Russia at the End of the Post-Soviet Era

Sergei V. Kiriyenko

VIENNA: In a world where the Soviet Union no longer exists, where new centers of power and influence are emerging, one important question remains: what has taken the place of that huge space on the map once inscribed with the letters "USSR"? The disintegration of the Commonwealth of Independent States (CIS), Russia's fall from being the indisputable leader of the Commonwealth, the formation of bilateral and multilateral alliances within the CIS that are oblivious to Russia's interests: these are substantial rebukes to Russian influence and to the idea that a quick reintegration of the commonwealth states around Russia is possible. The economic unity of the Soviet Union was largely determined by the interests of the old common military-industrial complex, for whom economic expediency and competition were alien notions because it operated in an environment of economic isolation and military-political confrontation with the rest of the world. The political reforms initiated by Mikhail Gorbachev put an end to the cold war and opened the country up but no common interest appeared to take the place of the lost imperial/military mission.

According to data provided by the Russian Institute of Economic Analysis, currently Russia's share in the world's land space is five times higher than Russia's share in the world population, and 8 times its share in the world GNP, calculated on the parity of currencies' purchasing power. If Russia's share of global GNP is calculated using the market exchange rates of national currencies, the difference will not be 8 times, but 14 times.

What does this mean in terms of Russia's future? Will Russia follow the Soviet Union and inevitably disintegrate into several independent states or will the threat of such disintegration force it to rebuild its economic potential? If it chooses the latter, there are two possible ways to do it. One is through the continuation of market reforms and the strengthening of democratic institutions; the other is through pursuit of the stagnant authoritarian power model and a strengthening of state control over a monopolized economy. The path Russia chooses will determine how quickly and with what results Russia can overcome the deep systemic crisis, which has marked the post-Soviet period in Russia's history.

Today's crisis, indeed, is a very complex and multifaceted phenomenon, governed by several principle processes. First and foremost, this is a crisis of an economic system which has defaulted on its internal and external debts. There is also a deep political crisis which leads to frequent changes of governments operating under political restrictions and, therefore, incapable of developing and pursuing strategic programs of economic change. Finally, it is a crisis of national ideology and national identity.

Russia's economic crisis is a crisis of a heavily indebted economy. For the last few decades the state subsidised inefficient production and covered up its inability to collect taxes and excessive social promises with the revenues secured by Russia's oil and gas exports. In the last few years, when world prices for oil and gas dropped and could no longer bring the desired funds, the state resorted first to high inflation and then to excessive internal and external borrowing. The world financial crisis and a sharp drop in the price for oil at the end of 1997 and in 1998 accelerated and aggravated Russia's economic crisis. But deep down the crisis was caused by a lot of comprehensive factors, brought to life by the innate inefficiency of the Soviet economy.

The Soviet economy was created (and for decades functioned) as the economic system of a militarized state, surviving in a hostile environment. Being competitive, especially being competitive on external markets, was not something which was taken into account in the territorial distribution of productive forces, the designing of principles for migration and social policies, the economic structure and management forms.

The country's economy remains based on a faulty system of incentives. For decades numerous work incentives were developed and maintained in the Soviet economy, whereas consumption incentives were totally and intentionally highly suppressed. This is quite typical for the economy of a totalitarian, militarised, and isolationist state. Higher competition and increased consumer demand are not really part of the vocabulary of such an economic system. Moreover, ideological and political influence was preserved through a state-controlled consumption system based on various forms of distribution through the budget (benefits and such).

Limiting public consumption was a way to compensate for the overblown needs of the military-industrial complex. But during market reforms the traditional suppression of consumer demand and lack of work incentives stood in the way of a sharp increase in labour productivity. Furthermore, extremely low levels of private savings and traditionally meager consumption needs (about 70% of the population consider $100 to be a sufficient monthly income for a family member) start to impede internal demand growth and internal production development.

Thus, the country becomes increasingly dependent on exports, first and foremost, on the traditional export of oil and gas. In the unfavourable state of world markets, such as the one that occurred over the last few years, the reduction of export items production costs is required and in its turn leads to the reduction of internal demand and the investment abilities of the population. Consequently, Russia has a defunct system of private savings, which could have stabilised its economy and been used as a basis for investment into its development and growth. As a result, rapid economic growth can only be achieved with state funds and state-attracted foreign credit investment, which can only result in increased state control over the economy.

Such state dominance, which largely contradicts the logic of market reforms, determines the character of economic policy of every Russian government. It is pathologically dependent on the ever-changing political influences the power structures and the political system are subjected to, which is especially obvious prior to a new election cycle. In such periods, interest in social problems peaks to make the state, which does not limit its presence in theeconomy, provide for exorbitant promises in the social sphere through releasing more money into circulation or building up its internal and external debt.

The main problem in Russia's economy at the moment is that both Soviet and Russian borrowings have totaled 158 billion dollars, which means that Russia with its annual budget revenue of 20 billion dollars, is incapable of paying back its debts because, for the next 12 years, its annual debt-servicing payments are to be from 12 to 17 billion dollars. Because such payments are more than Russia can handle and the government has proved incapable of renegotiating the payment schedule or of writing off some of the Soviet debt, it continuously fails to meet its repayment obligations. Thus, Russia is denied access to new credits and has to make its scheduled payments at the expense of its currency reserves, so impeding the financing of internal growth and, as a result, the same cycle of problems is reproduced.

The making of consistent strategic decisions in the economy is hindered by political disagreements which give rise to dangerous tendencies. If society fails to organise effective resistance to the state's attempts to increase its control over the economy, sooner or later, this will lead to a stronger authoritarian political regime. This process explains why, at the moment, Yuri Luzhkov and Evgeny Primakov, Boris Yeltsin's most influential opponents, are top presidential contenders, but strictly within the system of power, which has already plunged the country into a political crisis.

Russia's current political crisis, intensified by economic problems, stems from the fact that seven years after Russia started its reforms, there is still no agreement in the country on the goals and character of these reforms. There is no political system to back up any accord, nor an effective state mechanism, created by the political system, to control the process of reforms.

The roots of these problems can, once again, be traced to the Soviet system, which is not dead yet and is dying in a most painful manner. The Soviet and post-Soviet periods in Russian history gave rise to two extremes. We were citizens of a country where we were stripped of any freedoms. We were brain-washed to accept citizenship without the right to have a choice, without the right to decide on either our future or the future of our country. So we were stripped of any sense of responsibility for our country. The reforms created a contrary situation: we were granted freedoms, a lot of freedoms, but as before they had nothing to do with being responsible for our country. We now have a right to vote that we can exercise, but the way our political system works, that right to democratic choice is important only at the time of elections. After the elections are over and the results are known, society can no longer influence the authorities. It suffices to see how often over the past few years social dissatisfaction has spilled out into strikes and how little it has affected electoral results and governing structures; how little the most active and educated part of society cares about elections. Indeed, in the 1995 parliamentary elections 14.9% of electors with scientific degrees did not vote – twice as many as among electors with unfinished secondary education (7.5%).

Why have today's democratic freedoms in Russia failed to create a civil society? Liberal reforms in Russia were initiated by a liberally-minded bureaucracy, which, lacking adequate support, did its best to carry them out in the most severe and speedy way possible. Recommendations from international financial institutions contributed to this unseemly haste. But fast liberal reforms, which society did not understand and support, coupled with a basically intact system of social privileges and guarantees, quickly incited conflict between the liberal aspirations of the executive power and the paternalistic moods of the legislature. Then in 1993, as a result of a brutal political conflict, the executive branch amended the constitution to further increase its powers, which not only did not resolve the conflict but perpetuated another crisis. Although the parliament was not completely stripped of its ability to control the executive, it lost most of its influence and became a stronghold of the opposition to the existing system of power and statehood. This is easily understandable: if you can not find a place in the system, you will not be satisfied with the system as such.

Because the executive power had appointed itself an exclusive purveyor of right-wing liberal ideas, the legislature quite logically became the leader of the left-wing opposition. As a result, the natural struggle of the legislature to join the ruling elite as an equal met with the unyielding stand of a president allergic to "the Reds", and this bickering gradually, out of sheer senselessness and futility, degenerated into a fight to change the state system.

It was inevitable that the parliamentary majority would become leftist, it was equally inevitable that its intense opposition would lead to superfluous redivisions of power and changes in the discredited fundamentals of the state system. This propelled the conflict from the sphere of ideology and politics into the sphere of the institutional system. The tug-of-war between the Duma and the president together with the government became the operational principle of a state mechanism naturally incapable of ensuring continuity in the country's development.

In the wake of this struggle, privatization was traumatized. The liberal bureaucracy, in its attempt to privatise state property as soon as possible and thus create a class of proprietors to ensure the stability of market reforms, lost control over capital movements in the financial sphere, allowing several big financial industrial groups to become what was later termed the "oligarchy". Big capital exerted such a profound influence both on the executive and the legislative branch that, starting from 1994, the authorities could not perform their functions without constantly having to come to an agreement with the "oligarchs". At the same time the authorities were plagued by their chronic inability to either keep to their exaggerated social promises or publicly acknowledge this inability. As a result, the authorities failed to adequately carry out their formal functions, obligatory under any circumstances, functions that are not politically determined, such as maintaining order and individual safety, preventing economic damage caused by massive strikes or, say, the "rail wars" of the last year. All these factors caused frequent changes of governments which, regardless of their composition or political orientation, were all incapable of pursuing any consistent strategy of reforms within the existing political system.

Of course in a normal environment, parliamentary and presidential elections are the most natural and logical way of obliging the government to act consistently and in the interests of society. Why, then, does the election mechanism used in Russia for almost 10 years not produce this effect? Technically the electoral system is not faulty at all; it has all the characteristics of a democratic election system, with some peculiarities though, such as elections that contain both first-past-the post electoral districts and those based on party lists. But at least a democratic form of ballots exists. So the problem is not with the system but with those take advantage of it and how they do so. At the beginning of reforms in Russia the country lacked a big class of people united by common interests, for whom market changes were vitally important. Statistical and opinion research data show that there are more than enough people to form such a class. But the political system that exists in the country makes them stay away from any participation in politics, including elections.

Why? Because in the existing system of power any individual, with the exception of those totally dependent on state support (pensioners, handicapped, etc.), is better off dealing with their problems on their own, either by operating in the shadow economy with complete disregard for the state or through "personal" relationships with governmental officials. The effect of such behaviour is two-fold. First of all, it results in alienation, because such isolated ways of existence can not unite anyone. Everyone knows where and how to fool the state but this knowledge only heightens the sense of social isolation and division. It the domain of atavistic individualism. Everyone is unhappy with their life but everyone deals with life on their own.

Opinion polls, differing by about 20%, show that three fourths of the population, when comparing their living conditions with others, are convinced that they have been much more successful in adapting to the new living conditions than the rest of the country. Difference in evaluations is approximately 20%. This is an example of alienation that eventually makes the middle class lose interest in elections because this class does not believe that the country can be influenced through elections and, thus, stops it from perceiving itself as a class of people united by the same goals. The result is debilitating. The vulnerability of the middle class has transformed it into a tacit supporter of the corrupt oligarchical regime.

This is a problem of the absence of self-awareness by an individual as a citizen and part of society. In a society devoid of such self-awareness, not a single party will ever have a stable electorate united by something more substantial than agreement on the forms of protest. This accent on the negative unites the electorates of every grouping from the Communist Party of the Russian Federation to Grigory Yavlinsky's Yabloko. But such a political system is incapable of serving creative collective interests. The political views of the parties of organized protest against the existing regime or their adaptation to it will always be extremely volatile and be determined by short-term trends, which will always be their determinant. In such an atmosphere, people remain a community of subjects, united by the same territory, language, mentality and the same dissatisfaction with the irresponsibility of politicians.

In societies lacking civic self-awareness, political calamities and economic catastrophes take place and yet fail to inspire a comprehensive purposeful reaction. This social passivity only makes the authorities even more irresponsible and leads to even more social apathy. In the existing indistinct mechanisms of responsibility, the authorities can lose trust and bear some responsibility only if they do something extraordinary. Here is an illustrative example: it is only after the president started and lost the war in Chechnya that the opposition managed to attract society's attention to his impeachment. In this situation, the communists discredited themselves by failing to impeach the president.

The deplorable consequence of this construction of power is its capability for self-reproduction. Shake-ups in Russian politics over the last year when the government was changed four times boil down to mere periodic changes in the elite, which gets access to power. In August of last year, Victor Chernomyrdin was once again appointed acting prime-minister after the government which I headed (briefly) resigned. He immediately changed the terms for restructuring the internal debt offered to investors after August 17. This lead to a quick devaluation of the ruble, which was extremely beneficial for the export-oriented elites which dominated Russian politics at the time, because for them a stable ruble meant losing a big part of their profits when world oil prices were sharply dropping. What prevented Chernomyrdin from becoming the prime-minister again? Why did the State Duma refuse to confirm his tenure of office? Because at the time the left-wing opposition had grown very strong and it was supported by the financial-industrial elites (including the military/industrial barons) who now favoured home production.. They sought a more autarkic policy. So Evgeny Primakov become the premier as a generally accepted compromise.

In September of last year the ruble was devalued, monetary policy was revised and the economy was reoriented towards home production to satisfy internal demand (as opposed to the export of oil and gas). Evgeny Primakov was then appointed prime-minister, thus, completing the process of the transfer of power from one political elite to another. Liberals and export-oriented elites lost power. This was confirmed when the communist Yuri Maslukov appeared in a key economic post.

But what really happened is that a grave disequilibrium surfaced: the new elite reinforced its political powers by getting access to and control over the country's finances, but nothing had really changed in the economic structure. Its declared attempts at rerouting financial flows on a massive scale failed. The economy's dependency on raw material exports actually increased when world oil prices rose and export revenues consequently grew, which was especially apparent with the ruble's devaluation. The positive balance of Russia's trade is based on raw material exports which each month bring in two billion dollars – something the new elite could not find an alternative to, despite all its declarations.

Primakov's resignation and the formation of a new cabinet restored the disrupted equilibrium despite all the talk about the roll of clans and their interests played in the decision and its evaluation as political gambling by the presidential circle. New ministers and vice-premiers (Kalushny and Aksenenko) quite openly made public the prime goals of the government and the Ministry of Fuel and Energy – the restoration of normal relations between the government and big capital, renunciation of excessive ‘atrocities' in giving export access to oil companies, creation of the conditions to increase the production and export of oil, revealed that energy exports had once more become the backbone of the government budget. This was a complete revamping of Primakov's dozy economic policy.

Here is how the mechanism for self-reproduction of the political system functions – within the parliamentary democracy there are oligarchic groups competing for power with opposition groups. For both, the law is less important than achieving their goals. Democratic elections are used as a mechanism for legitimising this system. Call this system Russian democracy without liberalism.

So, is Russia's model of power invariably authoritarian? Or does every distress Russia suffers bring it closer to real democracy where free elections lead to a strengthening of the law? Unfortunately it is too premature to give an answer to this question.

The beginnings of an answer will become possible after the coming presidential elections, which could have several possible outcomes. The first, but not the most likely, is that Boris Yeltsin will be elected for another term or that his term of office as Russia's president will be extended for one reason or another, such as the formation of a Russia-Belarus union and so on. This will mean that Russia's authoritarian model of power will be not only preserved but will instantly ossify. Another outcome is the victory of Yeltsin's "inheritor". But to achieve this result will probably require a violent repression of the political system. The third possible outcome is that the strongest from among the current critics of the president will win, inheriting the existing system of power, which they will then use to find their own enemy and to fight it as long as it will be possible to remain in power, in the meantime inspiring the compassion or hatred of their compatriots, for whom nothing will really change.

At the moment the conditions of the presidential race indicate that contenders loyal to the president have little chance of winning the election. Thus it is unlikely that they can guarantee that they will protect the interests of the elite close to the current president. Since Boris Yeltsin's participation in the election is improbable, any technology to keep the current elite in power is fraught with the danger of introducing changes into the existing election rules. At the minimum, delaying the elections for one reason or another, such as through a possible union with Belarus and thus the creation of a "new" country, is only a slight possibility, but it should not be ignored. But any change in the terms and dates of the election will inevitably lead to the formation of a more severe, more closed political regime, one orientated towards the creation of the "state capitalism" economic model, with near total state control in the financial sphere and an economy dominated by vertically organized large state-owned or state-controlled corporations.

Whereas Boris Yeltsin has sacrificed his status of "Father of the Nation" to maintain an uncompromising conflict with the opposition, the new president within the same model will have to take into account new trends and to become an excessively caring "Father of the Nation" through clenching both supporters and opponents in one firm fist.

Still, there are objective reasons for hoping that for the idea of a stable political system ensured through the establishment of a government formed on the basis of a victorious majority in the Duma. The technical senselessness of the current relationship pattern in the existing system of power is apparent and tiresome. The peole have a high level of dissatisfaction with a parliament dominated by communists which interferes with doing any practical work. A tendency of growing influence of political unions with hazy ideology, which prevents both a liberal revamp and the restoration of communism, has sufficiently manifested itself. All this combines with an increase in the electorate's interest in moderate centrist conservatives. Ideologically this all boils down to a growing concentration of majority support around a relatively depoliticized pragmatism which lacks principles but avoids extremes. This is a good basis for laying down a political construction which can be created after the elections and as a result of elections. Only one component is missing : it is necessary to form a confident right-wing centrist coalition to prevent the moderate left-wing centrists from getting an opportunity to persistently experiment with the search for Russia's "special way".