of the
Soviet Union, he confronted Yeltsin over the issue of Russian independence.
Either because he did not understand the theory, or maybe just for tactical
reasons, he never indicated any awareness that 'modernization' and 'socialism'
were actually two separate paths of development. While the theory underpinning
'modernization' essentially reflects the values of central capitalism,
according to the original vision of perestroika, which he himself had
advocated, the theoretical expression of socialism is synonymous with societal
Finally, despite Gorbachev's formal victory in the referendum of 17 March
1991 on the preservation of the Soviet Union, in reality the state's
dissolution was accelerating as local elites fought for survival and tensions
between the centre and the regions deepened. Political disintegration was
hastened by Gorbachev's need for allies among both the central and the regional
party elites who subsequently embroiled him in their own political manoeuvring.
Federal powers became the subject of political horse-trading, and the general
secretary-president did not receive support from either the elite of the centre
or those in the regions, while the elites at both levels were dissatisfied with
As Gorbachev's principal rival, Yeltsin deliberately sought to speed up the
disintegration of the Soviet Union in his capacity as President of Russia.
Gorbachev found himself bereft of convincing arguments because he approached
the question of the structure of the state purely in legal-political terms,
thus separating the organization of the state from the structure of society.16 This suited Yeltsin who, in 1990, without compunction,
allied himself with the local-regional elite. For decades the formal federal
structure of the Soviet state had made the sovereignty of its constituent
republics a fiction. It was well understood that the accumulation of capital at
the centre and its role as a welfare provider promoted a centralized state
structure. However, perestroika could not ignore the way that the Soviet
state had been constructed. In defence of the republics and the regions, ethnic
identity was proclaimed a value in itself within the Russian Federation, of
which the local elites naturally claimed to be the authentic representatives.
The central authorities of the Russian Federation also proclaimed a nationalist
defence of 'Russian values'.
On 12 June 1990, the Declaration of Sovereignty of the Russian Federation
proclaimed the precedence of local-republican laws over those of the
Federation. Thus began a transformation of the centralized state, which
heralded not its 'modernization', but its abolition. The Russian 'declaration
of independence' effectively announced the 'dissolution' of the Soviet Union
and strengthened the conviction that breaking up the Soviet monolith along the
lines of nation states would ease integration into the global economy.
Gorbachev found himself increasingly isolated within the Party. However, in a
secret document of August 1990, drawn up at a time when the various platforms
within the CPSU were diverging, the Deputy-General Secretary Vladimir Ivashko
warned of the danger of the Party's disintegration.17
Gorbachev had always tried to position himself on the centre ground, in both
the Party and the country, but the 'centre' no longer existed. He distanced
himself from the 'sentimental' Communists in the Party while also clashing with
At the plenary session of the Central Committee in December 1989, Gorbachev
further reduced his base of support by dismissing as 'conservative' a grassroots
critique of the structural problems of the state. The First Secretary of the
Party in Kemerov Oblast, A. G. Melnikov, expressed doubts about the direction
in which perestroika was heading and argued that the process of reform
was becoming discredited just at the point when it was starting to win over
some sections of the masses.18 He warned against the
Party turning its back on the population at a time when conflicts were being
deliberately generated within the Party between the apparatchiks and the
membership, national and central Party organizations, Party committees and the
Party press, Communists and People's Deputies. He urged the members of the
Central Committee 'to note that because of the critical situation in our country
[consumer goods had disappeared from the shops, in many places production had
ceased altogether, strikes, nationality conflicts, economic slowdown etc. -
author's note] we are now praised by the whole bourgeois world, by all our past
and present enemies and even the Pope offers us his blessing. The Central
Committee should reflect deeply on these matters '.19
This was the only speech during the meeting to prompt Gorbachev to rush to
the podium and deliver a long riposte to the effect that the Kemerov Party
Secretary's view was 'dangerous' because it questioned the correctness of where
perestroika was heading, and to insist that 'I will never agree with the
view that we are making a gift to the bourgeoisie! So the Pope is satisfied and
approves! This attitude, I am telling you, demonstrates a provincialism in both
theory and practice which I emphatically denounce. It does not answer the
substance of the question! You should understand that this is an attempt to sow
seeds of doubt in the Central Committee about the decision we have made to go
forward with perestroika!' Gorbachev continued to denounce Melnikov,
even in his final sentence at the end of the plenary.20
Interestingly, in a newspaper article a few days before the
'Operetta-Putsch' of August 1991, Gorbachev insisted that he should not be
considered a traitor as 'those who regard recent events as a betrayal of
socialism reflect a post-Stalinist legacy that is still far from being
exhausted'. Those still stuck thinking in the ways of the past have to
understand that 'the revolution in people's minds is a slow and difficult
process'.21 However, in respect of slow thinking,
Gorbachev never really thought through the possible negative consequences of
his own policies, despite the many warning signs that came from across the
whole territory of the Soviet Union and which were publicized in numerous
articles in the Central Committee's own journal.22 In the
struggle for power, Gorbachev paid more attention to international opinion than
to the 'sensitivities' of the Communists in his own party. Gorbachev's
obsession with 'devolving' power led to him making concessions even when this
was against his better judgement, including on the key issue of the
relationship between property and the survival of the Soviet Union. Of course,
Gorbachev was feted not only by western politicians and the Pope, but many
western Marxist intellectuals also overestimated the opportunities for
socialist progress. Even the eminent Marxist economist and Trotskyite
theoretician Ernest Mandel expressed great optimism at the prospect of the
socialization of state property as part of the process of democratization,
although he modified his views in light of later developments.23
Property and system
Behind the struggle for political power lay the fundamental question of the
regime change: What will become of the state's property? Within the CPSU debate
took place on three distinct but related levels. The first dealt with the
permissibility of including large-scale private property in a 'social market economy'.
The second revolved around the question of whether privatization and the
redistribution of property would allow local republican elites to increase
their independence, undermine central authority and ultimately lead to the
collapse of the Soviet Union. Finally, the ultimate issue for the Soviet
leadership in respect of changes in the ownership and forms of property were
the implications of this for the future social and economic status of the
higher state and Party officials. Recently opened archive sources clearly show
that even as late as spring 1990 the leadership did not fully appreciate the
social, political and economic consequences of their 'revolution' and that,
despite their initial intention, perestroika was fast becoming the means
of an anti-socialist 'change of system'.
The sharpest exchange of views took place prior to the CPSU's XVIIIth
congress (though the congress itself was of little significance and in fact
accelerated the process of dissolution). The Central Committee sat in plenary session
from 5 to 7 February 1990 to prepare for the congress and to draft the platform
of the Central Committee. Documents from this meeting show that the Central
Committee's vision of the future, as outlined in its platform - A Humane and
Democratic Socialism (which was adopted only after a long debate prompting
more than 100 interventions) - was unable to appreciate, either from
theoretical or practical points of view, that the Soviet Union was not
developing towards socialism, but was actually on the verge of a restoration of
It is significant that during the debate the only time the systemic problem
of socialism was raised in the Central Committee was by the 'lead reformer'
Stanislav Shatalin, but even then only on an emotional and semantic level. In
respect of the property question, G. Razumovski read the following statement
from the draft document: 'The Communist Party of the Soviet Union considers
that the current state of the country's economic development does not exclude
the ownership of property, including the means of production, by individual
workers or by groups [of workers]. Irrespective of what form property takes,
the exploitation of human beings cannot be countenanced'.24
Gorbachev's reaction to this passage was to reject the idea of private property
because 'many comrades from workers' collectives, secretaries of Party
committees and those working with them will raise the question of whether such
a move will lead to a negative reaction among the people, among the masses'.
Nevertheless, Gorbachev expressed his approval of the text as 'it expresses the
Party's position to be against the exploitation of labour' and called upon the
Supreme Soviet to assert this position in the framework of a societal debate.
Gorbachev's legendary naïvety and inexperience in economic issues (noticed
also by US President Bush25) was revealed by Shatalin's
response. As a 'democrat' and the chief author of the document setting out the
programme of regime change, he was able to rub Gorbachev's nose in it. Shatalin
observed that all the terms for collective property used in the Central
Committee's document, such as group-, co-operative-, communal- and civic
property, were 'completely undefined'. Shatalin the academic also noted that
'there is even the mention of share ownership. And if Comrade Gorbachev and I
were to suddenly acquire shares, stocks in a company, begging your pardon
Mikhail Sergeyevich, you and I and indeed anyone else who buys shares will establish
the exploitation of one man by another'.
To his credit, Shatalin was the only one who spoke unambiguously about what
was happening in the Soviet Union. He also expressed an opinion about what
should be included in the document regarding the concept of private property.
In his opinion, this question had already been debated by the country's leading
economists at the Central Committee in October and November 1989 - 'We had some
disagreement with Mikhail Sergeyevich but we reached a consensus according to
which private property was not held to be monstrous, but also that there was no
need to produce a programme document on the subject. Am I right, Mikhail
Sergeyevich?' Gorbachev agreed that this was correct and Shatalin continued
with his almost scandalous but crystal clear analysis: 'At my place of work I
am not exploiting anybody, except my fellow workers. However, if I buy shares,
I exploit labour. If I receive a dividend on my investment, likewise, I am a
Eventually the meeting became hostile towards Shatalin when he pointed out
the direct relationship between private property and share ownership and the
exploitation of labour, thus 'exposing' the capitalist nature of the 'socialist
market economy'. Amid the uproar, the academic economist Leonid Ivanovich
Abalkin was called on to speak by Gorbachev and argued that 'I think we should
exclude from the draft any reference to private property and use the concept of the
property of the individual worker'. However, Abalkin himself added further to
the confusion by listing 'co-operative, rental and share ownership' as forms of
collective property. 'In this way', Abalkin summed up, 'we shall have a three
tier system: individual, collective and state forms [of property]. I believe we
must draw a definite line under the thesis that the exploitation of one human
being by another must not be allowed'. Although Abalkin noted that
'bureaucratised property is not socialist property', he also agreed that the
exclusion of all forms of private property was a question of definition.27 It is debatable whether Gorbachev or Abalkin laboured under
the greater misapprehensions, though Shatalin certainly enjoyed the meeting.
We have focused on this discussion as it illustrated the extent to which
Party meetings had no real influence on the course of events and showed how
little the thoughts of the general secretary or of a leading academic economist
counted in the debate.28 As 'personal property' or 'share
ownership' could be understood as either collective or private property, the
decisive factor determining what that 'understanding' would be depended on the
nature of the system itself, but about this there was no debate.
Eventually the document approved by the plenary was written to reassure the
public without actually explaining the true nature of affairs. It endorsed the
principle of different forms of property - the leading role of public property,
the 'de-bureaucratization' or socialization of state property and support for
workers' and collectively owned group property alongside the harmonious
regulation of both a planned and a market economy. At the same time it sought
the Soviet Union's integration with the global economy, the convertibility of
the rouble and the development of market incentives.29 In
other words, it packed together items that could not be made compatible, either
in theory or in practice.
An insight into why this should be can be gleaned from the meetings already
referred to between Gorbachev and the leaders of Hungary. In July 1988 a Party
delegation led by Károly Grósz came to Moscow for talks with Gorbachev who
considered developments in Hungary as a model that could be followed elsewhere.
Both at the time and later, Gorbachev asserted that the aim of perestroika
was to 'strengthen socialism' and saw the similarity and the socialist tendency
of the reforms in both Hungary and the Soviet Union: 'today among all the
socialist countries the Hungarian experience is the most approximate to the
efforts of the Communist Party of the Soviet Union'.30
Neither Gorbachev nor the Hungarian leaders - in accordance with their role
as standard bearers of reform - questioned the correctness of the
'direction of travel'. During the visit of Miklós Németh to Moscow in March
1989, the general secretary mentioned more than once that 'the most important
of task for us all is to be people-centred, it is the renewal of socialism'.
These secret documents (who would have imagined that a decade later they would
be in the public domain?) leave no doubt about the sincerity of Gorbachev's
convictions. However, they also reveal Gorbachev's surprisingly limited
understanding of economic ideas, especially those relating to the ownership of
property. When advising the Soviet general secretary of the Companies Law
passed in Hungary in October 1988, Németh pointed out a provision that
permitted private sector companies to employ up to 500 people, though he noted
that 'such enterprises do not yet exist'. Gorbachev responded with a surprising
question: 'Is the employer a private proprietor?' He received an unambiguous
answer from the Hungarian prime minister who, despite referring to employee
ownership, emphasized the opportunity being created for the 'democratic'
accumulation of capital. Gorbachev then went on to refer to the renting out of
state farmland as a 'cooperative of cooperatives' (in the Soviet Union at that
time all small private enterprises operating on rental arrangements (from state
enterprises) were called co-operatives) and so completely overlooking the
economic and social problems and consequences of capital accumulation
particular to this sector.31
Three weeks later on 23-24 March 1989, Károly Grósz visited Gorbachev again
and, as revealed in a strictly confidential document, Grósz's naïvety matched
that of Gorbachev's. 'Comrade Grósz regarded the development of a long-term
programme to be the primary task' and added that 'the debate is not about
socialism but about the definition of which there are already many different
opinions'! In discussing the different paths to socialism, Grósz assured
Gorbachev that in the struggle for power 'we wish to retain power only by
political means, to find solutions to our problems and avoid armed conflict'.32
It appears never to have occurred to either of them how the danger of 'armed
conflict' could even enter into a debate that was merely about altering the
form of socialism. Instead, Gorbachev informed the Hungarian Party leader that
the CPSU had placed 'the question of the theoretical and philosophical renewal
of socialism' on the agenda of the Central Committee's autumn meeting, though
by then the one-party system in Hungary had all but disintegrated. While
Gorbachev considered it important to handle theoretical questions in a
'flexible' manner so as not to prejudice practical developments, he did seek to
define the main criteria for socialism: 'socialism addresses the interests of
the people, its aim is to improve the people's living standards, eliminate all
forms of injustice and exploitation. It guarantees participation by the people
in the making, monitoring and implementation of decisions'.33
It is worth noting that the 'leftist' Yeltsin had arrived at a similar
conclusion even before he became an advocate of the market.
Later that year on 24-25 July, Rezső Nyers and Károly Grósz visited
Gorbachev in Moscow. Though Nyers argued that property reform was the most
important element of the whole reform programme and stressed the Hungarian
intention to 'democratise publicly owned property', he also explained to
Gorbachev that 'we are thinking of a system that uses existing capital more
efficiently. We are planning to increase the role of private capital and to
attract foreign capital, too'.34 Gorbachev's reaction
mirrored the thinking of Hungary's leaders in respect of both protecting the
system of public property and the need for integration into world markets.
Again, there seems no recognition of the essential contradiction between the
two. At best there was only a concern regarding the implications for
maintaining political power of an increase in western influence. Indeed, by
securing acceptance of the Law on Self-Accounting and Self-Management by the
2nd Congress of Peoples' Deputies in March 1990, Gorbachev hoped to agree a
definitive position on property reform.35
On 7 March 1990 the President of the Supreme Soviet A. Lukyanov sent to the
CPSU Central Committee, for approval, draft amendments to the country's
constitution relating to property, which were to be endorsed by the 3rd
Congress of People's Deputies.36 It is significant that
the concept of private property did not appear among these amendments, which
sought to move the economic system towards the 'socialization' of state
property: 'The economic system of the Soviet Union is based on the collective
and state property of the citizens of the Soviet Union'. The notion of 'civil
property' allowed for 'the pursuit of independent economic activity not
prohibited by law'. However, there was no mention of surplus value or capital
income, only of 'income derived from labour' and 'other legal sources'. With
hindsight this formulation provided the loophole for income to be derived from
the ownership of capital. The proposed Article 12 provided an interesting
definition of what was meant by the term 'collective property' and reflected
Gorbachev and Abalkin's confusion on the issue as well as that of Bogomolov and
Shmelyov from an earlier period.37 Alongside various
association, societies and communities of workers and citizens, 'joint stock
companies' were also listed among the forms of collective property without any
mention of income that would accrue from the ownership of capital in such a
company. Collective property would materialize as part of the 'transformation
of state property' through the 'voluntary amalgamation of the assets of
citizens and organisations'.38 Accordingly, privatization
(i.e. the private appropriation of state property) had no place in the amended
Soviet constitution. In reality, privatization did not come about through the
'voluntary amalgamation' of citizens/workers' assets, but through
administrative 'marketization' or direct political order, as well as to a
lesser degree through foreign investment.
In the final analysis, the real drivers for change were the elites of the
constituent republics, in particular the Russian power brokers' aspiration for
independence. In the second half of 1990 many groups of experts, intellectuals
and politicians that had formed the core of centralized Soviet power gradually
abandoned Gorbachev for service in the new Russian centre of power led by
Yeltsin. Ideologues of perestroika such as Aganbegyan and Zaslavskaya
ditched the original language of perestroika, suddenly 'realizing' that
economic self-management and the democratization of a self-regulating society
were incompatible with a market economy. According to the custom of 'realpolitik',
they too became champions of the so-called 'unconditional' market economy. One
political consequence of this realignment was that on 15 November 1991 many of
Gorbachev's closest advisers and supporters, such as Yuri Afanasyev, Pavel
Bunich, Tatyana. Zaslavskaya and the film director Elem Klimov called for the
discredited president's resignation.
Starting in September 1990, Yeltsin adopted Shatalin's programme, which provided
him with an important organizational weapon since Gorbachev had opposed its
acceptance because it would have meant the immediate dissolution of the Soviet
Union, not to mention the certainty that 'the programme for socialist renewal
would have resulted in the very opposite'.39 In doing
this the political initiative passed to Yeltsin. Anatoli Chernayev, one of
Gorbachev's advisers, wrote about Gorbachev and the situation in his diary as
the process of regime change unfolded day by day.
1 September 1990
At the press conference today
Yeltsin forgave Gorbachev, but said that Rizkov must stand on his own feet, and
if he doesn't, 'we will have to stand him up'. He lavished praise on Shatalin's
programme and promised to make it the basis for the reforms in Russia.
The programme (which I read
through) is not even a European Common Market but some kind of EFTA. Not much
will be left of the Union The people standing in the queues
are criticising and cursing Gorbachev. Letters in today's Pravda
overflow with hatred of perestroika and Gorbachev. Truly, here we are on the
road to Calvary.
Yeltsin is secure for at
least two years but Gorbachev's prospects are diminishing daily and will soon
be zero. Yeltsin has embraced principles and objectives, and takes advantage of
Gorbachev's inconsistencies. Everything that Yeltsin now so loudly proclaims
was said by Mikhail Sergeyevich at some time or other over the last five years
of perestroika. He made no impression then because he was held back by ideology
and still is. This summer in the Crimea he started on an article to prove the
he is standing up for socialism. At the same time he supported Shatalin's
programme which contains not one word about socialism, socialist decisions,
Ultimately he was the one who
drove away all those with whom he had begun perestroika, with the exception of
Yakovlev and Medvedyev. They all left his camp and became Gorbachev's sworn
enemies with certain groups and classes lining up behind them. This process has
been drawn out over three years. This revolution should have been done in the
2 September 1990
What will happen to Rizkov?
What will happen to the economic programme? What will happen to the Union? By
New Year we won't have a country. Will we still have Gorbachev? I hope so
4 September 1990
Shatalin's programme. The Russian parliament is debating it and will accept it.
At the same time, according to the Communist Party of Russia this is a betrayal
of the Soviet Union, of socialism and will hand the country over to
capitalists. Meanwhile, the shortages are worse than ever (only rioting can
follow). There is no bread and where there is, thousands stand in line to buy
it. Something unheard of is happening in Russia. Is it possible that we are on
the threshold of a bloody catastrophe?
Gorbachev appears confused.
His power is slipping away before our eyes. From morning 'till night he
discusses the economic programme and the Union Treaty with all manner of
representatives instead of putting them to parliament. He wastes half his day
at the Congress of the Russian Communist Party. What does he expect from them?
He is dithering, he doesn't know where and how far to go. He doesn't know what
With the XXVIIIth Party Congress the history of perestroika
came to an end and a new process began, which can be called the 'peaceful
change of system'. This process included the dramatic declaration of
independence by Russia (the Russian Soviet Federative Socialist Republic -
RSFSR) led by Yeltsin. Less attention was paid to the significance of Russia's
economic independence proclaimed by two laws signed by Yeltsin at the end of
December, which, in effect, transformed Soviet assets into 'Russian property'
in the interests of privatization. This immediately moved the question of
property relations to the fore41 as it finally dawned on
the majority of Soviet leaders that the existence of the Soviet Union, and thus
their own political positions, were now in imminent danger.
The Central Committee, or rather its Secretariat, raised the alarm in two
documents. Deep concern was expressed at a meeting held at the beginning of
January 1991, conventionally known in Party circles as the 'Ministers' meeting',
which Baklanov, Vlasov and Senyin reported to the general secretary, members of
the Political Committee and the Central Committee Secretariat. Their report,42 dated 5 January 1991, reveals that at the meeting, which
included the ministers for industry, construction, transport and the army, it
was emphasized that an 'extraordinary' situation had arisen in many branches of
industry which needed to be addressed immediately and decisively. Reading
between the lines, the document was an unambiguous warning to Gorbachev that
the dissolution of the Soviet Union would be unavoidable without a
concentration of power. In light of the events of August 1991, there can be no
doubt what those who took part in the meeting meant by 'extraordinary methods'
to concentrate power and 'special measures' which could reverse the train of
events. As it can be seen as possibly the first documented step along the path
that led to the August putsch, the report is worth quoting:
The participants in the meeting
believe that the way out of the current situation is for the country's
leadership to take determined and active measures against those destructive
forces that seek to undermine the sovereignty and economic independence of the
republics, destroy the Soviet Union and wreck its economy. Within the wide
authority exercised by the President of the Soviet Union, survival demands
special measures to restore and strengthen the power of the state, defeat
extremism and separatism and defend the territorial integrity of the country
and the economy. At the same time, great concern was voiced about the deepening
economic crisis which, in many republics, is aggravating separatist tendencies
and the destructive activities of certain parties and movements, fuelling anti-Soviet
agitation and attacks upon the CPSU The participants in the meeting
consider that a decline in social and political stability is leading to a
significant weakening of economic control, the breaking of economic
relationships, falls in productivity and increasing social tension in workers'
collectives. They agreed that measures taken to date to overcome the crisis
have led to no appreciable improvement Echoing the views from workers'
collectives, the ministers expressed their indignation at the activities of
certain leaders of republican Soviets and Governments. Time has run out for
calls for constructive co-operation. Tough and decisive steps are needed to
counter the adventurism of certain political figures who have risen to
prominence on the back of public meetings in many regions the situation
demands the introduction of presidential rule and for a state of emergency to
be declared in the energy and transport sectors, as well as in other important
branches of the economy.43
A few weeks later, a document with the somewhat mischievous
title of 'Report to the Communist Party of the Soviet Union on the economic and
social consequences of questions of property law and legal activity relating to
privatisation in the Russian Soviet Federative Socialist Republic', dated 19
February 1991, was presented to the Party leadership by Luchinski, a member of
the Political Committee, Baklanov, Gorbachev's adviser on defence and secretary
of the Central Committee and Alexander Vlasov. This document outlined the
historic problem even more clearly and comprehensively.44
It seems that this was the first document to recognize in relation to Yeltsin's
legislation that what was at stake was the very survival of the social system
and thus the survival of the Soviet Union itself.
The authors stated that at the end of December 1990, under the flag of an
independent Russia, Yeltsin and his group had ad acta set aside Soviet
laws. Luchinski and Baklanov effectively argued that this meant either Soviet
or Russian law was illegitimate: 'The Supreme Soviet of the RSFSR has accepted
and caused to come into force from 1 January 1991 a law "On property in
the RSFSR" whose object is to alter the socio-economic basis of the social
structure in Russia, ignoring and damaging the interests of the Soviet Union The Supreme Soviet of the RSFSR
has repealed the laws "On property in the Soviet Union" and "On
enterprises in the Soviet Union" The RSFSR's legislative activities
have unambiguously introduced private property, the appearance of which is not
restricted by sector or by scale. The right to take into private ownership
land, capital and means of production has been recognised and the creation of
private companies [that] are allowed to engage in a wide range of activities
with no restriction on their size. Entrepreneurs have been given the right to
employ an unrestricted number of workers. Class differentiation within society
and the creation of a class of wage labourers is inevitable. The law "On
property in the RSFSR" does not include the right of workers to
collectively-owned property and the law "On enterprises in the RSFSR"
does not include a category of company based on collective or popularly owned
property. In light of the fact that the RSFSR Supreme Soviet has declared the
relevant federal laws void throughout the country, we consider that the RSFSR
legislation does not recognise companies based on workers' collective property
or the property of the people. The transformation of state property,
privatization and the establishment of new enterprises are heading towards
capitalist property relations and bourgeois business. There is no possibility
of equality of rights in respect of forms of property In this way, the Russian
legislation serves two main aims. On one hand, it has acquired all the means of
production within its territory by withdrawing them from the Soviet Union. On
the other hand, it has initiated an irreversible social transformation in order
to assist the limitless expansion of private capitalism '.
As the decision of 22 January of the Council of Ministers of the RSFSR
transferred the ownership of all industrial enterprises on Russian territory to
the Republic, there was no longer an economic basis for the Soviet Union (or
for the CPSU's order of 24 December 1990 regarding the validity of the law 'On
property in the RSFSR'). Though Luchinski and Baklanov pointed out that 'these
[Russian] laws conflict with the interests of tens of millions people, with
many thousands of workers' collectives and decisively affect the process of perestroika
and the fate of the country', Gorbachev placed all his hopes on the March
referendum that was to decide the Soviet Union's future.
It is worth noting Luchinski and Baklanov's observation that 'the real and
indivisible assets of the Soviet Union, produced by the labour of many
generations, are being alienated by dictatorial methods and being distributed
along state and territorial lines, which means providing a basis, in respect of
property relations for contradictions and conflicts - including between
nationalities - within the whole edifice'. Despite the use of such antiquated
language, the document clearly identified the main interests and interest
groups, begging the question for Gorbachev: Which side are you on? He could not
decide at the time, and this led to his downfall. Neither those who had
believed in him and in maintaining the state socialist system, many of whom
later became involved in the putsch, nor the Yeltsinites who had embraced
capitalism, supported him any longer. Those who sought a 'third way' between
state socialism and capitalism had lost faith in Gorbachev even earlier. The
practical incompatibility of fundamental tenets of democratic socialism
(multi-party system, workers' democracy, pluralist property forms, social
self-organization, market economic incentives) had ensured they remained empty
In the final analysis, even the document's authors (including Balkanov, who
became one of the leading figures in the putsch, the deputy chairman of the
National Defence Council - Soviet Oborini) were not able to offer
effective counter measures. One of their suggestions was to 'order the Central
Committee of the Communist Party of the Russian Federation to begin working
with workers' collectives to nullify the Russian Federation's law
illegitimately transferring federal assets to the Republic and to raise
awareness of the social and economic consequences of the legislation'. Another
suggestion proposed a more 'authoritarian' solution by asking Gorbachev, in his
capacity as president, to order an inquiry (based on paragraph 124 of the
Constitution relating to the defence of the Soviet Union and the Soviet people)
into the constitutionality and compatibility with Soviet legislation of the
RSFSR's law 'On property in the RSFSR' and law 'On enterprises in the RSFSR'.
In addition, they urged the publication of a presidential decree repealing
Article 3 of the decision of the Supreme Soviet of the RSFSR of 24 December
1990 (which, from 1 January 1991, declared the law 'On property in the Soviet
Union' invalid on Russian territory). Finally, they also advocated using the
Communist parties in the republics throughout the Soviet Union to obstruct the
export of potentially productive assets from the territory of the Soviet Union.
However, as local leaders were naturally more concerned with protecting their
own positions, their interests no longer - to put it mildly - coincided with
the maintenance of the Soviet Unions' state-economic structure. The situation
deteriorated so far that even the August putsch was a dysfunctional event
because there could be no military solution to either the domestic or the
external dimensions of the crisis.
At the same time as struggling to defend federal property, the CPSU was
incapable of protecting or even democratically nationalizing its own assets.
Pressure came from 'below' from the Democratic Forum of the CPSU, which hoped
to turn itself into an independent political party, as well as from the now
'opposition' politicians who wished to achieve the division of the Party's
property in a referendum.45 In the event, the division of
the Party's property was initiated from 'above' when Party leaders began
distributing assets, such as educational institutions.46
In this way the 'nationalization' and privatization of Soviet state property
became irredeemably linked with the very existence or otherwise of the Soviet
Union and the CPSU. A few weeks before the putsch, the Party attempted to
escape the crisis through wholeheartedly embracing the spirit of the market
economy by using manufacturing-trading activities to balance the Party's books,
expanding its publishing business and even considering involvement in
Even when it became apparent that state and Party property was being passed
into the hands of groups over which control could not be exercised,48 the theoretical debates regarding property did not die
down. On the contrary, thanks to glasnost an atmosphere of inquiry
materialized, which many thought could result in a more intellectually grounded
programme. However, the most well thought-through proposals identified a
fundamental contradiction in the attempt to balance a market and a social
economy. In truth, as discussed below, this was the key issue and the one
that meant perestroika would result in a change of regime.
Programmes of regime change
The market - against self-management and workers' property
The first concrete programme for the introduction of a market economy was
the so-called 'Shatalin Plan' of May 1990, which sought to set up a market
economy in the Soviet Union in 500 days. In other words, the aim of the
programme was to transform 'a totalitarian socio-political structure into a
market economy' in less than half the time it took to accomplish Stalin's
programme of collectivization.49 The plan was named after
Shatalin, an academic mathematician who was considered one of the economic
'geniuses' of the age.
With hindsight, Shatalin's plan was an extraordinary mixture of populist
demagogy and political programme built on a dichotomy of state and market: in
the name of the people the state was to implement a transformation against
itself. The preamble of the programme was addressed directly 'to the people'
instead of the state while, at the same time, it began with the declaration
that, compared with all previous reforms, 'the most distinctive innovation [of
the programme] is that its principles are based on a new economic doctrine.
Movement towards a market economy is first and foremost the task of the
state, not that of ordinary people The programme's aim is that
everything possible should be taken from the state and given to the people
[author's italics]. There are good grounds to believe that if the greatest
amount of goods and resources can be returned to the people through appropriate
means, this will result in their far better economic usage and make it possible
to avoid many of the negative consequences of transition to a market economy'.
In the introduction to the programme - 'Concept and programme' -
privatization was defined as the giving back of state property to 'people' and
to 'the people'. With only slight exaggeration, the language and tone in which
the introduction of a system of capitalist private property was discussed made
it seem as if it was actually about introducing societal self-management:
'Through denationalization and privatization, the right to property is realised
by the transfer of state goods into the hands of citizens. It is precisely the
transfer of property to the people that primarily demonstrates the social
orientation of the economy. This is not an act of revisionism, but of restoring
social justice, strengthening the human right to receive a proportion of
In reality, the Shatalin programme, which was to be introduced in August,
meant that some in the Soviet leadership were prepared to disregard the
original economic concept of perestroika, (a programme for producers'
self-management) as developed by Abel Gezevich Aganbegyan. One of Gorbachev's
chief economic advisers, Aganbegyan had produced an entire theoretical
framework for perestroika. The significance of his book was shown by its
speedy publication in English in 1988 with a foreword written by Alec Nove, the
best-known theoretician of 'market socialism'.51 The most
optimistic left-wing socialists had hoped that it signalled the start of the
transformation from 'state socialism' to socialist self-management. However,
this analysis did not take into account (or naïvely ignored the reality) that
an even greater priority than catching-up swiftly emerged as the driving
political force in the Soviet Union, one that was diametrically opposed to the
anti-bureaucratic/self-management-based reform of socialism.
The idea of self-management had appeared earlier outside the Soviet Union.
In Hungary, the practical basis for self-management was weak following the
dissolution of the workers' councils set up in 1956. However, at a theoretical
level it remained a powerful idea. Relatively well-developed theories existed
both as philosophy and in terms of economic science. Even before the change of
system and the return to a market economy (understood as capitalist private
property), the majority of the original theoreticians of self-management in
Hungary pointed to three main issues: (1) the Yugoslav model of self-management
had failed; (2) during the eighties in Poland those advocating self-management
in Solidarity had been defeated; and (3) international conditions had changed
in favour of multinational capital and centres of international finance
(globalization). We should also emphasize a fourth factor, that the rejection of
self-management reflected a change in the interests of economic and political
elites and managers (something that the former advocates of self-management
were not keen to mention). After 1985, neither the intellectual concept of
self-management, nor its political representation was regarded as 'realistic'
because the state socialist elites had become aware of new options for
survival. In Hungary, the majority of George Lukács disciples from 1968 -
contrary to their teacher's views - came to espouse liberal economics justified
by the need to integrate into global processes.
A similar intellectual journey was made in the Soviet Union too, though over
a somewhat shorter time frame. The main outline of a concept of self-management
first surfaced publicly in 1988 and was defeated during the course of 1990
precisely when workers committees of employee collectives emerged to oppose the
alliances of both the democrats (i.e. liberals) and state apparatchiks, as well
as the forces of conservative restoration.52 From the
summer of 1990, the proponents of 'self-management' were represented in the
Central Committee of the CPSU by the so-called Marxist Platform, led by the
young economics professor Alexander Buzgalin. This group was the first to perceive
one of the fundamental characteristics of the situation: that perestroika
would ultimately open the way for a neo-liberal solution to the problems of the
economy. The Marxist Platform believed that only by encouraging workers'
self-management could the Party gain support from the masses that would not
lead back to pre-perestroika days, but to a new economic system in which
many millions of workers would have a direct interest.
The 'free marketers' also advocated that people have a 'stake in the system',
but from the quite different perspective of monetary relations and exchange.
Though not said in so many words, unambiguously by their actions they enabled
the top layers of society, the managers, significant groups among the
nomenclatura, financial bureaucrats, etc. to secure advantageous positions from
which to pursue their interests at the expense of 'the productive classes'. The
entire 'transition', the privatization of state property (as distinct from
socialist self-management or other kind of collective solution), was to be
carried out in accordance with international commercial norms. The supporters
of self-management had no cogent answer to this demand since the majority of
the population (including many of the CPSU's almost 19 million members) was not
'ready' for a non-market model of genuine self-management. From one day to the
next, it was simply not possible to abandon the centuries-old link, or at least
the belief in it, between capital (market) and state power, even though there
was traditionally strong antipathy towards private property in the Soviet
Emotional rejection of private property was one thing, but an even bigger
problem for the advocates of self-management was that society's capacity had
hardly developed due to the overbearing power of the Soviet state. It was no
accident that the workers did not defend state property. Stalin's Constitution
had proclaimed the 'property of the working people', however the form that the
'property of all the people' (Kruschev) took meant that it was under the
supervision and control of a variety of bureaucrats (management bureaucracy,
state and Party bureaucracies, military bureaucracy, etc.) and guaranteed these
groups privileged social status.54 Even when perestroika
was unravelling, the leaders of the CPSU did not incite strikes or mass
movements to 'save' Soviet property by taking direct control over it. In fact,
Gorbachev and his followers were more afraid of mass movements than they were
of Yeltsin's 'change of system', clearly calculating that a genuine revolution
would be more risky than a regime change executed by the elite. Yeltsin had
shown that it was possible to address the masses over the heads of the
bureaucracy, but to incite a genuine mass movement would have entailed enormous
risks, even if this could have been achieved through the old elitist methods.
It remains only to point out that the imposition of self-management from above
is a contradiction in terms.
As is well known, the bureaucracy erected a monumental institutional
structure for itself over the decades. In 1987, the Soviet economy supported 38
state commissions, 33 federal ministries and more than 300 regional ministries
and authorities.55 Drawing on the authority of
Aganbegyan, the literature emphasizes that each of these 400-odd bodies
possessed its own bureaucracy: departments, directorates, offices and other
units. Many millions were employed by some 1.3 million productive units (43,000
state enterprises, 26,000 construction companies, 47,000 in agricultural
organizations, 260,000 services providers and over 1 million retail units). All
these bodies employed some 17 million people, around 15% of the total
workforce. Top management itself accounted for up to 3 million people.
The initiators of perestroika hoped to lay siege to this bureaucratic
bunker with the mutually fortifying movements of workers' self-management and glasnost.
Aganbegyan reported a degree of success in the election of factory directors by
workers (in accordance with the government's policy and vision of economic
development). As a result, workers' co-operatives were no longer the employees
of the directors, but the other way around, or at least the two enjoyed a
complimentary relationship. Such developments seem to ensure the socialist
direction of economic reform as management could not emerge as an independent
force in opposition to the workers and limits were placed on arbitrary and
excessive state interference in the economy.
For a short while it appeared that perestroika's tendency towards
self-management was being built on solid foundations. Already in 1983 Andropov56 (whose experiences in Hungary meant he was familiar with
the subject) had made some allowance for producer self-management to contain
and counterbalance both the bureaucracy and the consequences of market reforms.
However, it became apparent that the leasing out of small-scale, state-owned
enterprises resulted in consumer goods migrating to the private, 'capitalist'
sector - initially accompanied by a threefold rise in prices - which Andropov
sought to control through discipline and 'social vigilance'.
From 1988, perestroika provided the framework for attempts to weaken
central control through the embrace of the market and market mechanisms,
central to which was the hozraschot system of independent enterprise
accounting that was invoked by both the 'free marketers' and the advocates of
self-management (though using different meanings of the term). This key element
of 'market socialism' entailed the replacement of central planning directives
by policies of local prices and incentives, extensive autonomy for individual
enterprises and decentralization in general. We have already seen that, from
1988, the problem of property pluralism arose in respect of permission to
operate 'co-operatives'. These new forms of economic organization were
naturally small (potentially) private enterprises and, from 1988, were able to
employ (along the lines of the Hungarian experience) workers who were not
members of the co-operative itself. This development belongs to the pre-history
of privatization in as much as the sole aim of the co-operatives was market
The chief anxiety of officialdom was the type of consumer goods that could
be freely traded. In December 1988 co-operatives were forbidden from selling
videos or manufacturing alcohol, and prohibitions were created in other areas,
too. There was no intention for the state to give way to private capital and
the new 'private' sphere was limited to around 3.1 million employees,
approximately 2.4% of the total workforce, producing some 3.4% of the country's
GNP.57 'Self-financing' gave considerable autonomy to
enterprise directors over the use of profits and was the antithesis of
producers' self-management because managers had no interest in sharing power
with workers' collectives. Management had to engage in a 'war on two fronts'
against both central and local bureaucracies, as well as against the councils
and organizations of the workers (enterprise councils, trade unions, etc.). To
counter state centralization they allied with their employees, while relying on
market mechanisms and counting on the support of the authorities to oppose the
aspirations of the workers. As we have emphasized, the crucial unresolved
question of the whole self-management concept was how it could conform to,
integrate with or disengage from the global economy, or even accomplish all
three at the same time. The liberals (neo-liberals) felt secure on this point
because the Marxists had no adequate answers to the 'challenge of
Influenced by Michael Ellman and János Kornai among others, one of the
leading liberal figures, Grigory Yavlinsky, formed his own concept of property,
drawing on notions of socialism and 'state capitalism' and which were in close
accord with the practice of the time.58 Yavlinsky did not
accept the neo-liberal approach to state property, and considered 'spontaneous
privatization' to be unconstrained theft. Yet, in seeking to find a place in
the reform process for the 'management-bureaucracy' he failed to appreciate
that in the Soviet Union, and more generally in Eastern Europe, only a semi-peripheral
form of capitalism was possible. Allowing management to 'opt out from state
control', which Yavlinsky opposed, resulted in the culture of operating 'two
sets of books' becoming widespread in state enterprises as this enabled the
sale of illegally appropriated goods on the black market and for premium
payments to be made for non-existent products. An informal corporative network
developed among enterprise directors and managers, which flourished under perestroika.
The network, which survived perestroika, grew to embrace middle-ranking
officials and, by 1987, directors and managers had openly turned against the
proprietor of their enterprises, the weakened state. Following two directives
of 7 April 1989, practical property reform essentially meant the leasing system
within which state enterprises and assets were rented out to private
individuals, but not to state companies. Following the collapse of the former
owner (the Soviet state) after August 1991, managers took the place of the
state, taking both the authority to direct and the assets themselves into their
own hands.59 While in the past they had had to act
illegally to line their own pockets, now they could enrich themselves within
The 'rebel' Yavlinsky condemned this system as 'mafia capitalism' and not
part of the liberal reform programme. Yavlinsky and the liberals had in mind
'real' property owners, not those who privatize for their own benefit but those
who purchase shares (no doubt thinking of domestic 'investment institutions',
foreign capital or banks, as who else had access to capital?). However,
enterprise directors and local state entities together acquired the majority of
shares, thus these denationalized enterprises became neither state owned nor
classical private companies. The 'new' state did not even attempt to exercise
control, as its 'new' officials were too untrained, uneducated and corrupt for
the task, a problem that was probably even greater in the non-Slavic republics.
The introduction of 'shock therapy' in the early 1990s arrived like manna from
heaven for the enterprise directors, who became the most enthusiastic
supporters and beneficiaries of de-regulation.
According to Yavlinsky's belated - though correct - interpretation, the
essence of the problem with management ownership was the lack of a market
structure that could guarantee regular business activity. The system that
emerged resembled a peculiar lottery where the game needed to be played only
once. Since 'there was no developed market structure, huge profits could be
made without constraint that had no relation to the economic activity or
profitability of an enterprise'. He concluded that the black market had not
been eliminated, as was shown by the prevalence of tax avoidance, various forms
of money laundering and the continuation of the 'two set of books' culture.
Here we must also include the well-known East European practice of privatizing
the most profitable parts of an enterprise and driving the remainder into
bankruptcy. In Russia it was not possible to base the economy on exports alone.
For Yavlinsky, an 'effective proprietor' was not one who carried off state
property and then left it to the next owner to sort out the problems. He
pointed out the enormous chasm between theory and practice in the Russian
market. 'Property', he urged, 'must be passed to those who have vision'. In
this respect Yavlinsky was the acolyte of international capital, aiming to
restore the responsibilities of management towards the 'true' owner.60
Yavlinsky's 'sterile' position failed to take account of the fact that
employee ownership could have offered a genuine solution to this problem. On
the one hand and not without reason, the Russian liberals/neo-liberals were
genuinely afraid of all forms of employee ownership even if it operated on a
capitalist basis. At the same time, they were also obsessed with a utopian
vision of the essential compatibility of privatization, 'justice' and
'community'. There was enormous intellectual and moral resistance to the idea
of privatization in Soviet society, though, when later couched in terms of
anti-communism, it proceeded relatively smoothly in practice (the explanation
for which deserves a separate study in itself).
Though they appear so naïve today, ideas relating to social control of
privatization and the priority of social and producer collectives were included
in Gorbachev's presidential decree of 1 March 1990 and the Soviet parliament's
property legislation. Alongside the desire to preserve a substantial part of
state property (as discussed earlier), preference for communal and collective
forms of property was emphasized by the CPSU Central Committee and the Central
Control Committee's order of 25 April 1991, which prescribed the 'extensive
participation of workplace collectives and trade unions' in the privatization
process. It is illustrative of the strength of the demand in society for the
socialization of state property that the way privatization was described made
it seem as if it meant the creation of socialized, popularly owned property. At
the founding congress of the anticommunist opposition movement Democratic
Russia on 20-21 October 1990, the problem of privatization and the protection
of the welfare of workers were discussed as if the two were not incompatible
(reminiscent of the moralizing populism of Shatalin programme). Subsequent
accounts of this period of economic history do not interpret such popular
sentiments as the legacy of certain historical experiences of social self-regulation,61 but rather as the remnants of an irrational attachment to
state socialism and collective property and in stark contrast to the economic
rationality of 'pure' private property.62
Based on the later experience of privatization in the Soviet Union, a more
objective assessment of employee ownership that examined the role of small
shareholders in relation to production would conclude that privatization was
fundamentally about power and sought not only to abolish state property,
but also to destroy any meaningful 'employee ownership'. Under the new system,
employee ownership could only have existed as a form of private property and,
being alienated from the producers themselves, excluded workers from
involvement in the affairs of the enterprise and even from partaking of its
profits. Some more partisan analysts have insisted that without directly
participating in the direction of the enterprise and the control of management,
the worker-owner cannot exercise the functions of a proprietor, although
'popular share ownership' may itself be a significant factor in protecting
employment. In the final analysis, in a market economy 'the "formal"
proprietor becomes the "real" owner when the owner's interests supersede
those of the producer'.
This irresolvable contradiction within the system meant that the
owner-producer could not play the same function in the factory as had the
workers' councils in Russia in 1917 or in Hungary in 1956 when, as the
representatives of the community of workers, they were in charge of property
(i.e. the production process) and factory management operated under the
workers' collective control.63 Large-scale 'employee
ownership' itself represents a danger in capitalist conditions since, in times
of crisis, the demand for self-management may arise and threaten the system of
private property. Thus, property and power are intimately related. Ultimately,
the fate of collective property in the Soviet Union was sealed, but this
process cannot be fully understood without reference to the international
context, which had a decisive influence over the change of system in the Soviet
Union and, in particular, over how property was to be reallocated.
The IMF's solution
December 1990 saw the publication in the USA of a 'non-official' and
'non-binding' study, the preparation of which had been initiated by the leaders
of the great powers in July 1990 at the suggestion of the Group of Seven (G7)
at the Houston Summit. Accordingly, staff at the IMF, the World Bank and the
OECD, as well as advisers to the president of the EBRD, prepared a voluminous
document that, in light of subsequent events, effectively became the programme
for regime change in the Soviet Union.64 Following the
publication of this document, Shatalin's populist programme was no longer of
unique interest because the Soviet leadership and the international community
had now found a modus vivendi. By then power had passed from Gorbachev
to Yeltsin, which had removed all remaining practical barriers to a change of
system. Carefully written so as to be largely free of ideological formulations,
the IMF study was promoted as a 'model' and a 'resource' for the economic
concepts and policies for the Soviet change of system.
Not forgetting the importance of external factors, the collapse of the
Soviet Union and the failure of the state socialist system would not have
happened without the decisive role played by domestic economic and political
crises and the active co-operation of the Soviet state elite. There can no
longer be any doubt that the disintegration of the Soviet Union and state
socialism was bound up with the unreserved embrace of the global economy by
those in power in order to preserve their own positions, maintain their luxury
life-style, and to ensure their control over state property in perpetuity.
Fearful for their social position, the elite was open to any solution that
would consolidate their status. The most powerful groups in the Soviet Union
joined an obvious and open alliance with the international centres of
power and money. The idea that the change of system arose from an external
'conspiracy' (still popular in some circles) is untenable since the IMF study
quite openly stated its intentions, including collaboration with the leading
organs of the Soviet state in what it called a 'secret alliance'.
The IMF study 'undertook a detailed analysis of the Soviet economy so as to
propose reforms and define those criteria against which Western economic
assistance may most effectively support those reforms'. Such a considerable
research initiative and collection of data could not have been accomplished
without the active co-operation of the Soviet authorities, a fact indicative of
the true agenda. The study (which included only the 'main conclusions' of the
research) expressed particular thanks to Soviet federal and republican
institutions for their 'comprehensive and substantial support and assistance'.
It also thanked, by name, particular 'sponsors', including the Ministry for
Foreign Affairs, the Foreign Trade Committee of the Council of Ministers (which
had organized many of the discussions), the State Bank, the State Committee on
Education, the State Planning Committee, the Finance Ministry, the Ministry of
Foreign Trade, the State Reform Committee of the Council of Ministers and many
other leading institutions. It also referred to many meetings held in Moscow,
Brussels, Paris and Washington.65
By the summer of 1990, reputable US politicians and businessmen were already
talking openly about how the Soviet Union could no longer get itself out of
trouble and the need for direct international intervention. The correspondence
between George Soros and Boris Yeltsin at this time is particularly revealing.
Writing shortly before the meeting of the G7, Soros made two important points:
In the interest of the whole
world we must avoid a chaotic collapse. Contrary to normal practice, far
reaching intervention in the internal affairs of the Soviet Union is essential
[author's italics]. The only way in which this intervention can be both
effective and acceptable is if it is directed towards establishing a monetary
system which transforms the Soviet Union into a federation of independent
republics and, in the case of the Baltic republics, independent states success or failure depends on
whether a monetary system can integrate the economy, determine the method for
reviving the collapsing economy The Soviet leadership is well
aware that it would be impossible to establish such a currency without outside
help. Not only is credit needed, but also the creditworthiness to be derived by
commitment from the West. If the G7 indicates its willingness to support a
monetary system which can revive the Soviet Union the offer should be
enthusiastically accepted [author's italics]. Assistance
must be provided for defined programmes and given to new people. The way out
for the whole country lies through Russia.66
Yeltsin replied the same day. His imagination was not fired
by the suggestion of a monetary system and rather disliked the idea. However,
as the principal 'regime changer' Yeltsin asked for Soros's support, pointing
out that he was the right man, the 'new person', who was worth giving money to
because, to put in crudely, he was the one who could realize the independence
of the republics. Furthermore, he expressed anxiety about the president of the
Soviet Union receiving financial assistance as its ineffective use would, as he
put it, discredit Gorbachev.67
In contrast to Soros, the G7's study focused its attention not on the
financial system, but on the ideological starting point of getting rid of the
planned economy. The programme advocated a rapid breakthrough, echoing
the slogans of perestroika's leaders for 'speeding up' and 'breaking
through'. However, the difference lay in the unambiguous aim to proclaim a
capitalist market economy, though the term 'capitalism' itself was hardly used
in the document itself.
Similar to Shatalin's and Yavlinsky's proposals, the IMF study envisioned a
'democratic capitalism' based on a market economy (as if utopian capitalism
would displace utopian (developed) socialism, though no more than was the case
in Shatalin's programme). In terms of its implementation, one could be forgiven
for seeing a parallel with Stalin's 'great leap forward'. Shatalin's programme
was the first to outline the now well-known methods for 'reconstruction': swift
and radical change, breakthrough. The IMF's programme outlined the criteria for
the creation of a 'market economy' as: the liberalization of prices in
accordance with conditions for both domestic and foreign competition, the
encouragement of private property and the privatization of state enterprises.
The principles for the regulation of enterprises, which were contained in
the planned basic law of the Soviet Union in October 1990, had already provided
of the possibility for a private sector on the basis of property pluralism
since 'the establishment of market relations' presupposes 'free enterprise',
including the entrepreneurial operation of state property, and even prescribed
the abolition of the crime of 'private business activities' from the Soviet
legal code. The preamble of the draft law, which was drawn up by a commission
led by Abalkin, declared 'freedom of choice in forms of property and economic
activity' as well as 'free and healthy competition'. It continued that 'within
the framework of a market economy, the leaders (directors) of state companies
appointed by the state (or chosen by workers' collective) fulfil the functions
of an entrepreneur in accordance with the activities and limits assigned to
them in respect of trade, innovation and risk taking'. At the same time, the
document made only a quantitative distinction between private and collective
enterprises.68 As a result, it becomes hard to
distinguish between the 'socialist' Soviet legislation and the Russian law.
It was no accident that the IMF's programme praised the principles outlined
by Gorbachev (the authors of which were also among those who wrote the draft
legislation discussed earlier) as heading in the direction of establishing a
market economy. Nevertheless, it still sought to draw the attention of the
Soviet leadership to certain 'specific actions to ensure that the transition is
First and foremost it promised 'technical assistance' from the West, by
which was meant the rapid creation of the institutional infrastructure of a
market economy. However, there were sharp and deep differences between the
establishment of such an institutional structure in Russia and the way
developed capitalism operates according to the structures found in the central
capitalist economies. These differences reflected the fact that integration
into the global economy and becoming part of the capitalist centre represented
two entirely different sets of problems.69 The experts
from the IMF believed that 'the private sector could play a substantial role'
even in respect of this 'technical assistance'.70 A
'market economy', 'balance of payments' and 'systematic reforms' would all
contribute to the ultimate solution - the closer integration of the Soviet
Union with the global economy. The Central Committee concurred with this aim
and in December extended an invitation, in accordance with ancient custom, to a
US businessman of Russia origin, a descendant of a former Czarist minister, in
order to demonstrate the Party leadership's commitment to new forms of
international economic cooperation. The account of this meeting (signed by V.
Ivasko) served as a declaration of the transition to a market economy. The
document also emphasized that the principal aim was for foreign and US capital
to 'support the radical measures taken by President Gorbachev which are aimed
at stabilising economic, social and political conditions in the country'.71
The IMF study only objected to and strongly rejected one matter in respect
of the redistribution of property: employee ownership and communal property in
general. It devoted considerable space to criticism of the practice of allowing
employees to own property (and of all forms of collective property), which had
been tried in the Soviet Union (and in other Eastern European countries). With
no little cynicism, the 'G7 study' noted the disappointing experiences of other
countries, even though by that time it would have been known that the Hungarian
government and political parties brought all their power to bear on restricting
and paralysing the acquisition of communal-employee property, meaning that in
fact it was the workers' experiences that were disappointing. The essential
parts of the IMF's concept were realized in the former Soviet Union insomuch as
a new power was established to oppose workers and employees becoming property
owners, at whose expense profited the managers and directors, those who had run
state enterprises in the Soviet times, the nomenclatura's people.
Later experiences of privatization showed that where there is a shortage of
capital, privatization could take place only through raw expropriation. This
fraud was most clearly demonstrated by the 'voucher' scheme or 'popular
privatization', which accorded with the spirit of Shatalin's programme but
which was at odds with the more cautious IMF programme. The preferred method
for privatization was 'management privatization', which involved an alliance of
bankers, managers and state functionaries. With state approval being given on
the grounds of it being to 'everyone's benefit', officials at the state bank
would authorize the maximum amount of credit at the lowest possible price for
the 'purchase' of the most profitable parts of enterprises.72
It would seem that the IMF's advisers - to use the old Marxist-Leninist
terminology - wished to establish the 'social basis' for the realization of
their programme by promoting a class of 'influential men'. In practice, these
people were handed state enterprises, which was justified in 'scientific'
language as 'placing large scale enterprises on a commercial footing and
ensuring they function as such while they remain in public ownership'.
According to the programme, enterprises should function as a kind of joint
stock company 'free from state control, with state holding companies following
the model of private sector holding companies'.73 As is
now well known, due to the lack of capital in the system, the end result was
that the rapid 'emancipation' of state property descended into a frenzy of
division and acquisition by the elite (which Russians called 'prihvatizatsya').
We recall that Yavlinsky, the head of the liberals, had wished to see 'real'
owners who had bought shares on the open market (domestic investment
institutions and foreign capital and banks - who else had the capital?), not
the nomenclatura and management bureaucrats privatizing to themselves with
state support. 'Property', said Yavlinsky, 'must be passed to those who have
vision'. In this respect Yavlinsky was the acolyte of international capital,
aiming to restore the responsibility of managers towards the 'true' owners.
However, it is not clear why the new proprietors should have 'withdrawn' in
favour of foreign capitalists as this would have undermined the social basis of
the system. Once more it can be seen that property and power relationships were
one and the same and Yavlinsky's 'good capitalism' foundered on the absence of
Yavlinsky's analysis, written after the transformation, was even more
divorced from reality than Shatalin's plan. Yavlinsky wrote that there had not
been (and still is not today) a market structure that would guarantee normal
business processes. Instead, a system emerged that resembled a peculiar gamble,
one where the 'game' only had to be played once since 'there was no developed
market structure, huge profits could be made without constraints that had no
relation to the economic activity or profitability of an enterprise'.74 The black market and the shadow economy were not
eliminated and capital was characterized by tax avoidance, various forms of
money laundering, innumerable types of fraudulent privatization, etc. The
hallmark of the new system was a lack of clear boundaries between legitimacy
and criminality.75 It is no surprise that none of what
Shatalin's programme anticipated came to fruition other than the fact of the
'redistribution of property'. The consequence of all this has been that to this
day privatization has not attained social legitimacy in the successor states of
the Soviet Union because the new regimes were unable to observe basic moral or
even legal standards in their expropriation of state property. In the wake of
the catastrophic experiences that have accompanied the change of system,
Yavlinsky has sought to justify himself by condemning the leaders of perestroika
as 'stupid' and messing up the property question, as if the theory itself was
good and only the practice at fault.76
In essence, perestroika came to an end with the private expropriation
of state property. Instead of a new 'democratic capitalism', a 'Russian
capitalism' reminiscent of the early twentieth century emerged,77
the political framework for which was symbolically provided by the 'Operetta-Putsch'
of August 1991 and Boris Yeltsin's '18th Brumaire' of 4 October 1993. The first
represented the end of the state socialist system, the latter the victory of
the Russian market economy. The 'putsch' was carried out by those members of
the power elite who did not want to abandon the old system, while the latter
was financed by international capital against those groups who had been left
out of the 'redistribution' of property.78 The state
remains the strict guarantor of property relations, defining both the 'state
dependency' of the new Russian bourgeoisie and the political-institutional
conditions for the emerging class society.
1. A quarter of a century ago we attempted to give a historical perspective
to these views, but did not imagine that the same issues would later resurface
as a lived historical experience. After one hundred years, the question of the
relationship between property and the state re-emerged as a result of changes
in political and social forms (see Pártviták és történettanulmány. Akadémiai
Kíadó, Budapest, 1989.).
2. The historical writings on the subject cannot be abridged within the
confines of a short monograph. Considerable efforts have been made by Russian
researchers to examine the literature on the property question, most recently
in the volume marking the 80th birthday of the scholar Vinogradov: Sobstenmosti
v XX stoletyi. Moskva, ROSZSZPEN, 2001.
3. Vo. Sz. N. Lapina-D.L. Leljuhina: Gosudarstvennaia sobstvennost' Rossii:
neketoriie isztoricskiie uroki." In Szobstvennoszt' v XX veki. M.
216-223.o and Je.Kozlova: Krestianszkiie predstavlenyija o zemelnoj
szobstvennosty: isztoria I sovremennost'" In op cit, pp. 667-685.
4. Property is a sum of human relationships that arise from
production and, more generally, the reproduction of human life, including the
process of appropriation. No manifestation of property was ever simply
economic, but always included power (politico-legal) relationships and
determined society's hierarchical structure. This point needs to be emphasised
in the interest of methodology. For ideological reasons, some sociologists
attempt to divide the economic and power dimensions of property, even to
juxtapose the two. Often they attribute to (capitalist) private ownership the status
of a 'pure economy' and endow it with economic rationality, while state
property is regarded as irrational, driven only by a logic of political power.
Despite many centuries' experience, communal property is rejected as utopian or
seen as a distorted form of state property.
5. During the decades of the arms race a European orientation
entered the consciousness of the Soviet elite and the political bureaucracy.
Though an illusion, amidst the euphoria of perestroika the idea of the
'common European home' encouraged the Soviet and then Russian political elite
to dream of the possibility of 'European integration'. Jerry Hough: Russia
and the West. Gorbachev and the politics of reform. (2nd Ed.)
N.Y. Sidney, et. alia. A Touchstone book by Simon and Schuster Inc. 1999, pp.
6. See our monograph: Front M-Szvak Gy.-Niederhauser E.-Krausz T.: Oroszország
Története. Budapest, 1997, V chapter.
7. The nature of state socialist development has been debated in numerous
Hungarian language publications, most recently in the journal Eszmélet.
A substantial monograph by Peter Szigeti represents the start of the latest
intellectual debate: "Experiences of state socialism and historical
lessons." Eszmélet, No.58 (2003) pp. 37-73.
8. Western literature often, and with some justice, associates the origins
of perestroika with the Khrushchev era, but also as having some kind of
continuity with the NEP. Perestroika: The Historical Perspective. Ed. C.
Merridale, King's College, Edward Arnold, London-N.Y. 1991, mainly, chapter 4:
The New Economic Policy and Contemporary Economic Reform. The history of perestroika
is treated very competently by M. Maliya: Sovietskaia tragdiia. Moscow,
ROSSPEN, 2000. Reference should also be made to several monographs dealing with
the pre-history of perestroika: Reform in Modern Russian History,
Progress or Cycle. Woodrow Wilson Center Press and Cambridge University
Press, Ed. Theodor Taranovski, 1995.; Thomas C. Owen: Russian Corporate
Capitalism from Peter the Great to Perestroika. New York, Oxford, Oxford
University Press, 1995. Jerry Hough Russia and the West.Gorbachev and the
Politics of Reform. 2nd Ed. Simon and Schuster Inc. N.Y.,
London, Sydney, etc. 1990.
9. The theoretical-intellectual background of perestroika lied originally in
a volume of selected articles entitled Inogo ne dano ("Nothing else has been
given ) in which the main ideologists,
scholars of "restructuring" outlined the present and future
alternatives. The concept that I have referred to has been the most extensively
elaborated in the theoretical reconstruction of V. Kiseljov entitled Skolko
modelej szocializma bilo v SSSR? (How many models of socialism have existed
in the Soviet Union?) In: Inogo ne dano. (Nothing else has been ) Peresztroika: glasnoszt',
demokratiia, socialism. Moscow, Progress, 1988 (ed.: Iu. N. Afanasiev), pp.
10. Oroszország és a Szovjetunió XX.. századi képes történeti
kronológiája. Budapest, Akadémiai Kiadó, 1992, pp. 266.
11. The antagonism between the two was illustrated in a contemporary
document: Gorbachev-Yeltsin: 1500 dnei politicheskogo prtivostojaniia.
Edited by L.N. Dobrohotov-M.K.Gorskov, Moscow, 1992, Terra, vo. pp. 9-13.
12. ibid pp. 116-117.
13. M. Sz. Gorbachov: Oktiab'r i perestoijka: revoliuciia
prodolzhaietsia. Moscow, 1987 pp. 31-32.
14. In his discussions with Hungarian leaders, that Gorbachev only spoke of
Yeltsin as a 'leftist' was confirmed by Károly Grósz in July 1988. In March
1989, when talking with Miklós Németh, Gorbachev referred to Yeltsin as a
"typical left winger", and in the same month introduced Yeltsin to
Grósz as a 'leftist. Gorbachev tárgyalásai magyar vezetőkkel. Dokumentumok
az egykori SZKP es MSZMP archivumából. Bp. 1956-os Intézet, 2000, pp. 156
15. Ibid pp. 129-130, 181.
16. V.A. Mironov: Rossiiskoie gosudarstvennoie sztroitelstv v
post-sojuznyi period (1991-1994). Kentavr Isztoriko-politologicheskij
zhurnal) 1994, 3, pp. 3-4.
17. RGANI (Rossiiskii Gosudarstvennyi Archiv Noveishei Istorii - Russian
State Archive of Recent History) F. 89.op. 8 d. 69. 1-5.
18. At the time the district of Kemerovo was a focal point of workers'
19. Minutes of the 9th December 1989 plenary session of the
Central Committee. In Izestiia CK KPSS, 1990, no.4, pp. 58-59.
20. ibid p. 122.
21. Michael Gorbachev The August Coup, (Harper & Collins,
Ipswich, 1991) pp. 47 & 107.
22. Many who had devoted their lives to the Party sincerely felt it to be in
'mortal danger'. One example of this feeling was reflected in an application to
rejoin the Party membership sent to Gorbachev on 28 September. Roza Mihailovna
Glushkova, a secondary school graduate who had spent three years studying
Marxism-Leninism at university and who worked as a locksmith in a factory in
Kalinin, stated her reasons for reinstatement as a Party member as follows:
" the main reason that continues to
worry me and has made me think of why I left the Party is that Lenin, who
founded the Soviet state, is being attacked in a most despicable manner and is
subjected to a campaign of denigration . some of the
'democrats' would like to see the end to all things begun by Stalin, in other
words to destroy everything that V I Lenin and the Bolsheviks initiated. In our
town of Kemerovo, L Balashov - a people's deputy - wrote an article in the
local paper entitled 'Lenin - the peoples' executioner'. This is not a matter
of differing opinions but, in my view, a real counter revolution This is the reason that I feel I
must rejoin the Communist Party of the Soviet Union, because the situation has
taken a bad turn This prompts me, Mikhail
Sergeievich, to ask to be given back my membership of the Party in order that I
may defend Lenin's name and so that the Communist Party of the Soviet Union can
again become the genuine defender of the true interests of workers and
peasants". Izvestiia CK. KPSS, 1990, no.3. p. 149.
23. Ernest Mandel: Beyond Perestroika. The Future Gorbachev's USSR.
Verso, London- N.Y. 1989.
24. Sztenogrammi Plenumov CK partii CK KPSS - 5-7 fevralia 1990 goda" Izvestija
CK KPSS no.190 3, p. 46.
25. During an unofficial conversation at the Malta summit Gorbachev, with
his customary self confidence, told President Bush that the Soviet Union was
moving away from nationalised property towards socialised property. According
to American experts who overheard Gorbachev's remarks, he referred to the
Swedish model arguing that property owned by more than one person is not
private property. In his reply, President Bush drew Gorbachev's attention to
the fact that "in Sweden it is private property that makes money."
Gorbachev replied that in the USA there was practically no private property.
"How can that be" asked Gorbachev "because in your country many
firms exist which have more than twenty thousand shareholders?" in Michael
R. Beschloss-Strobe Talbott: At the Highest Levels. The Inside Story of the
End of the Cold War. London, Warnes Books, 1994.
26. Izvesztija CK KPSS, 1990 no. 3, p. 48.
27. ibid. pp. 48-49. Gorbachev's position on the establishment of the
Russian Communist Party displayed similar half-baked thinking. Those who
pointed out that the establishment of a Russian Communist Party would mean the
end of the Communist Party of the Soviet Union were regarded as meddlers and
nuisances who could not understand that "the non-establishment of the
Communist Party of Russia would be an affront to the people of Russia."
ibid. pp. 66-69.
28. The plenary also discussed property ownership in relation to agrarian
developments and reached much the same conclusion as above. See Ponomaryov and
Gorbachev exchanges, ibid. pp. 80-81.
29. ibid pp. 100-101.
30. Report of the HSWP Political Committee on the visit to Moscow of Károly
Grósz on 4-5 July 1988 in Magdolna Baráth & János Rainer (eds.) Gorbacsov
tárgyalásai magyar vezetőkkel. Dokumentumok az egykori SZKP és MSZMP
archívumaiból. Budapest, 1956 Intézet, 2000, pp. 149 & 153.
31. ibid. Minutes of meetings between Mikhail Gorbachev and Miklós Németh on
3rd March 1989 in Moscow.
32. ibid. pp. 178-179.
33. ibid pp. 185.
34. ibid p. 190.
35. ibid pp. 191-193.
36. Constitutional amendments 'Economic Structure', Chapter 2. Articles 10,
11, 12 and 13 in Postanovleniie Verhovnogo Sovieta SSSR. RGANI f. 89 op
30 d. 28. pp. 1-4.
37. This misunderstanding of what constitutes collective property has older
roots that can be appraised from the 'strictly confidential' document prepared
by Géza Kótai for the HSWP Central Committee's International Relations Bureau
for the December 1988 Moscow visit: "Comrades Bogomolov and Shmelyov emphasised
that we are already experiencing the convergence of two systems. In this regard
we should note that for the moment we have no answer to what socialism is or
what socialist property relations are. We know that we must transcend the
Stalinist and post-Stalinist models, but not how. This convergence does not
mean that the Soviet Union, USA, or Hungary will become like SwedenOne can imagine that joint stock
companies in the USA contain the seeds of socialism. In many respects,
according to Comrade Bogomolov, Sweden today is more 'socialist' than the
socialist states themselves. We should also begin -as an experiment - to make
changes to the forms property can take by using opportunities such family
businesses, rental arrangements and joint stock companiesThe situation is made more
difficult by the fact that at times it can seem as if the elimination of the
Stalinist legacy is an attempt to eliminate socialism." Gorbachev
Papers op.cit. pp. 238.
38. RGANI f. 89. Op 30 D. 28.
39. Perehod K Rinochnomu Hoziaistvu, 1990, Conception and Program, Moscow
(Red.: S. S. Shatalin).
40. A. S. Chernayev: 1991 god. Dnevnik pomoschnika prezidenta SSSR.
Moscow, 1997 pp. 44-52.
41. Signed into law by Yeltsin in early January 1991.
42. RGANI f. 89 Op.D 1, 1-4 O.Soveshchanyii minystrov.
43. ibid RGANI.
44. RGANI F. 89 op 4 d 20.1.2-9. The authors and original title of this
'secret' typewritten document: P.Luchinski, O. Baklanov, A. Vlasov: O
Socialno-ekonomihseskih posledstvijah zakonodatelnoi deiatyelnosti po voprosam
szobstvennosti i privatizacii v RSFSR. The document was sent to the Central
Committees of the Communist Party in the republics and signed by V. Ivashko.
45. RGANI f. 89 Op 11. D 86. 1-3 and O provodimoi oppozicionimi KPSS
partyijami kampanii po sboru podpisej grazhdan om naznachenii referenduma po
nationalizacii sobstvennosti KPSS..
46. RGANI. Copies of the original document without special archival number:Ob
obrashchenijah v CK KPSS po ispolzovaniju materialnij bazi partyijnih uchebnih
zavavdenii i drugih objectov sobztvennosti KPSS.
47. RGANI E 89 op 12. D.28 O proizvodszvevnno-hoziaitvennoi deiatelnoszti
partiinih komitetov partuchrezhdenii. pp. 1-3.
48. Among others, Shatalin actively participated in the 'distribution' of
the Party's educational institutions, not neglecting the interests of his own
institutions. Protokoli zasedanija Gosudarstvennoi Komiszi Ministrov SSSR
pro ekonomicheskoi reforme. No. 11. 12 Oct. 1990 1-9 especially 1-5 p. 9-10
49. Perehod k rinku. Koncepcija i programma. Moscow, 1990. It was
indicative of the hurry to publish that the programme was put out by the Children
Books (Detskaia kniga) publishing house with the process of collating the
manuscript beginning on 9 April and going into print exactly one month later.
The editorial committee was composed of Shatalin, N, Petrakov, G. Yavlinsky, S.
Aleksashenko, A. Vavilov, L. Grigoryev, M. Zadarnov, V. Maschits, A. Mihailov,
B. Fyodorov, Y. Yasin. Individuals representing some of the republics
participated in the production of the book, if not its writing, and gave their
names to enhance the book's pan-federal prestige. The work of many famous (or
subsequently well-known) scholars was drawn upon including N. Shmelyov,
V.Musatov, Ye. Gaidar, T. Zaslavskaya, A. Aganbegian and many others.
51. A G Aganbegian: The Challenge Economies of Perestroika.
52. Left wing economists and theoreticians also provided an intellectual
basis to this emerging movement (Buzalgin, A. Kolganov and Boris Kagarlitsky.)
On the organisation of the platform, see A Buzgalin: Belaja vorona.
Poslednij god zhizni CK KPSS: vzgliad iznutri. Moscow, 1993, pp. 57-76. D.
Mandel's critique at end of 1990: Perestroika and the Struggle for Power in
the Soviet Economy: A New Phase in the Labour Movement. 1991, pp. 117-154.
53. Self-management initiatives that were already operating failed because
of unforeseen problem of 'shortages', bureaucratic resistance, the collapse of
links between producers and because international conditions contributed to the
discrediting of the collective enterprises.
54. T. Krausz: 'Stalin' Socialism - today's Debates on Socialism: Therory,
history, Politics. Contemporary Politics. Vol. 11 Number 4, Dec. 2005 pp.
87-106 in English.
55. Paul R. Gregory: Restructuring the Soviet Economic Bureaucracy.
Cambridge University Press, NY.Melbourne, Sydney 1990, pp. 2.
56. Y. V. Andropov: "Karl Marksz i neketorije voproszi
szocialistycseskogo stroitelstva v SSSR" Kommunist 1983/3 pp. 20.
57. D. Dyker: Restructuring the Soviet Economy Routledge, 1992, pp.
58. G. Yavlinsky: Uroki ekonomicheskoi reformi. EPIcenter, Moscow,
59. Original analysis of the problem and its understanding has been greatly
assisted by the works of István Szelényi and Erzsébet Szalai who have explored
the role of economic elite: Szelényi, I, Gyl, E, Townsley, E, 'A
posztkommunista gazdasági vezetés (menedzerizmus). A gazdasági intézmények
atformálása és a társadalom szerkezetében végbemenő változások a
posztkommunista átmenet idején', in Krausz, T (ed.) Rendszerváltás és
társadalomkritika, Napvilág 1988 pp. 153-193; Szalai, E, Gazdasági elit és
társadalom a magyarországi újkapitalizmusban, Aula Kiadó, Budapest, 2001.
60. Yavlinsky, op.cit. p. 60.
61. Under Yeltsin's presidency in the early 1990s Chubais' voucher
privatisation was introduced in order to manipulate society's mood and ideology
under the slogan of the people's dividend, but which in fact defrauded the
workers. The author has personal experience of being offered such a voucher in
a public house in exchange for a glass of beer. In the end, the voucher scheme
was one of the methods by which society was deprived of its assets.
62. From a similar ideological perspective see: Y. Alexandrov:
"Privatizacija obshchestvennoi sobstvennoszti v Rossii ekonomicheskaja
teorija." In Sobstvennost' v XX-om stoletii. K 80 -letiiu akademika
V.A. Vinogradova. Moscow, ROSSPEN, 2000, pp. 490-506. The prevailing
neo-liberal orthodoxy led the author to effectively adopt the Stalinist logic
that there is essentially no difference between state property and
social-communal property. Collective property simply disappears into the realms
63. T.V. Gavrilova: "Akcionernaia sobstvennost' i korporacionnoie
upravleniie." In Sobstvennost' v XX sztoletii. I., pp. 628-631 and
D.O. Churkov: Russkaia revojluciia, rabicheje szamoupravleniie. Moscow,
AIRO - XX, 1988.
64. The Economy of the USSR: a study undertaken in response to a request
by Houston Summit: summary and recommendations. IMF, World Bank, etc.
66. For the correspondence (in Hungarian) see, Soros György, A lehetetlen
megkísértése. Soros Alapítvány, Budapest 1991, pp. 117-120.
68. RGANI, ibid.
69. Historical and intellectual analysis of this phenomenon was undertaken
in the 1970s by Immanuel Wallerstein: The Modern World-System. Capitalist
Agriculture and the Origins of European World-Economy in the Sixteenth Century,
Academic Press New York, 1974.
70. The economy of the USSR, op cit.
71. RGANI, F.89. op.11. d 67. pp. 1-3. O vsztrecse sz Dmitrijen fon
Vitte. 3 December 1990.
72. See for more detail in "Privatisation in Russia" in Socialist
Economic Bulletin, December 1997.
73. The Economy of USSR, ibid pp. 27.
74. G. Yavlinsky: Uroki ekonomicheskoi reformi. EPIcentr. Moscow,
1993, 10-18, 58-62.
75. P. Klebnikov: Godfather of the Kremlin: Boris Berezovsky and the
Looting of Russia. Harcourt,, N.Y. 2000. V. Radayev: Tenevaia ekonomika
v Rossii: izmenyenyiie kontorov. Pro i Contra. zima 1999, 5-23. The entire
issue is taken up by the shadow economy. The problem is examined from a
different angle in Eszmélet, No 56 (2002/winter) 79-89: see Boris
Kagarlitsky: "Political Capitalism and Corruption in Russia."
76. Not surprisingly Yavlinsky has attempted to position himself as critic
of the emerging situation and blame the politicians. In Hungary László Csaba
represents the naïve assessment of the IMF's approach that the neoliberal plans
were fine, it was just that 'Russians' made a mess of the things.
77. See "Putyin és az orosz kapitalizmus. Utószó a jelcinizmus
kérdéséhez" in Lenintől Putyinig. Ibid.
78. See J W Moses: Boris Jelcin Brumaire 18th'' Eszmélet
(1996/spring) 29 pp. 165-182.