Marxist Theory

Capitalist Restoration in the Former Soviet Union

(This document was adopted by the Inquilabi Communist Sangathan in 2001, based on a report by Robin Singh)

  1. The two fundamental contradictions of the Soviet Union for most of its history were:

a. The contradiction between the international character of the world economy and the isolation of the Soviet Union, or at most of the Soviet bloc, in an imperialist dominated world;

b. The contradiction between the need for workers’ democracy to develop in a harmonious manner the potential of a collectivised, planned economy and the dictatorial rule of the Stalinist bureaucracy.


In the early years of Stalinist bureaucratic rule, the economic superiority of state property in the means of production and central planning allowed the Soviet Union to industrialise, arm, escape the terrible effects of the 1930s depression, and survive the invasion of Nazi German imperialism. This gave rise to the myth of the superiority and invincibility of so-called Soviet socialism and of Stalin. But by the 1980s, the Soviet economy could no longer grow rapidly by the methods of applying more labour, land, raw materials, energy, machinery and other means of production in the old way. It needed to shift to methods of raising labour productivity and improving technology and product quality. But this was incompatible with bureaucratic command methods. By the 1980s the Soviet economy was stagnating.  Significant sections of the bureaucracy were making comparisons between the freedom of Western capitalists to exploit workers and enrich themselves, and the constraints of their own system. By the later part of his perestroika plocy, Mikhail Gorbachev had begun pushing the Soviet economy in the direction of a controlled restoration of capitalism for the benefit of the bureaucracy.


Gorbachev’s policy has to be assessed from two standpoints. On the one hand, from the defence of the historically progressive heritage of the October Revolution, and on the other hand, from the standpoint of the struggle to build the revolutionary leadership of the working class, against all counter-revolutionary leaderships, including the Stalinists. In making this assessment, we need to avoid empiricist statements like perestroika being negative while glasnost was positive. We need to integrate the whole of his policies and place them in proper perspective. Perestroika meant the introduction of capitalist-style economic measures in a bid to get the soviet economy out of the stagnation it had fallen into. Glasnost was an attempt to introduce a limited measure of bourgeois democratic rights to make perestroika more acceptable. In addition, there was an attempt to renegotiate the terms of the USSR along with a continued display of hostility to the nationalist movements taking advantage of the openings provided by perestroika and glasnost. Finally, the international policies of Gorbachev entailed getting economic and political support from the imperialists and in exchange drop all pretence of supporting international anti-imperialist and anti-capitalist struggles. In assessing the complexities involved, our starting point has to be the consciousness and organisation of the international working class. Overall, the Gorbachev policies contributed to the shifting of the balance of forces in the world in favour of capitalism and against socialist revolution by further weakening independent class politics of the proletariat, by damaging its socialist consciousness, by promoting illusions in bourgeois democracy, and by creating illusions about what the capitalist economy could do for the working classes. Notwithstanding any by-products, such as the eventual collapse of Stalinist politics and the clearing of the road for revolutionary reassertion, this central feature of Gorbachev and his impact should not be ignored or obscured.


Gorbachev’s policies only hastened the collapse of the rule of the bureaucracy, without providing any alternative. Stagnation became crisis. The August 1991 coup was a last-ditch attempt by Stalinist bureaucrats to protect their power. The failure of the coup brought Boris Yeltsin to power. Four months later, the USSR was ended and the openly capitalist – restorationist bureaucrats had plunged headlong into their project of restoration of capitalism in the framework of national states and national-chauvinist politics.

2. Yeltsin’s victory set the course for a hoped-for swift restoration of capitalism. But it proved easier for him to consolidate political power than to achieve capitalist stabilisation. With strong pressure and support from the IMF, World Bank and Western imperialist powers, the new governments of the former Soviet republics annulled the central plan, the planning bodies, and the state monopoly of foreign trade. They progressively freed prices and privatised state enterprises, initially with a large component of nominal employee ownership. They cut back on government subsidies and bank credit to money-losing enterprises.


The results were disastrous. Industrial production plummeted. Prices skyrocketed, and bills, taxes and wages weren’t paid. Living standards fell drastically. Healthcare deteriorated. Infant mortality rose and life expectancy fell.


Two forces might have prevented capitalist restorationism. Those sections of the old bureaucracy and military who saw state property as necessary for the Soviet Union to remain a great power with themselves at its head, and the Soviet working class. The Russian parliament became the centre of bureaucratic political resistance to Yeltsin. But it could not launch a fight that would inspire the working class. Evengtually, in October 1993, Yeltsin used military power and disbanded it. This also established that key sectors of the armed forces were with Yeltsin and the restorationsits.

3. The Yeltsin regime was immensely unpopular, particularly the ministers associated with the economic “shock therapy”. Apart from the destruction of the top level of the old bureaucratically planned economic structure, draconian monetarist austerity packages were introduced in the name of reducing hyper-inflation and defending the value of the currency. These, and the introduction of market mechanisms, a stock market, along with privatisation, meant enabling a newly emerging layer of bureaucrats-turned would-be capitalists to amass tremendous wealth. Lacking adequate private capital, these layers began a process of outright looting of state property. This was a historically unprecedented form of “primitive accumulation f capital”. The result was a swift economic and fiscal collapse. The state apparatus became deeply implicated in mafia-like criminal activities.


But despite all this, the bureaucracy proved to be no alternative. Voters turned to nationalists and fragments of the ex-CPSU. But the CP of the Russian Federation essentially conceded the second round of the 1996 presidential election to Yeltsin and converted itself into a parliamentary loyal opposition, thereby signalling that it had no fundamental disagreement with the restoration of capitalism, only tactical and sectional issues in mind, like how far the wing of the bureaucracy supporting it would benefit, etc.

4. The route to capitalist restoration has two alternatives. Either (and this is certainly what the imperialist powers are pushing for) a sell off of enterprises to foreign banks, finance and multinationals, and the creation of a typical comprador bourgeoisie; or the creation of a national capitalism which will however be well integrated into the imperialist dominated worls economy and within the imperialist power structures. Problems exist for both options. Financially, the latter route is difficult, since there is a great dearth of capital. To run the big enterprises involves taking into account the social institutions linked to them (crèches, housing etc.). Privatising these, in a situation where a large part of the population has gone below the poverty line, would be socially explosive. To sell off enterprises to foreign buyers would be economically more viable, but politically even more explosive. As a result, what has been happening is “illegal” actions, loot and plunder, and a flight of capital abroad. This allows the amassing of wealth by individuals, but shrinks the basis of the economic stabilisation even more.


The initial form taken was to transform the enterprises into companies by shares, then the sale of these shares to the population or to the enterprise collectives through pre-distributed vouchers. To the workers, this was projected as some protection against outsiders. From the viewpoint of the enterprise management, this meant freedom from the control by the central power. For the regime, it meant privatisation to satisfy western pressure while simultaneously keeping the workers relatively happy and at the same time developing the starting point of a full scale creation of real owners who would impose the desired capitalist restructuring.


5.The limits of the restorationist project also stemmed from the drain of capital cuased by Yeltsin and his circle of mafia-cronies. So the goals of the state were being thwarted by its own personnel. The failure to crete a hegemonic and crediatable capitalist class was driven home by the crisis of August 1998, when the Asan crisis caused a fall in the price of oil. Renaging on debt meant a loss of $20bn by the west.


The best investment case in the former “socialist bloc” is Hungary. Per capita investment in Russia is less than 2% of its Hungarian counterpart. A large number of private banks had mushroomed, but these were primarily involved in speculation, not investment. The crash of 1998 saw many of these collapse.


6.An extremely important question for revolutionaries today is the class character of the Russian state. Is it even now a bureaucratically degenerated workers’ state, albeit in its last gasps, and do revolutionaries have the duty to call for the defence of remaining progressive gains of the October revolution and military support to the state against imperialism in case of war? Do they still have to call for an anti-bureaucratic political revolution? There exist two possible errors in answering this. The first error is to say the Yeltsin’s coup of late 1991 created a capitalist state, so capitalism has now been restored. The second says, there is not yet a generalised commodity production, so these are still bureaucratically degenerated workers’ states.


6.i. Marxists do not identify the government with the state. When Trotsky fought against the characterisation of the Soviet state as ‘state capitalist” or ‘bureaucratic collectivist’, he was not placing any reliance on the Stalinist bureaucracy either. But he was arguing that certain historic gains of the October revolution such as nationalised industry, the state monopoly of foreign trade etc. were still in existence. The armed forces, led by the bureaucracy, were still committed to the defence of these structures, even if primarily for the benefit of the bureaucracy itself. When we consider the post-1991 Russian state, too, it is not enough to argue that Yeltsin was pro-capitalist. It could be possible to have a pro-capitalist government in a workers’ state. But the key institutions of the Russian state have undergone a metamorphosis. The planning apparatus has been dismantled. The state monopoly of foreign trade has been ended. Substantial privatisation o the economy has taken place. The fact that much of private property is now in the form of corrupt accumulation does not negate this fact. When we view the long history of capitalism, it is evident that primitive accumulation of capital has taken many forms, and corruption as a route to capital formation is hardly specific to the ex-USSR.


6.ii. However, to argue that some kind of a capitalist state has been set up is not the same as arguing that capitalism has been successful in its project of creating the conditions for its ‘automatic’ reproduction. The full-fledged restoration of capitalism involves the creation of markets in labour, means of production, capital. In Russia, there is a widespread survival of companies and industries which in capitalist terms are bankrupt. Significant parts of industry remain state property. The existence of these sectors play a role in subsidising the capitalist sector with cheap raw materials, fuel, transport, etc. Moreover, the state, and major industries, continue to pay the workers in kind, through low cost housing, cheap transport and health care, etc. Attempts at privatisation of the big enterprises have often come up against the snag that the social gains of the old system cannot be privatised easily, and may lead to much more serious social explosions. The existence of significant barter means that much of the market economy is operating at a level that cannot be considered a normal capitalist style of operation.


6.iii. Parallels and analogies with past revolutions and restorations are of limited value. In the case of the English Revolution (1640 – 1660) or the French Revolution (1789 – 1815), royalist restoration did not mean a return to feudalism, because of two key elements: a) A historically more progressive economic system had been unchained and the new ruling class had begun to form.

b) Restoration was also caused, especially in the English case, because the gentry and the bourgeoisie who had initiated the revolution had become aware that the maintenance of their social domination called for restoration of their internal unity, and the smashing of the subaltern threat. After the death of Cromwell, this had necessitated the restoration of the monarchy.


In the Russian case, the Stalinist counter-revolution had not merely destroyed political forms of democracy. Ultimately, socialist construction, unlike the construction of capitalism, is a conscious process. And every cook can govern only when there is a vibrant workers’ democracy. Stalinism had thus prevented the development of a crucial element of socialisg construction.  Statisation and planning without democracy so grossly dsistroted the economy that in the long run progressive forms did not emerge. The soviet economy went into its terminal crisis instead. At the same time, unlike in the bourgeois revolutions mentioned earlier, the generation that had made the revolution is no longer alive in Russia. The atomisation of the working class by the Stalinist bureaucracy meant that the bureaucracy id not face a similar order of subaltern threat – i.e., there was no organised vanguard layer of the proletariat which could have launched a battle to carry out the political revolution. The restorationist project has to compromise with working class aspirations, ut at a much lower level.


6.iv. At the same time, this whole process shows the fundamental validity of the historic analysis of the USSR by Trotskty and by our current since the mid-30s. We characterised the USSR as a bureaucratically degenerated workers’ state, where the Stalinist counter-revolution had led to the loss of political power by the working class and had opened up the possibility of capitalist restoration, but where as yet capitalism was not restored. We had called for an anti-bureaucratic political revolution. Was this an error? To answer this, let us look at the other options. For those who held that the USSR had been “state-capitalist” or “social – imperialist”, the events of 1989-91 had merely been a step sideways. This fails to explain why real capitalists all over the world were so deeply enthused by the events. This also fails to explain the problems of transition to a capitalist economy – indeed, if capitalism had existed all along, where was a transition? The argument that this is a general case of state-dominated capitalism transforming into private capitalism fails to explain, for example, why the process is so much less painful for the capitalist classes of countries like India ad so much more for the Russian capitalists. The theory of “new class” or “bureaucratic collectivism” was free of this particular problem, but only at the cost of far graver damage to historical materialism. Whence came the new class? If it was indeed a class, and therefore the Stalinist economic system a new mode of production, what did it mean for the Marxist programme? Trotsky argued that if we accept this analysis we would have to call for a new minimum programme, rather than the programme of political revolution and socialist democracy.  This remains relevant today. If Marxist class analysis is not to be treated as an irrelevant ideological baggage or a pretension born in another age and having no space today, if it is to be taken seriously, then how do we account for a triangular class war? In the case of a triangular class war involving feudal forces, capitalism and the proletariat, in the 19th Century, Marx was clearly to indicate that the working class has to give critical support to the bourgeoisie as the progressive force. At the same time, this involves accepting that the new class is not a historical aberration but one that has come on the historical stage for a long span. To accept such a proposition for the bureaucracy is to move in the direction of accommodation with it in the expectation that there might be centuries of deformed workers’ states, or bureaucratic states. If on the other hand the bureaucracy is treated as an aberration, we have to explain how an aberration is given the designation of a class with a global alternative.


However, Trotsky’s formulation can be and has been used for various mistaken claims, and that needs to be examined. It has sometimes been argued that the rule of the bureaucracy was a form of the rule of the working class. This had even led to hailing the Soviet invasion of Afghanistan. Trotsky’s own position was clear, and different. The formulations of the Left Opposition all stemmed from Lenin’s own characterisation of the Soviet state as a workers’ state with bureaucratic deformations.


Can a workers’ state exploit workers? Put in a normative manner, it cannot. But we are dealing with a historic phenomenon. This was an isolated workers’ state where civil war had decimated the class conscious vanguard. The rise of the Stalinist bureaucracy was to take place in this context. All Marxists, from Lenin onward, thought the danger of capitalist restoration would come from foreign (imperialist) powers, traders, and kulaks. For a long time, the bureaucracy was considered a minor factor. In fact, it was able to establish its domination for most of the 20th Century. This was an unexpected turn taken by history. The working class was so brutally smashed that it could not reorganise and overthrow the bureaucracy. But the bureaucracy remained a parasitic social layer which concealed its identity. It did not have the self-confidence of a ruling class. And its domination was mostly without hegemony, therefore requiring totalitarian dictatorship so often. In the long run only two options remained possible – revolutionary overthrow of the bureaucracy by the working class or capitalist restoration.


To call the bureaucracy a parasitic social layer is not to minimise in any way the brutal and oppressive regime it imposed. But it does reaffirm that this was not a stable mode of production, with social relations capable of reproducing themselves for an entire historical epoch.


6.v. The characterisation of the anti-bureaucratic revolution as “political revolution” referred to the fact that the bureaucracy had politically expropriated the proletariat, and only a restoration of workers’ democracy could enable a resumption of the transition ot a classless society. It did not imply that social relations would remain unchanged before and after the revolution. But it did stress that the economic gains of the October revolution would not have to be reconquered all over again. However it is necessary to recognise that the apparent separation of the “political” and the “economic”, which appears so evident in capitalism, breaks down in a system where political power is the vehicle of economic privileges.


7.The process of capitalist restoration in Russia and elsewhere have been slowed down, not merely because of economic bottlenecks, but due to the fear of working class resistance. This does not imply an imminent workers’ revolution. But the restorationiss are aware that working class support for democracy dos not mean support for ruthless shock therapy. In fact, shock therapy has led to increasing curbs on democratic rights of the working class. The UNDP has reported that the transition of the 1990s has led to “widespread poverty, alarming fall in life expectancy, widening inequalities between the sexes, falling investment in education, the collapse of public health and the spread of disease, crime, nationalist violence and suicide.” Around 40% were living below the poverty line in the aftermath of the crisis of 1998. Wage arrears in 1998 ranged from over 4% of the GDP in Russia to around 40% in Kazakhstan. Inflation, virtually unknown to the generations living in 1991, shot up to 2500%. In Armenia, food prices rose by 24,000% between 1991 and 1996. The weakest people – the aged, the disabled, single mothers, lost access to benefits and faced extreme hardship. Life expectancy in Russia, for men, has gone down to 58 years on average. Infant mortality rose by around 15% between 1991 and 1994. TB, AIDS and STDs rose steeply. Women have been increasingly pushed out of public life and out of the workforce. This has led to a growing imbalance between men and women. Violence against women has risen. Throughout the ex-USSR and east and central Europe, prostitution has made a massive comeback, often organised by crime-networks in Western Europe. And Putin’s agenda is to cut down social welfare measures even more. Not the dream of West European standards shown by academician-touts in Gorbachev’s entourage, but the nightmare of third-world economy is closer to the reality haunting the workers.


7.i. However, this has not been taken in a supine manner by working people. In 1996, over 100,000 Ukrainian miners struck work, demanding back wages. There have been many more struggles. But it is nevertheless the case that a mass working class upsurge is not looming just ahead. This is a working class that for decades has not had independent class organisations. When Trotsky was expecting a workers’ upsurge,  he had in mind generations who had seen the revolutuion and the civil war. The massive terror od the 1930s destroyed those militants and atomised the class. The new generations have lived through a system that was bureaucratic, national chauvinist, corporatist and that depoliticised them. The identification between the system and socialism, however false, means that this Russian (Ukrainian, etc.) working class is for the moment disoriented, and unwilling to accept socialist politics.


However, struggles and resistance are not absent. There has been a lot of passive resistance. This, together with the instances like the miners’ struggle, or the struggle of the Vyborg Paper and Cellulose Mill, where over two thousand workers, fearing layoffs after a British firm, Alcem, bought out the Mill, and demanding millions of dollars in back wages, occupied the plant and ran it under workers’ management for one and a half year. Ultimately, special riot police carried out an attack and occupied the plant. The struggle also gained much support and active solidarity from other working class organisations. The fact that a democratic strike committee led the struggle, and that workers’ control returned to the agenda, are indications that alternatives are being considered as neo-liberalism cuts to the bone.


From these struggles to a new revolutionary upsurge is a long way to go. The old trade unions lack legitimacy. Bureaucratised institutions that never fought for workers’ rights until 1991, they cannot lead real struggles. But local and regional unions have come up. In addition, in the bureaucratic system, the unions had certain legal rights. For example, factory closures, sacking of workers, etc., require the agreement of the union.


To complete the process of capitalist restoration, Putin has to overcome all forms of working class resistance, active or passive. Even more drastic steps have to be taken to privatise the entire economy, to change all elements of the old labour laws that provide some measure of security for the workers, cut social welfare spending even more, etc. Despite its weaknesses, these are bound to provoke reactions from the working class. Putin’s Chechen war is a part of a bid to create a nationalist euphoria and further divide the working class. The major so-called left party, the Stalinists organised in the CPRF, have likewise taken up a nationalist position. Working class resistance cannot be built by such parties.


8.The struggle of workers in Russia and other countries of the former USSR are thus of a combined type. They have to fight against the capitalist state and its restorationist policies. At the same time, they have to fight against the remnants of the old bureaucracy. That bureaucratic opposition does not differ from Putin in the basic goal of seeking capitalist restoration. Their difference is over tempo, the degree of authoritarianism proposed, etc. This basic unity is well understood by Stalinists who are turning into Social Democrats with a neo-liberal tinge. Thus, the CPI and the CPI(M) in India both maintain fraternal relations with the CPRF and advocate an alliance with Putin and with the Chinese regime in order to challenge US unipolar domination.


The real road for Russian workers, like workers anywhere in the world, lies through independent class action. This means the construction of idependent trade unions, the development of the class struggle, and the building of a revolutionary workers’ party. We are in opposition to both the emerging bourgeoisie and the remnants of the bureaucracy. In order to effectively intervene in the class struggle in these countries, we consider the building of independent working class organisations and revolutionary parties to be essential tasks. There has been considerable interest in and sympathy for Trotskyist ideas in many circles in these countries. Our task is to convert this interest into active organisational efforts to set up the nuclei of sections of the Fourth International. In doing this, we of course need to avoid sectarian behaviour, and to avoid the strategy of looting existing organisations, as narrow, sectarian practice has led certain groups to do in a few countries. But this necessary caveat should not turn into a prescription against the formation of sections of the Fourth International. There already exist Trotskyist groups publicly proclaiming their opposition to all pro-capitalist currents, and we need to approach them, instead of waiting for a few big names to suddenly take up the struggle to build mass parties.