The Russian state and its evolution

19 January 2014

`Yegor Gaidar: “Authority and Ownership, the Troubles vs the Institutions; state and its evolution.”

This interesting book can be read for free in Russian, written by Yegor Gaidar who was the Prime minister of Russia during much of 1992; most works on history by former politicians are a bit apologetic, to some degree this is can be said about this work too.

The first part of the book is an interesting study on the subject of collapsing centralized states; it is less about the causes that cause the collapse of the old order, more about the process of disintegration once the old order has crashed. The crucial problem is that of feeding the cities: disrupted institutions of the state make it difficult to produce and distribute food; once this happens the new powers usually start to expropriate grain by force, this in turn leads directly to civil war and terror; once order returns it turns out that the new state is surprisingly similar to the old order of things.

The author might have intended to make the point that his own policies of shock therapy contributed to having saved Russia from civil war; I understand that another point is that during 1992 there was no time left, no organizational means for a more gradual 500 days program . Besides that the ruling class was busy with silently looting/privatizing all remaining assets.

The study is interesting in in the way that historical phenomena are explained by economic factors; I guess that such a reading of history is the only positive legacy of Marxist thinking. Another interesting theme is the influence of economic thinking upon the policy of the day; during 1917 the prevalent opinion was that a planned economy is a good thing, by 1989 the opposite was held as true; (also see my article on slavery , and how the shift to laissez fair economics played a role in the abolition of slavery)

The second part of the book explains the resulting order in historical context: the surprising result of the Perestroika is that we saw the peaceful transformation of the Soviet Nomenklatura (also known as new class ,etc ,etc) into capitalist managers and owners; the political changes that legitimized the big switch were brought about by those opposing the rulers - Gaidar headed the government of Democrats that brought change (this as a result buried the democrats for good - very few have voted for them ever since); So he needs to do some explaining;

This explaining he does that quite effectively; his analysis is based on Marx’s theory of the Asiatic mode of production - unlike other parts of the world, Western Europe developed the unique and extremely effective notion of private property; (actually this work by Marx was censored during Stalin). Production in the west is based on private ownership and the rule of law; in other areas of the world the Ruler/owner would grant fiefdoms to his vassals, so property and power were inseparable. Gaidar describes the evolution of the Russian state in terms of this concept; the history of Imperial Russia and Soviet Union as two instances of the Asiatic mode of production. The reforms of the 90ies are portrayed as an attempt to buy out sRussia from the Nomenklatura; the rulers would turninto legitimate owners in turn for concession that would establish a free market and the dominance of civil society. (well I guess the plan did not quite work out, at least until now - they rulers had their problems with the ceding power part, they did not quite do it)

I think this book has some wider importance besides the context of Russia, first of all it covers problems that other countries are facing, I guess China is facing very similar problems. Also the Western world also knows some formulas that socialize losses while profits are privatized by the manager elite. I think the problem of a looting manager classes is not limited to the disintegrating Soviet Union, its the opportunity that makes the thieve. Opportunities for large scale theft arise when the managers oversee systems that are far too complex for effective oversight; complexity makes effective oversight difficult when the issues are not clearly understood by those bodies that are supposed to create the ‘checks and balances’; The counter force against this tendency is a better dissemination of knowledge/information, this has been very much aided by the Internet, therefore the internet might gradually turn into a real check of those in power; lets hope that this institution will not be curtailed in novel ways - as might happen in the name of fighting terrorist, enforcement of copyright laws or precaution out against other nastiness (watch out for the hidden motive).

summary of reasons for the collapse of the Soviet union

The good part that it is much shorter than the “The History of the Decline and Fall of the Roman Empire”

  • Soviet manager class (Nomenklatura): After Stalin the manager class no longer feared repressions; they formed many informal relations among their own kind and everything was decided by means of an internal bureaucratic barter market; The manager class was also aspiring to consolidate its status; they internalized their own position as real masters of the show. In the end they wanted to appropriate state owned property and turn it into their own private property; now Perestroika created the opportunity to to do just that: new private cooperatives made insider deals with management, these deals enabled large scale theft/privatization of state owned assets; actually the same scheme was in widespread use during the 1920ies - during the NEP period. Crumbling administrative controls during Perestroika were of much help during the late 1980ies.

  • collectivized agriculture was inherently inefficient - farmers just had absolutely no incentive to work. In the 70ies-80ies they tried to fix this by technological means: mountains of fertilizers, thousands of tractors, enormous amelioration works - all in vain. By the 80ies the USSR was a heavily urbanized country, so the trick of just dismantling state owned farms would not work here; there was nobody left who would be ready to work the land (however in China this step was quite successful).

  • They had to sell oil in order to buy grain; by 1985 oil prices went down, at the same time salaries went up; by 1990 the country was heavily in debt and nobody was ready to give them additional loans.

  • most of industry was working to produce weapons for the military; consumer goods were of a distant second priority. By the end of the 80ies they were producing mostly junk that could not be exported.

  • belated attempts of reform were not very effective: from 1985-87 it was about fixing ‘isolated shortcomings’ ; from 1987-89 reforms were about ‘democratic socialism’; from 1990 onward they talked about transition to free market economics. At the same time administrative controls crumbled, the system was based on fear, once that element was gone there was nothing to hold/bind things together; with the absence of fear the administrative system crumbled.
  • the break up became inevitable after the armed coup of august 1991 : all republics just wanted out as a measure of precaution; the question of safety was very important, nobody knew would would come next in such a dysfunctional state; also the system just disintegrated. A power vacuum appeared, so local republics just took over.

did the soviet union collapse?

It is sometimes argued that the western Roman Empire did not collapse and that it gradually transitioned into the feudal order of the middle ages, maybe that’s what’s happened to the Soviet union?

What speaks for this argument is the fact the continuity of leadership - the fact that the nomenklatura just happened to privatize its assets and continue to rule under the new terms.

Anyway the democratic transformations after the collapse of the Soviet Union were not that very permanent, for example they failed to produce an independent judiciary, so that there was not deep rooted separation of powers.

Maybe the whole transformation into a democratic Russia was just a temporary re-branding, which was anyway followed by a later return to autocratic rule under Putin.

Could things have turned out different by adopting a more gradual program of economic liberalization at an earlier stage ?

small scale private enterprise was allowed by the law of cooperatives since May 1988, Gaydar explains that cooperatives were an important tool that enabled the looting of state owned assets by the Nomenklatura. Still i wonder what would have happened if they had introduced this measure in 1985, when the process of disintegration was less advanced;

The reforms in China were driven by decentralization/de-collectivization of agriculture; this could not have worked in the Soviet Union for a variety of reasons: it is argued that the initiative required of independent farmers was being suppressed for decades and would not just have appeared overnight; agriculture was more industrialized/reliant on machines (self reliance small farms were harder to implement); also farmers got used/were content with just slacking off.

However what might have been done is to allot larger plots of land to peasants for private use here %D0%B7%D1%8F%D0%B9%D1%81%D1%82%D0%B2%D0%BE here - that was one of the more effective measures of Goulash communism ;

No way to know would could have been ?

`Yegor Gaidar: “Authority and Ownership, the Troubles vs the Institutions; state and its evolution.”

Notes that I took while reading this book,

First part: ‘the Troubles vs the Institutions’

Agrarian societies (until late 18th century) is the dominant forms of political organization

Feudal states, common features - decentralized state + no standing army + few taxes by the crown/center (the local lord is the Boss) * Problems: potential for internal strife + weak army * Advantages: less complex state has less potential for system crash; Tradition aids/legitimizes the power relationship between Lord and Serf (in times of crisis the power relationship is not questioned; - it has always been like this -) There are lots of crisis situations, but system does not break down as a whole.

Centralized states

# one tax authority for the whole state # complex bureaucracy ; roads/post/communication system required for tax levies ; conflicts resolved by legal system and a hierarchy of courts # a standing army financed from taxes # food reserves/gold reserves to bridge situations of crisis / this increases stability of the system

* Problem: complex organization has serious potential for breakdown of state (what happens if taxes base fails and no one can feed the bureaucracy ?) * Far away local bureaucrats are hard to oversea from the center. * Stability is a constant search for equilibrium between taking away from the serfs without driving them into ruin; * Threat of invasion can lead to over taxation; tax based is diminished by ruined serfs; resulting in crash of the system; * As tax base is breaking down, the local bureaucrats turn to requisition by force; conflicts sharpen * troubles lead to total breakdown of law and order (as a first step criminals freed from prison): The state has no monopoly on the use of force; there is no Lord/Sheriff to take over the task; * if there are complex irrigation systems then these fall into disrepair / Finance system , long distant trade - all gone. * State structures vanish ; more basic relationships last longer: family relationships; master->servant/serf relationship

Modern revolutions:

English civil War / Dutch revolt / American revolution - did not break with tradition; these revolutions did not sweep away the courts/finances/taxes did not crash;

French revolution was a different thing - it was a total break with past traditions

* French state before revolution had high degree of stability; no external threats; * problems: financial instability/debts; failed harvest/famine of 1788 (problems after a failed harvest become apparent the next year) * 1789: becomes clear that army does not follow orders (neither of the old or the new regime); the old order crashed within days; * 1791: taxes abolished (Taille tax) ; (along with the whole old order) ; * New order equality before the law, abolishes Estates of the realm ; guarantees of ownership; freedom of expression; participation; secular state (problem: new order not legitimized by tradition, no means to levy taxes as the old system had to be dismantled)

* State need to finance its activities: requisition of church estates; these were cheap because of the revolution: there were few guarantees of ownership. * Printing presses emit papers; inflation sets in; * farmers have no incentive to sell grain - wait for better prices; states start requisitions by force. * System of laws was enacted - requisition by force sets in ** 4/5/1793 “loi du maximus” - regulates grain trade; price controls; supervisors present at markets ** 15/8/1793 grain tax; ** 1/10/1793 General Maximus fixes prices. enforcement of law now by means of terror; laws of suspect ! ** 1794-1795 Food scarcity & Hunger; the Terror was also a war against the farmers/result of requisitions by force.

Difference between troubles and revolution - when revolution ends, the main changes are taken over by the new order. Napoleon and later under Restoration preserved equality before law and property relations;


  • Civilization is a fragile construct; it can’t be maintained when cities are not fed and law and order is not maintained; In olden times consumption/production of food was decentralized - no need for hierarchies, now society is more complex: example electricity - in winter a few weeks without it is a major calamity.
  • crucial component of stability - the states monopoly on violence.
  • Army is part of society - if there is a general feeling that powers are corrupt or illegitimate then this talk reaches the armed forces; Any sign of disobedience is a mortal danger to any regime; if the armed forces refuse to shoot at demonstrators then the regime is finished - but this also finishes the army; army disintegrates: if orders are questioned and not followed then there is no army. The streets fill up with armed and aggressive young men.
  • Police paralysis: after a revolution the prisoners are all freed wholesale - when prisons are stormed then no one will be able to distinguish between criminals and political prisoners. Police does not work without trust/cooperation of population; Police can’t work when trust this is lacking, police officers are laid off or killed, police informers no longer cooperate.
  • After the revolution competing factions turn into competing centers of power - each one wants to be the real power. People question authority; this is the direct result of the financial crisis and the inability to distribute food.
  • Property - social relationship that relies on functioning courts and state; agricultural production severely affected by lack of clearness in matters of property question.
  • Taxation: no taxation after revolt, functioning of the state is now financed by means of printing money - inflation sets in; When trust in money is destroyed the state just stops payments of salaries.
  • Rural areas are differently affected: transport system is down + lack of property relationship + worthless money + now need to pay taxes all lead to depression in agricultural output; Farming becomes subsistence farming.
  • It becomes a challenge to feed the cities: the masses that caused the overthrow of the old system start to grumble, the new order must buy loyalty of its power base. Result: decision to appropriate food by means of requisition leads to war of the city against the peasant. Civil war starts.

Russian revolution

  • Prior settings: Most lands owned by aristocracy; Stolypin reforms created a new class of farmers/owners; by 1914 most of the grain is produced by them - subsistence farming still very widespread. Muzhiki/peasants are very hostile to the alien influence of the city; “Miroed” - the one who is against the collective.
  • 1914: Russia enters war, budget still balanced and strong gold reserves; still the war had to be financed by the printing press; 14-17 Russia - money mass in circulation increases x6; (France x2, Germany x3).
  • Farmers reluctant to sell grain due to inflation; 1916 - government makes plans for price fixing + requisitions! but is already not able to implement these measures by force.

Like previous revolutions/revolts - its the outbreak was totally unexpected by contemporaries;

  • start of disorders: due to lack of transportation shortages lead to bread lines in Petrograd (all trains busy in the 1st world war); still bread was available!
  • protests were not against the war - many workers in Petrograd worked in armament factories and were not against the war.
  • 26/2/1917 Army refuses to shoot when protests reached a critical mass - the regime is finished within 24 hours.

  • Law and order: 27/2/1917 All prisoners freed. 4 March: Old police is disbanded (provisional government had to appease the Petrograd Soviet - the institution that controlled the garrison), new militia formed on paper only - until late 1918
  • by June 1917 - peasants take over / destroy the landowners estates; no formal property relations exist - land being constantly redistributed, this chaos was a further disincentive to till the land.
  • Bread: initially tried to continue price fixing + requisition, was politically impossible, also could not work due to lack of state bureaucracy (regional authorities disbanded) Aug-Sept 1917 - raises purchase price x2 ! This measure works for the time begin, temorarily.
  • complete disintegration of army takes several months - new powers are distrustful of it (order #1 - capital punishment abolished); still discipline and order are not completely gone with the ancient regime.
  • printing presses are only mean to finance state: prices rise x3 till end of 1917.

  • July,Oct 1917 - in this vacuum a small number of armed men was sufficient to take power at the center. Two entities did not dissolve - the Czechoslovak Legion and Latvian Riflemen - these were made up of foreigners. this was the real Red Army until vacuum ended by the fall of 1918
  • Bread:
    • First measure was requisition from big traders ; initially tried to organize barter for food - impossible due to lack of organization/transport.
    • Reds believe in centralized planning (example of Germany in WW1) - did not try buy grain for market prices. the old state had to be completely destroyed;
    • Requisition: land owners estates were ruined, still existed the big farmers; Reds tried to create power base among poor peasants - divide and conquer (failed, at this moment there was less inequality to exploit than before) Requisitions by force lead directly into civil war; still total failure in May-July 1918 due to lack of reliable armed forces / transport is in chaos / no way to define norms by territory - no management/bureaucracy, without that requisition is just armed robbery. Summer 1918 - meetings and strikes demand free trade / closing of barrier troops; July 1918 - temporary dismantling of measures: barter trading allowed, the state buys up grain and raises purchase price! same steps taken by provisional government earlier Aug 1918 - firm that sends workers to barrier troops gets 50% share of the loot; this incentive motivates many to join (previous had problem to recruit for this task)
    • Only way to survive is individual barter with farmers; Barrier troops were supposed to stop this, but these did not quite follow orders.
  • August 1918 - red terror; the Cheka starts its killings (? interesting: the author does not mention/omits this fact); Autumn 1918 - the Red Army is formed on basis of discipline; the Soviet state as we know it exists.

  • Bread: start 1919 - each village would be given norms and ‘collective responsibility’ was enforced (Meet the new boss. Same as the old boss ) - the village would have to enforce the norms, else …. expropriations are effective; but also Red Army is much larger and has priority over the city - result: cities still hungry
  • Peasants in conflict - don’t like the expropriations by the Reds, but they want to keep changed property relations - are afraid that the whites will roll back to the ancient regime. Result: the Reds win - they were regarded as the lesser evil. Still: area that is tilled decreases - due to disincentive of expropriations and disrepair of agricultural equipment.
  • The Reds offered minorities their own republics (with formal right of secession); this did win them over. (also: the Poles offered neutrality in return - this allowed the Reds to move forces at critical moment of the civil war)

Breakup of the Soviet Union

Sources of the crisis:

  • 1930-1985 agriculture based on collectivized farms; expropriation of grain by force - all in order to enable/finance shock industrialization + heavy industry buildup. System is not efficient at producing - urbanization proceeds and more people must be fed ; as a result they must buy more grain on world market for dollars.
  • 1970 - growth increasingly dependent on export of oil/later gas.
  • 1985 - energy prices fell sharply in 1985 - in order to bye grain the USSR dependents on loans, debts grow.
  • 1986-1991 - salaries where raised, while production output fell; money went into savings, as there was nothing left to bye.
  • 1989-1991 - creeping privatization, the Nomenklatura takes what it can get, uses the same old schema as during NEP: cooperatives make preferential deals with state owned enterprises, these deals are used to pump assets into private hands.

22/8/1991 - end of the coup; a power vacuum forms:

  • chaos did not lead to violence (as anticipated here ) why? - higher level of education/urbanization; less potential for violence as events did no unfold as a result of a major war; the deterring example of recent Soviet history; responsible leaders who tried hard to avoid violence. (i think the presences of Nukes also had a sobering effect on the leadership, Yugoslavia did not have that component)
  • Power vacuum: who is in charge - Russia, Republics, the USSR Supreme Soviet ?
  • in Army: who controls army in breakaway republics? what about ethnicity of officers/soldiers? What about an officers flat in breakaway republic, should he stay or leave? No functioning army, the officers busy with their own problems, Militia disappears; new internal borders not protected; (? how exactly did Armenia and Azerbaijan fight a war without armies?)
  • After coup: republics all broke away as precaution against derailed/dangerous Soviet State (not just Baltic republics)
  • Question of borders and ethnic Russians remaining in republics: big potential for violence, things did not go as in Yugoslavia - the nuclear capabilities had positive effect on tempers; Borders kept as - nuclear arsenal goes to Russia.
  • Bread: soviet system was based on coercion - could not work when threat of repression was not real; No country would grant credit to a bankrupt country - so can’t buy from Canada. The only possibility is to deregulate prices / print money, in the hope that farmers will sell
  • Big difference: in 1917 the whole establishment believed in central planning and the virtue of state intervention ; the failings of the Soviet state convinced them in the opposite.
  • inflation eats away peoples savings: what is the reaction? (Me: I guess its the playbook of the Russian state: democracy in times of crisis in order to establish legitimacy) Effectiveness: would farmers sell produce on conditions of destabilized currency? - still it worked somehow. (Me: what was the relative role of foreign aid ? to what extend did it bridge the gap until harvest of 1992 ? - he gives some figures, but does not elaborate)
  • initially the Soviet Ruble remained common the currency of former republics: republics print money indiscriminately, so Russia is importing their inflation as well.
  • foreign debt accumulated by USSR: payment was adjourned till end of 1992; Also Russia got new credits from the West (how much) on the basis of having presented a restructuring plan. Sharp budget cuts were made - education, army, farming subsidies - all cut.
  • Yeltsin knew that he would have to pay with his popularity, but he was the man and understood the risks/necessity of the measure;
    • it was an unusual decision for a politician to subordinate personal interest to those of his country - Dual power of president vs parliament: existing constitution did not clearly divide power between executive and legislative branches - so it was not clear who was in charge; Could Yeltsin have announced elections in the fall of 91? this would have put him in conflict with the parliament - such a conflict could have turned into civil war. Instead decided to attempt compromise with parliament on the question of a new constitution.
  • Mid 1992 - old Ruble has started to work somehow; USSR dismantled without civil war; Nukes were all moved to Russia; main crisis averted.
  • Opposition consolidates: many regard the loss of soviet empire as a trauma - society accepted soviet ideology as integral part of its empire - unlike Poland, where society regarded the Soviet system as occupation, in Poland growth start to pick up around 1992 (Me: also in Poland the former owners were still around, big difference !)
  • 17/6/1992 - parliament passes budged that increases deficit spending, constant wrangling starts.
  • 25/4/1993 - referendum gives boost to legitimacy of Yeltsin; failed to reach compromise on constitution.
  • Summer 1993 - new Ruble unbinds currency from other republics.
  • civil war of 1993: 21/9/1993 - Yeltsin decides to dissolve parliament; fighting starts; still army was loyal to president and shot down the insurrection.

Second part: ‘State and evolution’

Asiatic mode of production (Marx) - private ownership is not prevalent source of production, property not enshrined by laws.

  • Only the State/Ruler owns all the lands; everything subordinate to state/bureaucrats power (rulers are semi-theocratic);
  • Property is an attribute of power; loss of power implies loss of property. Frequent major redistribution of wealth as a result of politics. Private property is tolerated but is always under control/under threat of expropriation.
  • Insecurity breeds lack of incentive for production, short term gains generally favored over long term investment; no real growth/development.
  • Insecurity breeds corruption among Aristocracy/bureaucracy (who try to convert power into tangible benefits)
  • Change/reforms are usually a tightening of administrative control, without real change.
  • endless dynastic cycle: State gets stronger; aristocrats/bureaucrats loot/steel and weaken the state; disintegration of state - new rulers take over; everything stays the same.

Ancient mode of production in Greece - later Rome

  • based on private ownership, attributed to Solon (Athens) (6th century BC)
  • production based on private ownership; privately owned slaves;
  • rights/property of a citizen guaranteed (or rather the norm is not to violate them) ;
  • Rulers do not have absolute power (???) ; state as instrument of the polis
  • political crisis does not lead to total redistribution of wealth; Rome adopts this system.

Succeeding Feudal order

  • No absolute owner/power over of all land; The Crown/Lords/Manor-commons all have some overlapping claims on the land; Catholic Church is a parallel structure;
  • No strong states: no total wars of extermination (?) that require mobilization of entire society + standing army (this would create a strong state);
  • selective adoption/preservation of Roman law in Medieval states. Decisions must be legitimized by tradition.
  • increasingly independent Market towns - Guilds and later Hansa cities - gain protection against Robber barons ; possible to get rich without having to be near a center of power.
  • weak state creates room for development of multiple independent structures Polis / civil society .
  • relative stability + guarantees of private ownership create incentive for innovation and growth.

Meanwhile in the Rus’/Tsardom of Russia

  • problem of confronting Nomads: the state as shield ; all of society mobilized into effort
  • Similar problems at European fringe: Spain vs Moors ; Austria vs Ottomans - all lead to strengthened of the Shield-state; this strengthens the centralized the bureaucracy and slows overall development.
  • upon winning the war with the Khanate states, the Moscow state turns inwards: free trading Novgorod suppressed/incorporated; tight control over land - Noblemen appointed and disowned from Moscow; cities and Orthodox Church subordinated; Serfdom installed.
  • territorial expansion into Siberia further strengthens the army + bureaucracy; State encourages Xenophobia and imperial complexes; cult of the State worship is established; ( Statolatory ) This is the continuous theme that goes on until our days.
  • Powerful state suppresses civil society - even when there is no external threat; no guarantees against arbitrariness of the state;

Western Europe: Late Medieval period

  • Strong states appear (Me: in France this happened upon start of 30 year’s war) ; but society is not crushed by the state, legal traditions + social differentiated serve to protect society against arbitrariness.
  • Mercantilism: the state directly intervenes in the economy (establishment of trading companies, colonial wars, concessions+trading monopolies, protectionism); all this work to strengthen owners - who are independent and not directly subordinate to the state.

Meanwhile in Russia:

  • 16th century: Russian defeat in Livonian wars make apparent a lag behind the west/need for reforms .
  • Two options for modernization; Peter the Great leans to the first option, but does elements of the second too!
    • Strengthen the state; adopt only technological results while leaving the system as is.
    • Adopt the western mode of production; Paradox: Peter by force institutes westernized elite that aspires for more independence.
    • Russian bureaucracy created: combines the worst traits of both East and the West; from Prussia it gets mechanistic approach to/remoteness from people; From the east it gets arbitrariness, unpunctuality and corruptness.
  • Russia is in permanent catch up race with the west; catching up achieved by directive from above and at great costs;
  • Subsequent reforms confirm relative independence of landowners (Charter to the gentry among other reforms) turn the elite from keepers into owners of the land ; Problem: serfdom is preserved as is (and manors/commons on the other side too), as a result private ownership of the land never gains wide legitimacy.
  • Situation becomes permanent - rulers in fear of conspiracies/mutiny by the elite (see Peter III , Pavel I)

In the west: 19th century Revolutionary movements

  • 19th century - really fast growth + ideals of equality all create great expectations with the poor sections of society;
  • Source of the crisis: technological development outpaced traditions ; crisis of too high hopes/expectations ; crisis of legitimacy; Seeming contradiction between rationality of production vs the chaos of the market; Anger fueled by frequent busts/crashes; Marx is wrong - productive forces were not superior to the relations of production
  • discontent is voiced/exploited by intellectuals on the margins who challenge the capitalist order; main threats now are Socialist demagogues.

The Socialist challenge was defeated by assimilation (in 20th century), not suppression

  • Social reform: Bernstein
  • limited state intervention in economy, while preserving its free market character: Keynes

Meanwhile in the Russian Empire:

  • defeat of Russia in Crimean war make apparent a lag behind the west/need for reforms.
  • Alexander II : 1862 abolition of serfdom, Military reform
  • Central question: to what degree to allow independence of land ownership/finances/markets from the state
  • Outcomes:
    • Commons/Community still own land that is not owned by landowner / long term pay-out scheme of commons.
    • system of collective responsibility for taxation/rents is maintained.
    • Peasants may not leave without permission of community; may not break away
    • Egalitarian streak of Russia is preserved; question who owns the land becomes remains critical.
  • 1880s finance policies of Vyshegradsky ; sound finances and industrialization from above (railroad construction); 1889 return to gold standard. protectionism to further indigenous production - fast industrial growth; all this is financed by high taxes on peasants - results in political destabilization.
  • Agriculture: most farmers still on subsistence farming; question: will industry develope and be able to stand on its own feet - or will the taxes spawn political unrest first?
  • Land question conflicting views: Plehve is for keeping control over land; keep peasants in check ; Witte says lack of private ownership on land leads to revolution.
  • Reforms start before 1905 revolution: 1903 - collective responsibility scrapped; 1904 - no corporal punishment; after revolution Stolypin’s reforms.
  • Revolution of 1905 and defeat in Russo-Japanes War make apparent a lag behind modernized Japan/need for reforms.
  • Stolypins reforms 9/11/1906: allow peasants to break away from manor lands and turn into full owners; encourages resettling to Siberia; Agricultural bank gives loans on land collateral.
  • reforms start to pick up by 1909; 1909-1913 sees fast growth of industry and agriculture that stands on solid footing.
  • Stolypin: rare example of Russian statesman who tries to limit the role of the state.

from World war I to Communist rules

  • wake of the war: remaining old difference over who should own land not settled - owner peasants still a narrow class (Miroed); rigid bureaucracy + sharp income gap contribute to deepening of political conflitcs;
  • World war I leads to erosion of morals, legitimacy and social norms; (see And Quiet Flows the Don ) Nobody would understand the goals of the war therefore the regime lost all legitimacy; everyone was against the Zar-Rasputin (Me: why is everyone so against him? Rasputin and Witte were the only ones in Russia who were publicly against entry of Russia into WW I)
  • Centralized management of economy during the war is the economical model for communism; economics under communism is very militarized and has state as monopolist. Lenin’s work Imperialism as the highest stage of Capitalism as the blueprint for economics of Communism - its describes the nature of the state they built. Monopolies kill free competition resulting into parasitic rent seeking capitalism; lack of incentive for development, resulting in permanent crisis … and that’s exactly what they got in practice!
    • Consensus of the establishment was the central planning (in some form) is a good idea; state control, supervision, accountability were all regraded as good things!
  • Dictatorship of the party: that’s supposed to make the difference/essence of socialism. Novelty: the Asiatic mode of production traditionally does not negate the notion of private property; Communism does - this paves the way for total control; In order to justify total equality of society and state they needed a totalitarian ideology. (Me: US President Coolidge nailed it: “government control cannot be divorced from political control” )

History of Nomenklatura and the Soviet state

a short history of the Soviet state:

  • all property is that of the state
  • state property is collective property of the nomenklatura
  • Each bureaucrat (and all of them) try to turn collective property into their own property.
1920 - 1930 : NEP : state capitalism/imperialism with elements of private ownership in economy
  • What was preventing the Termidor / return to capitalism ?
    • collective fear of bureaucrat: return of old owners was the worst thing that could happen to them; they understood that their own position as a class was not firm.
    • Repressions within the nomenklatura: dictatorship of the ideology was suppressing the urge to turn state property into their private property.
    • sectarian nature of Communist ideology:
  • Partmaximum - formal limit of managers salary was de facto removed in 1929 ; formally abolished in 1932 (by Politburo decision that was kept secret)
  • During new economic policy there was the wide spread scheme of privatization: official and private industry made deals to channel state resources into private hands; some estimates go that 350 million gold rubles where thus privatized !
  • Still the nomenklatura craves for political stability and ability to inherit property - private property.
1930-1953 : totalitarianism / Stalinist terror, individual is just a grain of sand
  • increasingly nationalist/chauvinist tone of ideology; still internationalist forms are preserved as state incorporates many nationalities (officially equal) and because ideology may not be rocked due to its central role
  • Ideology looses its appeal; turns into form devoid of substance - first step that system will lead to sobering up of the system.
  • Increasing income gap between managers and workers.
1953-1988 : Authoritarian stage
  • XX congress proclaims that there will be no return of terror (similar to Charter to the gentry )
  • change in practice of management; manager form many informal connections; beurocratic barter market forms in process of negotiating/finalizing of production norms ; managers now feel that they are in charger/owners ; shadow dealers + Zechoviki - illegal factories (though if this falls through than that had the death sentence)
  • elements of civil society start to appear ;
  • dead/ossified ideology remains as glue/framework + threat of repressions; Solzhenitsyn calls for break : Live not by lies

Economy dominated by military industrial complex; agriculture inherently inefficient - the technocratic fix was to pour mountains of fertilizers, gigantic ameleoration projects, heaps of broken tractors. All this inflated industrial output by means of building equivalent of pyramids. By 1985 it was clear that they were loosing the cold war; this made apparent a lag behind the west/need for reforms; Ossified structures made priority out of maintaining the inoperable status quo - quick succession of old general secretaries made everyone aware of the need for reform.

two real choices existed

  • Russian chauvinism with less communist rhetoric; problems: Military industrial complex already had the country, also this policy was associated with ‘tightening of screws’ - that was against the interests of the ruling class.
  • Socialism with a human face / reform communism; unclear hodgepodge of ideas every class picked what it saw fit ;
  • First stage 1985 - 1987 - slogan: ‘need to overcome isolated shortcomings’, Anti-alcohol and other campaigns. Power remains firmly in hands of bureaucracy.
  • Second stage 1887 - 1989 - slogan: ‘Socialism with a human face’ (whatever that may be), de-Stalinization campaign, more press freedom, start of cooperatives Main task as seen by rulers: Change of facade, legitimization/perfection of the bureaucratic barter market; for this to happen they needed mobilization of masses by means of anti-nomenklatura slogans - the irony of Revolutions. (Me: I think democratization is the mobilization trick that Russian elites use as temporary measure when the old order is bankrupt)
  • Third stage 1990 - 1991 - slogan: ‘transition to free market capitalism’ Administrative controls start to crumble, lead to lack of accountability on the part of bureaucrat/managers vs Moscow Ministries + no party discipline. Ideally suited for rapid privatization, as during NEP: managers make deals with cooperatives to privatize state assets; manager uses big potential of the state to fill his pocket. Power remains in hand of bureaucracy while accountability decreases - ideal setting for ‘secret privatization’. all big capital funds of Russia start here.
  • If the main task of Perestroika was privatization of state property into managers hand than that was a smashing success! He says this was not planned (as in conspiracy) but that this turn of event evolved gradually, as rulers acted out basic class instincts; all successive steps were leading to lessening of controls, thus creating opportunities for silent privatization/looting of assets.
Russian federation

Author says that realistic politics means of privatization are as follows: Nomenklatura exchanges power for property; says that would be a good deal for Russia, if it leads to effective free market mechanisms that are independent from the state. Nomenklatura would like to get property and keep power; see ideal state as liberal for insiders and restrictive for outsiders.

(Me: maybe this outcome was determined by the limited mandate given to reformers during 1991-1992)

He says liberalization of prices was the possible step on condition of disintegrating state order: real money removed the cover of pseudo state ownership;

challenges of Russian privatization

  1. very big scope
  2. weakness of legal private business (Me: as a result the shadow economy is only source of capital)
  3. lack of foreign capital
  4. No former owners who claim property (me: as always the most important thing comes last)

As a result the following measures:

  1. no individual approach - use of general procedures/regulations
  2. did not try to combine privatization with recapitalization
  3. everybody gets a small voucher check

Main result/target was to stop the privatization of insiders - stop the indiscriminate looting of the manager elite; from now on they had to obey some semblance of order, come out into the open. Economic reality was introduced - so they seized building pyramids (Me: and he dares to says that Russia did not have a real shock therapy!)