Date: Wed, 2 Sep 98 22:08:50 CDT
From: “Workers World” <>
Organization: WW Publishers
Subject: Capitalist meltdown in Russia
Article: 42420
To: undisclosed-recipients:;;
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Russia's capitalist crisis grows desperate

By Gary Wilson, Workers World, 3 September 1998

On Aug. 19, the Russian Defense Ministry advised officers and soldiers to “fish, hunt, farm and gather mushrooms in order to survive until the federal government accumulates enough cash to pay military wage arrears,” reported Radio Free Europe/Radio Liberty, a counter-revolutionary voice of the U.S. in Europe.

The advisory, from what was once the world's second most powerful military force, was a sign of the depth of the crisis there.

This crisis arises first of all from the incompatibility of trying to graft a capitalist order onto the broken-up remains of a vast military-industrial-scientific complex built up in the Soviet Union over decades of socialist central planning.

The capitalist West, particularly the U.S., inveigled key Soviet leaders—who already represented a privileged, wanna- be-bourgeois stratum in the USSR—to acquiesce to this scheme with the promise that it would end the brutal Cold War. But the reintroduction of capitalism has been an unmitigated disaster for the masses.

Now this basic underlying crisis has been exacerbated by the worldwide capitalist economic implosion that started last year in Asia and is continuing to spread around the globe.

Outside of Moscow, few workers have been paid in months, if not years.

In Moscow, coal miners—unpaid for almost two years—are camped outside the Kremlin. For weeks, they have been chanting for the removal of President Boris Yeltsin.

Russia is in the midst of a massive 10-year depression, according to a report by Jerry Hough of the Brookings Institution in the Los Angeles Times (Aug. 18). To hide the depression, Hough writes, Yeltsin has subsidized the living standards of workers in Moscow and a couple of other large cities by delaying wage payments everywhere else. Collective farmers are paid “very little for their harvest.” Medical services outside the biggest cities have been practically eliminated.

Industrial investment is nonexistent and factories have been unable to retool. Agriculture has not been able to get new machinery, fertilizers or pesticides.

Famine is looming. “Grain production this year is 50 percent lower than under Mikhail Gorbachev, and the numbers of cattle, dairy cows and chickens are down some 75 percent,” Hough reports.

After 10 years of capitalist “reforms,” life expectancy for men has fallen to 57. “Some 3 million people in Russia died who would have been alive if the old life expectancy rates had been maintained. Lack of medicines and a balanced diet were key reasons,” Hough adds.


Yeltsin has been a political creature of U.S. imperialism since his first photo-op atop a tank in 1991. This winter, with the economy in near collapse, he suddenly dismissed his entire cabinet on March 23. In particular, he replaced Prime Minister Viktor Chernomyrdin with Sergei Kiriyenko. Chernomyrdin had been prime minister for five years and had become a symbol of the devastation brought by the imposition of capitalism.

But changing the faces of those in office does not change the laws of economics. It is the uncontrollable forces of capitalism that are driving Russia into the abyss. Individual actions cannot change this.

The calamities continued. On May 18, Russia's stock market fell 10 percent. On May 27, the market fell another 10.5 percent. And on June 1, another 10 percent.

The capitalist meltdown in Asia and the steep fall in world oil prices hit the Russian economy like bombshells. On July 13, the International Monetary Fund suddenly made an emergency $22.6 billion bailout loan. This was followed by another $11.2 billion on July 20.

But the stock market continued to fall. On July 23, it was down 7 percent. Then on Aug. 10, another 9 percent.

Why wasn’t this huge infusion of capital having any effect? An editorial on Aug. 14 straight from the horse's mouth, the Wall Street Journal, put it bluntly: “Shoving money into Russia is like pouring water onto a sheet of glass; most of it runs right off the sides, into places like Zurich and London and New York.”


The Russian stock market has virtually melted down. It has lost over 70 percent of its value in the last six months. By comparison, in the 1920s crash in the United States the market lost about 80 percent of its value.

Russia's central bank spent $3.5 billion to $3.8 billion in the last week of July and first week of August trying the shore up the ruble. But banks reported a shortage of dollars as panic erupted on Aug. 15. Huge crowds in Moscow lined up at banking machines trying to withdraw their money, reported Fred Weir in the Aug. 16 Hindustan Times.

On Aug. 17, to protect the banks from total collapse, the government devalued the currency and imposed a moratorium on payments of foreign debt.

The U.S. media reports Yeltsin's sudden firing of Kiriyenko and the rest of his cabinet on Aug. 23 as just another in a series of erratic moves by the unpredictable Russian president.

But the change was not dictated by Yeltsin. It was dictated to him. It was really a political coup staged by Chernomyrdin, one of the richest and most powerful of Russia's ruling capitalist class.

Chernomyrdin met with Yeltsin the day before the announcement and told him what was to take place. Moscow's Echo radio reported Aug. 23 that Chernomyrdin demanded “total personal control over the nomination of all members of the government, and no interference by the president [Boris Yeltsin] in the work of the government.” (AFP, Aug. 23)


The British newspaper The Independent described it this way on Aug. 24: “Analysts said that the big business clique which effectively calls the shots in Russia had been prepared to dump Mr. Yeltsin. Mr Chernomyrdin, believed to be one of the largest shareholders in Gazprom, the gas group, has a reputation for backing the interests of traditional heavy industry against the newer entrepreneurial class.”

In other words, Chernomyrdin is from Russia's own industrial bourgeoisie and represents their interests. Kiriyenko was more associated with international finance capital—particularly U.S. finance capital, which has been demanding “shock therapy” for Russia.

Kiriyenko's policies may have come directly from Harvard economist Jeffrey Sachs and others like him. These policies appear to be designed to break the Russian working class but also to make the Russian bourgeoisie thoroughly dependent on Western imperialist banks and corporations—in other words, turning Russia into a neocolony of the West.

While there is talk of coups and putsches, one thing the imperialists don’t seem to fear at the moment is a revolutionary turn of events.

The largest Communist party, led by Gennady Zyuganov, is playing the role of loyal opposition in the Duma, or parliament. It is not prepared, either ideologically or politically, to call on the masses to revive the revolutionary traditions of 1917 that led to the conquest of power by the workers and peasant-soldiers. But that revolutionary overthrow of the bourgeoisie was the pivotal event that later made possible the building of a socialist planned economy—just when capitalism began to go into crisis in the 1920s and 1930s.

Zyuganov's party does not call for the expropriation of the new bourgeoisie and the establishment of a workers' government; it hopes to support the development of national capitalism. The Russian capitalists, however, have no future independent of global finance capital, as events have shown only too clearly.

Inside the Russian working-class movement a debate has emerged on which direction to take in challenging the government. The Russian Federation of Independent Trade Unions general council will meet on Aug. 27 to decide its next step. The political heat is rising.