Privatization and Russian Workers

Milton Fisk

BOTH THE SOVIET hammer and sickle and the Russian tricolor were fluttering over the Kremlin as I left Moscow in mid-December. When the Union was formally dissolved shortly thereafter, the new Commonwealth of Independent States (CIS) came into being, more as a memento of the Union than as a unified political force.

When the center yields, conflicting poles of attraction become rampant. This happens in economics as well as politics. The collapse of the centralized Soviet state went along with a rash of efforts for political independence. In the area of economics, the collapse of the centralized state has gone along with a polarization over views of property–about who should control productive facilities, work discipline, and investment decisions.

This “property question,” which Marx said would be the leading question of socialist movements in the nineteenth century, has now become the leading question in Russia. Conflicting poles on property are as numerous as the newly independent states. How is the state to divest its property and who is to be the main beneficiary?

On January 16 Russian president Boris Yeltsin taunted a group of workers in St. Petersburg to take over their shipyard from the state. But surely they wondered: Where would they get credit; to whom might they sell their product; how could they compete using their old equipment; what should happen to them in case of bankruptcy?

A majority of workers don’t want the “mafia”–those who have made themselves rich by taking advantage of the inability of the state to control the economy–or members of the state or old party apparatus, or even the Western banks to take over what is still called state property.

Workers have been told for seventy years that the enterprises are theirs. They might then like to divest the state of property in a way that finally made a reality of that claim. But under the circumstances, how could they make a success of it? They thus ignored Yeltsin’s offer.

Workers Getting in the Way

Despite Yeltsin’s self-serving gesture to the shipyard workers, worker collectives are seen by him and his advisors as an obstacle in the way of realizing the kind of hard-nosed management necessary to increase productivity, to close unprofitable enterprises, and to form the basis for a capital market. They are an obstacle to the unemployment and the cheap labor that for Russian neo-liberals are the means to recovery.

Privatization schemes are varied, but they all counterpose privatized property not only to state property but also to property in the hands of worker collectives. When Yeltsin’s Harvard advisor Jeffrey Sachs bemoans the slow pace of privatization, he means the slow pace of selling off enterprises, through issuing salable stock shares to banks in exchange for debt, to other enterprises in exchange for their shares, to citizens at large, and even in part to workers themselves.

Those who would hold the shares would have an incentive to increase productivity in order to raise the value of their shares. Shares could then be bought and sold, thereby creating a source of capital for enterprises. Workers and average citizens would, of course, quickly sell off their shares since wages would be kept low in order to establish a recovery.

Building An Alternative

A group of Russian social scientists, however, have set themselves in opposition to neo-liberal privatization. Some thirty of them met, along with an equal number of sympathetic scholars and activists from elsewhere, December 9-13, 1991 in a conference on “Democracy and the Economy” sponsored by the Self-Management Laboratory of the Department of Economics of Moscow State University.

In opening the conference, Yuri Osipov, dean of the Faculty of Economics there, charged that “the government doesn’t worry about working people, who must now solve problems for themselves. They must then be supported through their own self-management.”

According to Alexander Buzgalin, the chief organizer of the conference, the state’s divestment of property provides a great opportunity. It is now possible to build on the workers’ collectives called for, from above, in 1987 by perestroika. This can be done by establishing, from below, worker self-managed enterprises. There are 45,000 state enterprises in Russia and the other states of the CIS; only 200 are worker-owned and run.

Despite these odds, Buzgalin and his colleagues make a case for self-management being a practical option. The property question is far from settled in favor of converting state property into capitalist property. In a poll on privatization done in the industrial city of Kirov in 1991 and reported at the conference by Alla Guzanova, “The most popular option, though still not a majority option, is to turn state enterprises over to workers, without indemnity to the state.”

The existing workers’ collectives that are more than paper organizations can function as a starting point for the option of self-management. An association of workers’ collectives of the USSR was formed in 1990, calling for the right of a workers’ collective to choose the form of ownership of its enterprise.

In the present situation, though, the immediate need is to invigorate production. Self-management, its proponents admit, is not of itself a solution to the current crisis. Right now there is a need for sacrifices, which the Yeltsin shock therapy distributes unfairly.

Yuri Sukhotin, of the Center for Mathematical Economic Investigations in Moscow, insisted at the conference that “the people must decide democratically how to share the burden of the crisis.” Pensioners and salaried workers have been hurt by the freeing of prices on January 1. As enterprises are closed, the unemployed will have no social safety net to catch them. Democratic regulation must accompany introducing the market.

The slogan of self-management appears in this light as more than a device to raise workers’ consciousness. Self-management extends the necessary democratic process to the workplace. It also addresses the economic crisis by increasing incentives for work through giving workers more control. For the Russians at the conference, self-management presents a practical alternative, provided, they would insist, it is taken in conjunction with the protections of economic regulation.

A Model for Transition?

The program of these oppositionists is a transitional one that allows for a combination of market, self-management, and aspects of planning. The planning at this stage would be done externally to the self-managing units. It would involve such things as the regulation of prices to avoid suffering and also the control of credit, to limit unemployment that market mechanisms would create and to keep many self-managing units from being starved for capital by applying norms of profitability.

The coordination of self-managing enterprises would, during the transition, be partly an externally planned coordination and partly a market one. As Buzgalin puts it: “At the start the market will be the medium. In the future self-management will take the lead. We need practical measures for every period, rather than abstract formulas.” Beyond the transition a fully integrated system of self-managing enterprises would cease to rely on external planning.

A key feature of such a transition would be the conversion of state to self-managing enterprises–in which workers have access to relevant information about their production and in which decisions are made by direct democracy. This conversion would be a key feature not just because of the advantages coming from increased motivation due to greater worker participation–a factor emphasized in the early 1980s by Tatiana Zaslavskaia, a major architect of perestroika but also because hesitation at this point means a lost opportunity.

The decrepit structure of state property could yield to pressure from the Yeltsin apparatus and from Western capitalism to become a capitalist property structure. Self-management with its social ownership of the means of production must, Buzgalin says, “start now or it will be too late.”

Shock Therapy and the Workers

Many of the Russians at the conference are associated with the recently formed Party of Labor, which brought together activists from several earlier political groupings, such as the Marxist Platform of the Communist Party and the Socialist Party. They grant that the Party of Labor is now only a group of leaders without a base in the working class. They are held together by the urgency of the task of ending “shock therapy” before it turns Russia into a low-wage backwater of capitalism.

A majority of workers have found it difficult to resist the argument of their union leaders that shock therapy with its higher prices will create more production, thereby raising workers’ salaries in the near future. The inflation, since the January freeing of prices, may have made a deep dent in that argument.

The market in Russia and the CIS generally cannot generate consumer goods if it is based on low wages for workers and small stipends for pensioners. The demand will simply not be there, as a number of participants at the conference noted.

But there is another problem, one that got scant attention. The old Soviet economy was highly monopolized, with the number of goods produced by one supplier at thirty to forty percent of all output. Because this monopoly in supply continues, the freeing of prices cannot be expected to settle into a competitive price structure that would reflect “true costs.” The privatization of monopoly suppliers would simply reproduce this problem. Regulation of prices is a must until capital is available to restructure production away from monopoly.

The concept of self-management, if not applied in a broader political context that is also democratic, might aggravate the problem of monopoly in supply during a transition period within a mixed economy. Workers in a given enterprise would simply not want to allow competitors to start up. Such resistance would have to be dealt with in the broader context of democratic planning. This solution is within the potential of the transitional stage envisaged by Buzgalin and his colleagues.

Whose Wealth?

In any case, raising wages now is impossible without addressing the crucial property question. Real wages can’t be raised just by printing money. Instead, raising them would require a redistribution of that part of what is produced in excess of current costs, that is, of the economic surplus.

But how does one raise real wages in the present context of crisis, when the state wants to control the surplus just to carry on the business of ruling while the holding companies, the banks, and the “mafia” are also trying to control it to get capitalism off the ground? Some way would have to be devised for those whose real wages are to be raised to control a sizeable part of the contested surplus. And in the absence of a social democratic state, that can only be through an ascendant struggle for social ownership.

It is, to say it again, the property question, not the distributional one of how the product is divided, that must be solved first. If workers do decide to struggle against Yeltsin’s shock therapy, then there could be a confrontation between him and the unions. He might find it necessary to crush them.

It is in the interests of Western workers to support Russian workers by making clear that crushing their unions would be unacceptable. If Russian labor’s organization is crushed, a very large section of the world working class, lacking minimal protections and decent wages, will suddenly be thrown into competition with Western workers.

Western capitalism could then look to Russia as a low-wage source of material supplies in the way that Japan looks to the Pacific rim for components made by cheap labor.

May-June 1992, ATC 38