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Disaster made by the free market

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Issue 1762

Disaster made by the free market

THIS AUGUST marks the tenth anniversary of the failed coup in Moscow that led to the collapse of the Communist regime in the Soviet Union. Western leaders and the media hailed the end of the Communist regime as a triumph of capitalism.

They boasted that socialism was dead. They claimed that free market capitalism-what is today called neo-liberalism-would bring freedom, democracy and prosperity for all.

“Russians can now look forward to a prosperous and harmonious future,” enthused one newspaper report of the time.

Today Tony Blair preaches the same message as he travels the globe singing the virtues of neo-liberalism.

But ten years of neo-liberalism in Russia has been a catastrophe of unbelievable proportions. It has brought economic and social collapse, bloody wars and widespread corruption.

ON 19 August 1991 a reactionary group of generals, police chiefs and Communist Party bureaucrats attempted to take control of the Soviet Union.

They wanted to stop the dramatic changes which had already led to the fall of the Soviet Union’s satellite states two years earlier in the Eastern European revolutions.

By the early 1990s the Soviet Union had suffered two decades of stagnation and was in a deep economic crisis.

After he came to power in 1985 Mikhail Gorbachev had attempted to restructure the economy-in a process known as “perestroika”-to try to end economic stagnation.

He had embarked on a series of market reforms. But these had only made the crisis worse-accelerating the decline of industry and agriculture, and fuelling price rises and food shortages.

In 1989 a wave of miners’ strikes swept Russia for the first time in decades. The coup leaders represented a section of Russia’s rulers who thought force was the only way to restore order and halt economic decline.

But the coup attempt was bungled and it collapsed in just three days. Thousands of people rallied on the streets to block tanks and defend the parliament. Millions more celebrated when the coup collapsed.

One of the most famous images of the coup’s defeat was when Boris Yeltsin, a former Communist Party leader who had led the opposition, climbed on a tank to declare the reactionary threat was over.

Unlike much of the left, Socialist Worker always believed the Soviet Union and the Eastern European regimes had nothing to do with genuine socialism.

As the front page of Socialist Worker declared at the time:

“What we are seeing is the final failure of Stalinism-the repressive, bureaucratically controlled capitalist system that rose off the ruins of a workers’ revolution. Its rulers called themselves socialists and claimed to wield power in the name of the working class. But they presided over a system which was based on exploitation and denied the most basic rights to workers and peasants.”

The regime’s collapse did not mean the triumph of capitalism, as so many Western leaders and media commentators, and even some on the left, claimed. Rather it was the replacement of one form of capitalism, state capitalism, with another, free market capitalism.

Both relied on the accumulation of capital by, and in the interests of, a ruling class through the ruthless exploitation of workers.

WHEN YELTSIN came to power after the coup’s collapse, he followed the kind of market “therapy” so admired by Tony Blair and capitalist institutions like the International Monetary Fund (IMF).

Yeltsin rapidly introduced a swathe of IMF-style economic “reforms”-liberalisation of the economy, privatisation and slashing public spending. This experiment in structural adjustment has reduced one of the world’s leading industrialised countries to Third World conditions. Within just a few years the economy halved and industrial production plummeted.

In 1995 the free market fanatic minister Anatoly Chubais-a favourite of Western economists and the IMF-embarked on one of the most corrupt privatisation programmes ever.

Chubais handed controlling shares in Russia’s most profitable industries to a handful of leading banking conglomerates.

He admitted the bankers “steal and steal and steal”. Yeltsin wrote in his autobiography that “property was sold at bargain-basement prices” in “a climate of corruption and theft”.

Western leaders cheered Chubais on. Every time Russia negotiated a loan from the IMF, it demanded quicker and deeper free market “reform”. The clique around Yeltsin, and the bankers, media tycoons and other financial oligarchs grew fat on the riches of privatisation.

But workers and the poor have suffered unimaginable impoverishment. “Russia now has the greatest inequality-the income share of the richest 20 percent is 11 times that of the poorest 20 percent,” according to a United Nations Development Programme report in 1999.

Male life expectancy has fallen by ten years. The Russian population has shrunk by 3.3 million-an unprecedented fall in an industrialised country in peacetime. The Russian statistics agency predicts the population will fall by a further 11 million by 2015.

Workers’ wages have more than halved. Millions of public workers suffered months without getting paid, as the government refused to pay wages to comply with IMF budget-cutting requirements.

Some 50 million people, over one third of the population, live below the official subsistence line of 30 a month.

Two million people are estimated to have died a premature death from alcoholism, suicide, infectious diseases like TB, and stress-related illnesses. In 1998 the bankruptcy of the IMF-style prescription resulted in the economic crash which plunged Russia into even greater economic despair.

Such was the extent of the disaster that the Western free market fanatics began to row amongst themselves about “who had lost Russia”.

SOME commentators claim that, despite economic collapse and widespread poverty, at least the Russian people now have freedom and democracy. But there has been a remarkable continuity with the old Soviet regime.

One recent survey found that 61 percent of the richest people in Russia are from the old “nomenklatura”-the party and state officials who ruled the Soviet Union. Free market capitalism has not brought real democracy and freedom.

Although Russia is no longer a Stalinist police state, much of the repressive state apparatus from the old regime has remained in place.

In 1993 Yeltsin used the army to bombard the very Russian parliament he had defended two years earlier when it rebelled against him.

After his popularity had plummeted to just 2 percent among voters Yeltsin secured re-election in 1996 thanks to massive financial support from leading bankers and media mogals.

Such was the level of corruption and political bribery that media tycoon Boris Berezovsky spoke of the “rule of the seven bankers”. The Russian ruling class has fought two savage wars against the people of Chechnya, in 1994-6 and again in 1999.

It wanted to try to reclaim control of an oil-rich part of the empire it lost in the early 1990s.

Vladimir Putin, the former KGB agent who succeeded Yeltsin last year, is the man most responsible for prosecuting the current dirty war. He is also continuing the free market policies which have resulted in such disaster.

Yet Tony Blair was the first of the Western leaders to embrace and champion Vladimir Putin.

When Yeltsin handed power over to Putin he declared, “The role of the oligarchs will grow. The term oligarch simply means big capitalists in Russia. And big business is going to play a bigger and bigger role in Russia.”

That is exactly what has happened. In Putin’s first year in office workers’ wages decreased by 20 percent and on average Russian people became 15 percent poorer.

The economic and social disaster that has beset Russia is not down to some flaw in the Russian character or some peculiarly Russian form of “gangsterism” and corruption.

It is the result of the capitalist system of exploitation in both its state capitalist and neo-liberal varieties.

Russia is part of the same global capitalist system that has created poverty, war and environmental destruction across the planet.

The hope in Russia, as in the rest of the world, lies in the extension and deepening of the growing worldwide movement against global capitalism. Millions celebrated when the 1991 coup collapsed. But many are suffering under the economic reforms brought in by Yeltsin

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