Publication: Monitor Volume: 3 Issue: 182

Over the past two weeks a hyper-active President Boris Yeltsin has lashed out right and left, giving rise to speculation that a major shift in economic policy is taking place. Two weeks ago, Yeltsin called in the bankers for a stiff talking-to, and pledged to personally supervise future privatizations. In his radio address on September 26 Yeltsin blasted organized crime, and accused it of penetrating government structures. In his speech to the Federation Council on September 25 he called for "a new economic order" that will necessitate "a strong state." Respected Izvestia writer Mikhail Berger interpreted the speech as a sign that Yeltsin has now broken with the unfettered liberalism which has, at least in theory, been the guiding principle of Russian economic policy since 1992. (NTV, September 25)

Some suggest that this initiative came not from Yeltsin but from First Deputy Prime Ministers Boris Nemtsov and Anatoly Chubais, who are described as having metamorphosed from "naive liberals" to "liberal-statists." (Moscow Times, September, 26) Indeed, Nemtsov’s initial moves when he was appointed back in March — freezing utility prices, auctioning limousines — did seem to carry him in the direction of "popular" capitalism. Chubais, presumably, is a more recent convert to the idea, having been burnt by the "bank wars" that erupted this summer. (Although the voucher privatization which Chubais launched in 1992 also had strong populist overtones.)

But will Yeltsin really "bring the state back in" so as to level the playing field of the market and to help out the losers in the transition process? Or are his latest initiatives merely so much political hot air? One does not need to look very far to see the political utility of the popular capitalism idea. On the same day that Yeltsin was speaking to the Federation Council, Russia’s lower house of parliament — the State Duma — again rejected more than a dozen draft bills which the government had proposed earlier in the summer to cut various categories of social benefits. Yeltsin pointedly refuses to address the Duma.

The government faces a long battle this fall to persuade the Duma to revise the tax code and approve the 1998 budget. In order to put the Duma on the defensive, the government needs to get up a political head of steam. It is not clear whether the ploy will work. A writer in the new paper founded by Oneksimbank, "The Russian Telegraph," suggested on September 25 that Yeltsin has decided to turn to the senators in order to curtail his dependence on the bankers who financed his election campaign. While the regional leaders who make up the Federation Council would no doubt be pleased to see the Moscow bankers cut down to size, it is not clear whether they will cooperate so readily in Yeltsin’s latest political shenanigans.

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