Publication: Prism Volume: 6 Issue: 7

By Tatyana Matsuk

When the Council of Europe raised the issue of excluding Russia, the French finance and foreign ministers published an article in the Financial Times about how Russia should be helped, and how Russia could help herself. They pointed out that Russia needed a state based on the rule of law, but that nepotism and corruption were deterring investors. The reforms should be continued, and efforts should be made to establish effective, working state structures in the country. The West should participate in this, despite the events in Chechnya, because instability in Russia could have a negative impact on Europe.

I have no quibbles with the substance of this, but it raises a number of questions. How should the reforms in Russia–which were instigated by and also fouled up by the nomenklatura–be continued, and by whom? The new authorities? But are they very different from the old?

While Vladimir Putin was prime minister and acting president, 70 percent of the country’s aluminum industry was handed over to two members of the so-called Kremlin “Family.” A new Chechen war was unleashed, claiming the lives of soldiers and civilians, and eating up–according to official figures–4 percent of budget costs each month (as much as the state apparatus or education, and twice as much as healthcare). No end to this war is in sight. A passage appeared in Russia’s military doctrine on the right of first use of nuclear weapons “if there is an exceptional threat to the state.” While foreign investment has fallen twofold on 1997, and the minimum wage is less than US$3 per month when it is necessary to spend over US$20 on food (US$35 according to the trade unions), the newspaper Segodnya reported that some 100 oligarchs were invited to Putin’s inauguration.

The Western press dubs Boris Yeltsin’s regime “contemporary feudalism” and Putin’s “bonapartism.” But feudalism did not appear in Russia under Yeltsin. There has simply been no other system for the last few hundred years. And while the country is run by the nomenklatura, there will be no major changes. But if the West no longer intends to depend on the ruling clan destroying itself, then to whom specifically can the West offer help, and in what way? I offer my view on this subject.

Reforms can be successful not if they are imposed from above, but if they emerge, or are at least supported, from below. In Russia, 42 percent of the electorate voted neither for Putin, nor for the communists or nationalists (about 40 percent, as against 36 percent for Putin, and 20 percent for Zyuganov). This is a potential army of real reformers. People calling themselves liberal marketeers are instilling in the population the idea that today everybody should look after their own welfare themselves (they believe the same goes for countries, each of which should put only its own interests first). But under what conditions should people undertake the legitimate economic activity which is essential during the reform period?

First, they should have a desire to live better, and this should be formulated as specific wishes. Second, they should be confident that what they want can indeed be achieved, and that, if they risk changing their lives, they will not suffer catastrophically if they fail. And if they cannot imagine how it is possible to live differently, or cannot identify acceptable ways of changing their existence, then at first they “go with the flow,” and later, when they have reached the edge, they are ready for anything. Looking for enemies is one way of extracting oneself psychologically from an intolerable situation, and the individualism which is part of the Western mentality is not a life-belt for a drowning society, but a weight tied to its feet.

In Russia there are different conditions for survival, so the psychology should also be different. No one is surprised that when a hunter in the taiga leaves his cabin, he thinks about the people who will be coming after him and leaves them matches, firewood and food. Only this behavior gives you the chance of survival if you arrive at the shelter weak, cold and sick.

The nomenklatura is a clan which has control of the whole state machine. No one can stand their ground against it on their own. The same is true of organized crime. The pressure of these two mafias–the state and the criminal–can only be withstood by a “third”–the honest toilers. In other words, a network of organizations which are public not just in name–trade unions, new business support groups, associations of entrepreneurs and producers, credit societies and so on–which can offer their members services which are either ignored or have been distorted beyond recognition by the nomenklatura state. In time, these structures should give rise to local government, new political parties and a new system for running the economy. A new (in the sense of working methods rather than age) generation of politicians and managers capable of establishing, not just in word, a nonpredatory market economy, civil society and a democratic legal state, cannot be hatched in the bowels of the old nomenklatura and feudal system, nor can they be imported. First, an incubator must be made for these and for other real professionals–a sound environment and a social basis for reform, to develop the initiative from below. Then this new generation, relying on the experience it has gained and the new economic and social institutions built alongside the old structures, will simply leave the nomenklatura behind with all its cumbersome state machinery.

Since the beginning of perestroika I have not seen any alternative path, because those in power in Russia do not give anything up to anyone, they will not train their own gravediggers, and in the absence of help from outside, the system will simply continue to reproduce itself in various guises.

What do Russia’s professionals need in order to start implementing the plan of action outlined above?

(1) Resources. Many of them have nothing other than their head and their hands.

(2) Access to world markets.

(3) Information, contacts, independent structures capable of uniting people and organizing their interaction and training.

(4) Confidence that they can succeed, and that they can change their lives themselves; positive examples, psychological support and a rational approach.

(5) Protection from officials, monopolists, bandits.

(6) Belief in the idea that respect for people can be more than just an empty declaration, and that the world can be organized not just according to the principle of “every man for himself, and God alone for us all.”

The population is in such a state that it is impossible to reject free education and health care and a nonaccumulative pension system. A modern market economy will have to be built with nonmarket methods, although not those used in China.

Aleksandr Solzhenitsyn is right when he says that in the current situation it would be wrong to put land onto the market, because we would get what we already have as a result of the privatization of industry, popularly known as “prikhvatization,” or “grab-it-ization.” Neither should we divide up and privatize the natural monopolies (energy, transport). Instead of raising prices on their products and services, we need to lower them on the domestic market to match the money paid by consumers. Currently prices are set by those who have an interest in nonmonetary returns. Russian products should be made competitive on the foreign markets not at the price of unacceptably low wages for employees, but at least at the expense of the country’s own resources, if nothing else.

Backing should be given to the huge creative potential of Russians, on their level of education, which is still as yet very respectable, on high technology, on small and medium-sized businesses, which are capable of concentrating capital if they unite into associations and then into holdings. And I think the most promising and most secure way for investors to finance Russian enterprises is leasing. The main thing is to create a real alternative to the old inefficient economy of raw materials and oil, an alternative to nomenklatura institutions and management methods, and to make the social ladder negotiable from bottom to top for any real professional on the basis of his or her abilities, and not on the principle of nepotism. People should see that there are honest ways of earning good money and standing up for their interests in their own country. In order for all this to become reality, it is necessary to devise special measures that match the conditions in Russia, rather than unthinkingly copying what is done in other countries, fearful above all of reinventing the wheel.

For example, for Russia–where people do not want to pay taxes because they are unconvinced of the authorities’ good intentions–a taxation system which made officials directly dependent on tax payers would be appropriate. Imagine that income tax was the main tax, that one fixed part of it went to meet the minimal needs of the federal budget, another part to the regional budget and a third part to the local budget, but that there was a fourth part, and each taxpayer would decide how much of it goes to which budget, or perhaps not to the budget at all but towards concrete social needs. The authorities at different levels would have to compete with each other, putting forward development programs which were attractive to a broad spectrum of the public, and actually fulfilling them, otherwise they wouldn’t get a dime the next year.

This can be summed up as follows. To put Russia back on the path of reforms which would be beneficial both for Russia itself and for the rest of the world, it is necessary to:

(1) Offer help not to the nomenklatura state, the monopolists and oligarchs, but to as yet unknown members of the public, public organizations created from below, small and medium-sized businesses.

(2) Use nonstandard methods and measures which take account of the particular features of this country.

(3) Put tomorrow’s common good above today’s possible losses linked to risky investments and new markets.

(4) Instead of isolating the country, increase the contacts of its honest citizens with people in the West, allowing Russians not to feel that they are “second class” citizens, and that others want to consign Russia to the third world, and renewing their trust in the West, democracy and the market.

I am a realist, and understand that the chance of 1991 is lost, possibly forever. But I’d like to believe that things could get better. In any case, we should not lose heart–if only to ensure that things do not get any worse tomorrow than they are today.

Tatyana Matsuk is a senior research consultant with Ekonomika publishers.