Publication: Prism Volume: 1 Issue: 22

Russian Nationalism Takes An Economic Turn

by Mikhail Gershaft

Nowadays, it’s only the very lazy journalist or analyst who isn’tengaged in predicting the outcome of the upcoming parliamentaryand presidential elections in Russia. This really is interestingand topical, not only for Russia, but for the whole world as well.It is a process which is difficult to predict — after all, about250 parties and movements are vying for the people’s sympathies.

Naturally, the economy is becoming, directly or indirectly, thearena and object of struggle, and in the sharp confrontationswith opponents, the "trump cards" persuasive to anyHomo Sovieticus will be used: the threat to national securityfrom the course and the result of economic reforms.

In fact, GDP in 1995 is expected to be 46 percent, and in thearea of industrial production, 42 percent, of what it was in thepre-crisis period. Last year, enterprises were working at only44.7 percent of capacity. This is a greater decline than thatof the US economy at the time of the Great Depression.

The fact that the decline has taken place, to a significant degree,due to the decrease in military production, serves, especiallynow, more as an argument "for" the ominous scale ofthe loss to national security, than as a "plus" in thenecessary restructuring of the Soviet economy, which, first ofall, was excessively burdened with the military-industrial complex.Earlier, the argument in favor of increasing the size of the consumptionsector at the expense of the militarized sector persuaded professionaleconomists and comforted a population which had really grown tiredof the chronic shortage of essential goods, but now…

Now, this is not taking place.

Last year, the Security Council of the Russian Federation orderedthe Institute of Economics of the Academy of Sciences to workout a "Conception of Economic Security." Professionaleconomists write articles which are intimidating in their abundanceof statistics and their conclusions, and, as they once sent themoff to the Central Committee, now, they send them off to the "correspondingorgans." And the population is ready to forgo the illusionof prosperity to ward off the danger of the Russian state becominga "second-rate" or even a "third-rate" power.But insofar as the level of investment is less than one-thirdof the pre-crisis level, Russia’s sliding back to the lowest levelcould turn out to be real, permanent, and irrevocable, withoutchances to return to the ranks of great powers, of superpowers.

One must admit that this theme has substantial influence on Russianpolitics. For example, in the former Yugoslavia, three Slavicpeoples, by the will of historical fate, are divided now by abloody, irreconcilable war. More than a century ago, Russia waslinked with Serbia, insofar as Croatia and Muslim Bosnia wereoriented towards Austria-Hungary and Turkey respectively. Nothing,it seems, but historical inertia links Russia with Serbia. Butit is namely the argument of preserving illusory "greatness,"the striving to go one’s own way, tortuous and unjust in the eyesof world public opinion, which has forced the Russian leader totake awkward and inconsistent steps over the course of the lastfew weeks.

Analogously, specialists assess Russia’s resistance to NATO expansionas calculated for home consumption, to liquidate the attacks ofthe chauvinistic opposition.

Moreover, here it is possible to discern an attempt to wrestthe "banner" of fighters for national security and therestoration of national greatness from the national-patrioticand communist opposition. The chauvinists have no possibilityof exerting political pressure on the government, but they arepresent, unseen, in the Russian political atmosphere, feedingit and being fed by it.

Such are the metamorphoses of the political and economic processin Russia.

Let us look at the situation more carefully. If nothing standsbehind the threat to national security, and it is the sharpnessof the political struggle which gives birth to the growing scaleof this problem, then, perhaps, it is possible to come to termswith it as with the obligatory presence of an extreme right-wingparty in any democratic country (for example, Le Pen’s nationalistsin France.)

The government of any country is bound to care about the nationalinterest. In a recent interview with the newspaper Izvestiya,an aide to the US Defense Secretary, retired army general RobertLoggia emphasized that the American arms reduction program wasdesigned and approved by Congress in such a way that a majorityof the aid would be offered through American services or Americanmaterials, which would be provided through American contractors.Cases where money would pass into the hands of Russian, Ukrainian,or Belarusian firms or consumers would be virtually excluded.And it would be strange if a government acted in any other way.

If this phenomenon not only has deep roots, but also causes constantlygenerated by chauvinism and militant nationalism, then the worldcommunity must come to grips with it and feel the danger comingfrom Russia, who will try to recover her lost greatness over thecourse of long decades. Now, it is already obvious that the hopesfor a quiet world after the end of the Cold War have not beenjustified, and that although not all the "hot spots"of the contemporary world have been ignited with Russian participationand presence, this is most likely linked with Russia’s preoccupationwith her internal political quarrels and the weakness of her economicpotential. So far…

It cannot be denied that the process of losing past nationalgreatness is painful for any people. All the more so for the Russianpeople, whose greatness was bought at the price of enormous human,political, and economic sacrifice. (Greatness in the area of literatureand art, science and philosophy were not enough to compensate…)

Even in the pre-perestroika period, the bitter joke circulatedin the country that "the Soviet Union is Upper Volta, butwith nuclear missiles." Upper Volta could be replaced inconversation with Burkina Faso or Zimbabwe, depending on the audience’spolitical literacy, but this did not change the essence: everyoneunderstood and perceived the colossal gap between the people’sstandard of living and the military might formed as the resultof titanic exertion of the nation’s economic potential.

And now, it has become obvious that the attempts to close thegap, to which the efforts of the last Soviet decades had beendirected, will not succeed; the efforts were in vain, the smallgains were lost, and the fearsome military potential quickly gotold.

Thus, there are completely sufficient grounds for the conceptionof a threat to national security. One must admit that, by thejoint efforts of the national-chauvinist opposition, economists,and the press, the growing perception of a looming threat hassuccessfully been created. This is the "culture medium"for extremist revolutions and the coming to power of extreme forces.Most likely, this condition would not have been formed, or wouldhave soon dissipated in the patient "former Soviet people,"had there not been an objective, real basis for it.

Over the last few years, the de-industrialization of the countryhas taken place; to a significant degree, its scientific-technicalpotential has been lost; due to a reduction in government orders,dozens of scientific collectives and design bureaus collapsed,and a significant part of the nation’s scientific-research potentialflowed into the commercial structures. The chronic "braindrain" added to the somber picture. Only one million highly-qualifiedworkers were left in Russian industry, or about five percent oftheir total, as opposed to 40 percent in the US.

According to official data, unemployment is at 1.7 to 2 percent;according to unofficial data, 12-15 percent. But these levelsmust be correlated with the Russian mentality: virtually threegenerations of Soviet people have never experienced unemployment,do not know how to look for work; in the Soviet Union, there hadalways been a shortage and a demand for workers. High unemploymentand inflation are symptoms of a sick economy, but here and now,they fall on the fertile ground of national and economic security.It is easy to imagine what the sympathies of the population inthe upcoming elections will be if someone "identifies"to them the one to blame for their misfortunes, and proposes asimple and painless way out of the economic dead-end and "imported"deprivations.

Here, we face an important and interesting phenomenon. Why wereRussians ready, over the course of many decades of life underSoviet power, to wait for the promised communist prosperity, butare not ready to do so now? Could it be because the earlier promiseswere more believable, since they were backed by ideology and awhole army of propagandists? Could it be because nobody had askedSoviet people before, because the previous system was virtuallywithout alternatives? Could it be that their patience could beexplained simply by the presence of a perfect repressive apparatus?Even if there is a partial answer to the questions of the causesof "reform fatigue" in these choices, a return to thepast is quite probable.

Russia has now virtually lost the majority of the competitivemarkets of the Eastern European countries, is being squeezed outof the CIS markets, and, what is most painfully experienced inthe country, and will most likely serve as a clinching argumentfor the national-patriotic opposition, domestic production iseven being squeezed out of the internal market. The chairman ofthe lower house of the Russian parliament, (the Duma,) Ivan Rybkin"vividly expressed his position" in this way — writesthe Communist newspaper Pravda [GET CITATION]: "VastGreat Russia must straighten out its own production without givingway to arrogant newcomers from abroad."

The growth of the role and share of high-quality imported productionis a natural process, typical of any country in the modern world.But in this case, one can speak of a unique phenomenon in thehistory of economic development.

In principle, to simplify the situation as much as possible,at the present time, at the end of the twentieth century, theworld’s economic and production potential (especially that ofthe world’s developed countries) is completely sufficient to satisfythe needs of even such an enormous country as Russia, with itspopulation of 150 million, with its still-empty, post-socialistmarket. This applies to chocolate, Coca-Cola, and cosmetics tothe same degree as it does to computers, trucks, and householdtechnology. To make this conclusion, one does not have to be familiarwith the statistical data; it is enough to take a look at storeshelves and advertisements announcing foreign goods for sale.

There is no need to produce one’s own computers and trucks, sugarand macaroni, furniture, kitchen utensils, and children’s toysif all these things can be acquired at a higher quality and moreelegant style in the West or in the East. And if you add to thisthe Soviet consumer’s preference, formed over the long years ofthe socialist economy, for everything imported, what comes outis a depressing, but completely realistic, picture. It is notdistorted by the observed tendency to "dump" poor qualityproducts with expired freshness dates, poisonous alcoholic drinks,or obsolete technology on the Russian consumer market. These arecosts of the process, and they could be overcome by a strengtheningof state control over imports.

Actually, in 1991, Russian production made up 86 percent of herretail trade, and imports, only 14 percent. Three years later,the share of imports in retail trade rose to 39 percent. And thisis not because of any special lack of patriotism on the part ofRussian entrepreneurs.

The idea expressed above suffers from many omissions, but itis close to reality. If the twentieth century could not blot outthe Soviet Union from its history: it was too full of incalculablelosses, great events, and lessons for all humanity, then obviously,these decades could be excluded from its economy. The Russianeconomy, like the economy of the CIS as a whole, was late forthe beginning of the twentieth century.

But there is another side to this position: if the civilizedworld is able to satisfy Russia’s demand for food and technology,then what can Russia offer the world community in exchange? Theanswer, unfortunately, is obvious: energy resources and raw materials.

Just over the last four years from 1990 to 1994, the "specificgravity" of the fuel sector rose from 16 percent to almost23 percent of total industrial production; the share of metallurgyrose slightly, on a background of a substantial drop in machineconstruction, (it fell to one-fourth of its previous level inone year) chemical, and, symptomatically, light and food industry.

Thus the "loss of national greatness" and transformationinto a second-rate country leads to transformation into a "raw-materialsappendage," which, from the time of Lenin’s analysis of imperialism,served as the worst label of all for any country in the Marxistpolitical and international lexicon.

The predominantly fuel and raw-material direction of the economyalso, naturally, creates the highest degree of dependence on exports,especially oil, petroleum products, and natural gas. The reductionof world prices for these products was painfully felt in the Russianeconomy. To compensate for the reduction in income, Russia hadto increase the sale of that raw material. Increase in sales,under conditions when it is impossible to increase oil and gasproduction, could only take place at the expense of sales on thedomestic market. The shortage of fuel and raw materials on thedomestic market will give additional arguments to the extremeleftists, not only on the grounds of the "sale of nationalproperty," the enriching of a particular part of the bourgeoisie,the "comprador-bourgeoisie," according to the communists’terminology, but also on the grounds of dependence on foreignsuppliers, which could become a means of political pressure.

But Russia cannot make domestic prices for forms of energy higherthan market prices to prevent unwarranted fuel exports. It wouldbecome a source of inflation on an enormous scale. As can be seen,Russia has gone into an inescapable vicious circle of contradictions,as a result of and as payment for her decades-long socialist experiment,with the threat of its continuing. Even the moderate oppositionto the present regime proposes "state regulation," butthat means the freezing of low prices for forms of energy and19-20 types of production. The next step–limitation and quotason exports… For the Russian economy–it would be like historyrepeating itself.

Economists of the moderate opposition subject the reformers’"destructive work" to criticism, and, in the traditionalRussian spirit of xenophobia, warn of the danger of taking theadvice of Western experts, whose professional competence and objectivityare questionable, but whose interest in destroying the Russianeconomy is obvious.

The communists and nationalists are building their hopes on thereal and exclusively painful contradictions of the economic reforms.Here is the real platform which brings all programs together.Right after their traditional lip service about striving to returnpower to the people, the communists, just as traditionally, reachout their hand to "the great-power nationalists," assertingthat only the state can, and must, "force businessmen toshare with the people, because they are not able to restrain themselves."

Understanding that, under contemporary Russian conditions, marketrelations and "capital" can no longer be destroyed,they, in Leninist fashion, divide it into "comprador"and "domestic" varieties. "The main enemy is pro-Westerncomprador capital," which the communists associate with theleaders of the present regime, who rely on the oil and gas complexand are oriented, as it is thought, towards the West. "Fora third century, Russia’s foreign enemies await her departurefrom the historical arena." "Domestic capital is orientedtowards Russia’s restoration and qualitatively-new industrialdevelopment."

"The Communist Party," writes Pravda, with thegoal of attracting its former electorate, "is the party ofrestoration of Russia’s great-power status, the party of statists[gosudarstvenniki]; exploitation of both comprador anddomestic capital is foreign to it, but it is not foreign to domesticcapital’s efforts to preserve and strengthen the Russian state."In the present case, it is the lesser evil. Later, obviously,the class struggle will have to be expanded, but now, they haveto unite with these people.

It is noteworthy that the threat to national security attractsthe "reds" even more than the "pink" representativesof the Agrarian Party.

Food imports have undermined already-sickly Russian agriculture,and have created "a danger to food self-sufficiency."Here, the Agrarians see the fundamental danger to themselves,the threat to the very same national security, and, naturally,the one to blame is the West. A significant share of the ruralpopulation sees national security as a principle for the sakeof which the economy can be de-industrialized. These fears areillustrated by the predicted hypothetical situation of an embargoagainst Russia, analogous to the one against Iraq.

In this context, the attitude towards foreign investment is quitesymptomatic. The great interest shown by foreign firms in thefuel sectors, and, in most recent times, in oil refining, andalso in the sphere of guaranteeing general commercial activity–banks,trade, distribution networks, and communications, is completelynatural. Investment to create the necessary conditions of a functioningmarket grew by 446 times in the first six months of this year,in comparison to the same period in 1994, in spite of a decreasein investment in science and scientific maintenance, energy, agriculture,etc. This is a sector which promises a quick return on capital,and to demand another model of behavior from Western investorswould not only be naive, it would be illiterate. They have otherideas. Western investors can’t and won’t solve Russian problemsfor the Russians themselves. But to accuse them of evil intentionsis not only fashionable, it is profitable; by doing this, it ispossible to earn desired points in election battles, and, at thesame time, "kick" your opponents.

In this situation, the democrats and the Viktor Chernomyrdingovernment itself are trying to take the "initiative,"to wrest the "trump cards" from the national-communistopposition. Sensing the pre-election state of affairs, they aretrying to shed the tag of being responsible for the economy’sexport orientation.

But will this bring them success?

Grigori Yavlinsky, a quite competent economist, but, at the sametime, a politician who thirsts for the victory of his party inthe elections, opposes the model of reform in which income fromthe sale of raw materials and foreign investments serves as thesource for financing the economy’s transformation. But he is keepingthe other sources for financing the reform process secret, andobviously, like a stage magician, will pull them out of his sleeveafter the elections.

The government itself promises to cut hard-currency contractsand direct its resources to the financing of domestic industry.But the quality of domestic production leaves much to be desired.

Reality is confirming the conclusions we have drawn. The national-chauvinists,who long for power, and the government, who is trying to preserveit, disagree only on the search for those responsible for theworsening situation and for means of restoring lost greatness.Here, the extreme right disagree with those who rule now. Butit is difficult to overcome what was formed over the course oflong decades. The problem may not have a solution at all, withinthe bounds of one generation. The results of this struggle arehard to predict, but one thing is clear so far, that the attemptsto restore past greatness are capable, for many years to come,of serving as the source for the destabilization of world politicsand the world economy.

Mikhail Gershaft was formerly a Professor at the Universityof Kazan.