[PEN-L:142] RUSSIA'S CRISIS AND THE BIRTH OF A NEW LEFT

[Gregory Schwartz <grishas@xxxxxxxx>]

RUSSIA'S CRISIS AND THE BIRTH OF A NEW LEFT
By Renfrey Clarke
MOSCOW -  A few days back, my friend Rod came round unexpectedly
to visit.  He brought  a bottle  of vodka with him, but he wasn't
feeling festive. Quite the reverse.

An Englishman who has spent much of the 1990s in Moscow, Rod had
just lost  his job  teaching  English  to  adults  in  a  private
language school.  ``Back in  the middle  of August,'' he related,
``I had  five or  six students  in one class, seven in the other.
Then there  were about  three in  each, and  for the  class I was
supposed to teach yesterday, no-one came.''

And that,  Rod lamented,  was in the first week after the summer
holiday season, when his classes would normally have been full of
freshly-tanned young office workers getting down to acquiring the
language skills they needed to advance their careers.

But since August 17, when the government stopped trying to avoid
a devaluation  of the  ruble,  the  good  times  have  ended  for
Russia's small middle class, including Rod's pupils.

``The students  were earning  rubles, and  the foreign  teachers
were getting  dollars,'' he explained. ``So when the price of the
dollar tripled  in less  than  three  weeks,  the  students  just
couldn't afford it any more.''

None of  Rod's students  were really well-off. If they had been,
they would  have paid  for individual tuition, or studied abroad.
But they  were prosperous by Russian standards. Most of them, Rod
guessed, had  been taking  home the equivalent of around US$500 a
month earlier  in the  summer, when  the average  wage was  worth
about US$180.

The students  had described  their lives  in writing  exercises.
Most of  them worked  for commercial  organisations, often banks.
Their housing  was still  in cramped flats built in Soviet times,
but many  had been  able to  buy cars. Most had travelled abroad,
usually on holiday package trips to Turkey or Cyprus.

Above all, they had been optimistic about their prospects. Other
Russians might  face poverty  and hardship,  but  Rod's  students
would get  ahead; their energy and professional skills guaranteed
it.

That, however,  was weeks ago. Today, Russia's ``middle layers''
are learning  that  when  capitalism  goes  into  crisis,  junior
professionals and mid-level office staff are not exempt.

The odds  are high  that among  the people  who  were  in  Rod's
classes, quite  a few are no longer working for anyone. A Moscow-
based foreign  economic consultant  told me soon after the crisis
hit that  he expected  the crash  of the banking industry to wipe
out half  the jobs  in the  sector. Early  in  September  it  was
reported that Alfa-Bank, one of Russia's largest, had laid off 40
per cent of its employees.

Even those  members of  the new middle class who keep their jobs
will find  that the gloss has gone from their lives. Of the marks
of prosperity  that define  the middle  class, few  originate  in
Russia.  From  Western-style  apartment  renovations  to  foreign
airline tickets,  almost all require that someone, at some point,
buy and hand over foreign currency.

Sales of  cheap Mediterranean holidays are reportedly down by as
much as  half. With  the ``September  ruble'' edging down to 4 US
cents, compared  to the  mid-August ruble  of 15 cents, the money
which Rod's  ex-students command  is now hopelessly inadequate to
finance the modest luxuries they once enjoyed.

For that matter, it is not only the prices of luxuries that have
exploded. The  cost of  many staples  has doubled.  In part, this
stems from merchants taking advantage of panic buying and raising
their prices.  But most  of the consumer goods sold in Russia are
now either  imported entirely,  or depend  on  a  hefty  shot  of
suddenly-expensive foreign  inputs. As  a result, devaluation has
flowed on directly into hyperinflation and drastic cuts to living
standards.

The paradox  is that  millions of  people have  not taken to the
streets in  protest. It  is a grim testament to the effectiveness
of Soviet-era  repression  that  most  Russian  workers,  however
bitter at  recent  developments,  remain  depoliticised,  without
experience of  self-organisation, and  deeply skeptical  that any
initiative they  might make  would achieve anything except to get
them into trouble.

By contrast,  Rod's ex-students  are undoubtedly  self-starters.
But before  they rise  in revolt  against capitalism,  I suspect,
there is  a good  deal of  ideological debris  they will  need to
jettison.

Mercifully, the  collapse of Russia's currency will not kill off
the economy  entirely. The  reasons, ironically,  derive from the
government's failures  rather  than  its  successes.  For  years,
Russian finance ministers kept rubles in short supply as a way of
limiting inflation;  as a  result, people  found  ways  of  doing
without them.  These mechanisms remain in place, and are allowing
many commercial  operations to  continue even though the ruble is
scarcely worth picking up off the pavement.

Justifiably, most  Russians have  always  considered  the  post-
Soviet ruble  suspect as  a store  of value. As a result, savings
are usually  kept in the form of dollar notes stuffed in hard-to-
guess corners  of people's  homes. Estimated  at US$20  billion -
roughly twice  the state's  official foreign  currency reserves -
these hoards  will survive the crash both of the ruble and of the
banks, and  are likely  to  provide  a  buffer  against  complete
economic paralysis. In coming weeks, more and more dollars can be
expected to emerge from beneath the mattresses. Increasingly, the
dollar will  become the  mechanism not  just of  saving, but also
(and although this is illegal) of everyday exchange.

Another godsend  for Russia's  rulers is barter. Said to account
for as  much as  70 per cent of the value of transactions between
enterprises, this is the main reason why production in wide areas
of the  economy did  not come  to a  total halt  long ago. Barter
deals have  not needed  rubles in  the past, and do not need them
now.

A dollarised, barterised Russian economy might keep ticking over
for years,  at  abysmal  levels  of  efficiency.  But  there  are
countless functions  required  by  modern  industrial  society  -
starting with  the regular  payment of  wages and pensions - that
such an economy cannot perform.

Even if  barter  could  be  phased  out,  a  dollarised  Russian
economy, in  which the  government had  few meaningful  levers of
financial regulation,  would still  be incompatible with the task
of rebuilding  the country's social infrastructure and productive
plant.

Nevertheless, this  is the choice which Russia's elites now seem
determined to  adopt - in the form of a ``currency board''. Under
this system,  the government  would be  legally bound to keep the
number of  rubles in  circulation in  a fixed  proportion to  the
country's reserves of US dollars.

A simpler  variant of this system would be the one used for many
years in  Panama -  not to bother printing the national currency,
but to  use dollar  bills instead.  At least  the Panamanians are
frank about their semi-colonial status.

The relations that Russia has with international economic forces
are a  matter for  very careful, discriminating choice. Wholesale
surrender will only worsen the country's dilemma. But at the same
time, Russia cannot develop in isolation from the world economy.

This implies  that neither  market-worshipping neo-liberals, nor
economic xenophobes  from Russia's  Stalinist-chauvinist ``left''
can contribute to saving Russia from economic decay and political
dismemberment. The  need is  for radical  new ideas  and activism
from social layers that have not so far made much of an impact on
the country's  politics. And  this is where Rod's ex-students, or
people like them, may have a role to play.

In  capitalist   society,  middle  classes  ruined  by  economic
depression are a notorious breeding-ground for fascism. But where
the  people  involved  are  educated  and  well-travelled,  their
disillusionment with  the system  is more  likely to  thrust them
toward the left than the right.

The educated  young Russians  who are  now to  find their career
hopes blasted  will not  finish up more disgusted with capitalism
than millions of the country's wage workers are already. But they
will differ from the mass of the workforce in a key respect. They
will  not  have  had  beaten  into  them,  year  upon  year,  the
conviction of  their powerlessness and unfitness to influence the
circumstances under which they live.

The coming  radicalisation of  Russia's  ``middle  layers'',  it
follows, has  real potential  to create  forces with the program,
energy and  organisation to  achieve what  today's opposition has
never looked  like doing  - to crack the ice of popular passivity
and lead much broader social layers in the active defence of mass
interests.

--
Gregory Schwartz
Department of Political Science
York University
4700 Keele St.
Toronto, Ontario
M3J 1P3
Canada

Tel: (416) 736-5265
Fax: (416) 736-5686
Web: http://www.yorku.ca/dept/polisci