Creeping Capitalism in Soviet Russia

...Yet only five percent—primarily older people—said that they stayedaway from cooperatives for ideological reasons (Judy Shelton take note...

...Then, too, certain theorists explained that things had to get worse before they could get better...

...Fifteen percent saw the panacea in Western aid...

...The answer—because most people can't afford it—eludes Shelton, who makes the common presumption that the average Soviet citizen, with no consumer goods to spend money on, has oodles of rubles stashed away in a savings account...

...Such cultural attitudes, Dolan chides in Reason, are "far from conducive to the growth of a market economy...

...Another Soviet poll, taken in late October/early November, shows a far more negative picture: about half disapproved of co-ops, and only one-fourth approved...

...Still, the Soviet public obligingly provides grist for the naysayers' mill...

...yes, the Soviets are crazy to think they can afford a Scandinavian welfare state...

...W hich brings us to the matter of the very real resentment against prosperous entrepreneurs...

...Two hundred years ago, the instability caused by emerging market relations in France, as Simon Schama shows in Citizens, had at least as much to do with the overthrow of the monarchy as did hatred of aristocratic privilege...

...Delighted at a chance to escape the state's free health care system, with its abysmal conditions and endless waiting lists, and desperate not to see this chance slip away, they didn't seem at all upset about the doctors' high profits...

...But the crisis would have hit sooner or later...

...3 / MARCH 1990 Cathy Young CREEPING CAPITALISM IN SOVIET RUSSIA The problem with Soviet attitudes toward free-market competition stems not from a populace hostile to entrepreneurship as such, but from a system that perpetuates scarcity, penalizes production, and disdains the whole notion of property...

...Lest we bourgeois individualists rush to uncork the champagne, there's a whole army of naysayers telling us not to rejoice...

...The notion that Communist states shield people from the need to fend for themselves—whether that is seen as good or bad—could only occur to someone who has no idea what it's like to get a decent apartment or a chunk of smoked ham in the Soviet bloc...

...As long as Soviet people understand this, the fine points can be sorted out later...

...Otherwise, why would so few take advantage of farmers' markets, legal long before Gorbachev, with high-quality produce and no lines...

...True, the overall savings rate in the USSR is abnormally high...

...The students, reports the New York Times, listened in stony silence...

...They assert (leftists, to prove that even bad socialism has its advantages...

...In the West, such envy is moderated by the high average standard of living...

...rightists, to prove that the West must stay alert against Communism because perestroika won't work) that the victims of Marxist-Leninist rule may hate the corruption and oppression of dictatorship but they cling willingly to its apron strings...

...Questioned about their first choice of a workplace, 29 percent named a joint venture with a Western firm—showing not only little fear of capitalist exploitation but little nationalist pride about being exploited by foreigners...

...He broadly hints that this misinformation is, to some extent, deliberately fostered by the nomenklatura, the entrenched party and government elite which naturally does not look kindly upon market-style reform...

...The energy and inCathy Young is the author of Growing Up in Moscow (Ticknor & Fields...

...This indicates large reserves of support for an authoritarian (some would say fascist) model, not unlike the ones now existing in such Asian "tigers" as Taiwan and Singapore...

...In fact, the sentiment may be less a product of ingrained cultural values than a normal if misguided reaction to the scarcity of indispensable goods—such as rental space in New York, where landlords may not get their tires slashed the way some Soviet entrepreneurs do but are hardly viewed any more fondly, or denounced any less bitterly, for exploiting human needs for profit...

...The complexity of popular attitudes toward cooperatives is the focus of Gonzalez's article, whose Russian title can be translated as "Can't Live With 'em, Can't Live Without 'em...

...There's plenty of room for everyone to keep prices high and still prosper...

...The problem with socialist economies is not that human initiative and enterprise have been stamped out: they have simply been channeled into consumption rather than production...

...Ryzhkov said that the Soviet Union would make use of the positive experience of the West but adapt it to "our own social structure...

...Another item: even as Siberian workers clamored for a crackdown on co-ops, bus drivers in the Ukraine demanded the right to form private bus companies...

...Gonzalez stresses that over half of those polled—as many as 60 percent according to an earlier survey published in September—had a positive view of co-operators...

...Three-quarters of these patients were working-class—despite fees that could amount to one-fifth of a worker's monthly salary per visit...

...Even those miners in Siberia and the Ukraine who buoyed anti-Communists everywhere by going on massive strikes last July were demanding not only more autonomy from the central government and better living conditions, but also a crackdown on co-ops...

...Of course, many complain about the prices and the shoddy quality of the goods...

...A recent study by a Soviet sociological institute showed that about 40 percent of urbanites have never patronized a co-op, and a mere 14 percent patronize them regularly...

...A well-dressed, well-fed person with a house, a car, and a VCR may find it slightly annoying that Donald Trump dresses and dines much more expensively and has a yacht and a jet—but he doesn't get all worked up about it, pathological cases excepted...

...The notion that Communist states shield people from the need to fend for themselves could only occur to someone who has no idea what it's like to get a decent apartment or a chunk of smoked ham in the Soviet bloc...

...some, to an even deeper passion for communalism and egalitarianism inherent in the Russian character...

...Asked whether the government should help cooperatives, respondents were almost six to one in favor...

...Take the miners' strikes...

...Without idealizing the Soviet people in any way, it is simply wrong to see them as the problem, to say that they reject the free market when, in fact, they have never been given a chance to accept it...

...14 THE AMERICAN SPECTATOR MARCH 1990...

...6 very honest man wants to see -L./ socialism wiped out...

...Despite these flaws, the Soviet public's reaction to private enterprise has not been nearly as one-sided as it is often made out to be...

...One of the few holdouts complained that it was difficult to recruit members for a democratic socialist club: everyone who was not put off by the word "democratic" was put off by the word "socialist...

...Meanwhile, patients were flooding the offices of the new clinics...

...Nearly a third said they would be willing to work in a co-op...

...She appeals to human nature and to Adam Smith...

...genuity spent on these pursuits would have generated untold wealth if applied in business...

...Yet in her 1988 book The Coming Soviet Crash, economist Judy Shelton finds the problem elsewhere: the Russians are devout socialists with a visceral aversion, on principle, to buying food at market prices...

...Interestingly, in Tallinn, the capital of Estonia, opinions were almost all positive...

...Yes, most Soviets want the government to regulate prices, at least on essentials...

...It's a vastly different matter for a nation 'of paupers suddenly confronted with ostentatious wealth...

...Many blame the deterioration in living standards of the last few years on Gorbachev and his policies...

...Proposals of price deregulation, productivity-based pay scales, and an end to government subsidies to unprofitable enterprises are met with fear and anger...

...W hen Gorbachev and Prime Minister Nikolai Ryzhkov appeared before a national conference of Soviet students last November 15, they had to parry questions along the lines of "Why are we trying to invent something new when the Western model of a market society has already shown its efficacy...

...squeezed between the worst of two worlds...

...His half-hearted reforms, which dismantled some of the old levers of state control over the economy without creating new incentives in their place, may have precipitated the current crisis (sometimes, trying to fix a near-wreck will give it the coup de grace...

...Or at enlightened American Democrats whose best criticism of capital gains cuts is that they would benefit the "rich...

...THE AMERICAN SPECTATOR MARCH 1990 13 Yet most also believed that the public was overwhelmingly opposed to coops...

...Speaking of surveys, one after another shows the growing popularity of those deputies who favor the most radical free-market innovations...

...What a surprise that would be to the millions of Soviets (perhaps the majority, according to recent studies) who struggle to make it till payday...

...People go to the co-ops because the [state] stores are empty and for no other reason...

...Or for being unhappy when things get worse...

...In the Soviet poll published in the New York Times on November 5, 1989, reactions to free-market change were mixed and confused...

...In fact, these "compensations" have been a left-wing leitmotif picked up by much of the mainstream American media—and thoroughly discredited by the Soviet media in three years of relative openness...

...The less enlightened Soviet working class has to grapple with a Lewis Carroll world of an economy where nothing is what it seems...

...but seven out of eight people have no savings at all, and of those who do, most have very small savings...

...Some clear-headed Soviet commentators are starting to understand the nature of this problem...

...Early in 1989, the state went after medical cooperatives, severely curtailing the range of services they could provide...

...Cooperatives have turned into new monopolies: "The customer still has no choice, and that is what frustrates people most...

...The problem is that the frustration is taken out on those who are at least doing something, even if they charge huge amounts of money...

...Potential Soviet farmers and entrepreneurs still have no assurance that after availing themselves of the new opportunities, they will be safe from inane restrictions, expropriation—or the same grim fate that befell their 1920s predecessors...

...That's Soviet equality for you...

...The problem is a government that, after more than three years of talk about the need to get away from central planning, encourage individual initiative, and turn the land over to farmers, comes up with another fiveyear-plan, laws that gut the co-ops, and long-term leasing rights for peasants...

...A former Soviet political prisoner recently back from a trip to the USSR reports that, in meetings with old dissident friends, he found democratic capitalists where a mere four years ago he had left democratic socialists...

...It is true, as many observers leap to point out, that many if not most of these radicals envision a society less like the United States than like Sweden...

...Yes, the Swedish way (which is now showing signs of reversal) may simply be a kinder, gentler, slower road to hell thanthe Soviet one...

...The argument—let them eat long-term gain—wasn't much more popular with the French then than it is with the Russians now...

...Only 20 percent, by the way, said that the government should take steps to keep incomes at a roughly equal level...

...Yet Gavriil Popov, a pro-market economist and a radical deputy in the People's Congress, asserts that many Soviet workers had been asking for real performance-based pay scales long before perestroika...

...Actually, the preference for the equal sharing of miseries over the unequal sharing of blessings is a universal human impulse: just look at all the enlightened American citizens who would rather have all kids attend lousy schools than allow some to attend better schools than others...

...The Economist describes it as an organization of "Lumpen nationalists...

...Some observers attribute this to seven decades of Communist indoctrination...

...No wonder there were sporadic strikes to protest this ostensibly more "capitalistic" wage system...

...Perhaps being raised under Communism is no prerequisite for missing the link between profit and incentive to produce...

...Gonzalez finds contradictory the belief that the government should both help co-ops and impose stricter controls, but adds that "it is understandable: since the market is too weak to control the co-operators, someone else has to...

...Some years ago, the administration of a southern Soviet port, faced with huge losses, tried paying a selected crew of workers per ton of grain unloaded from incoming freight ships, and achieved a tenfold jump in productivity...

...take your money and go—where...

...The official trade unions, an object of universal scorn, are trying to gain popularity among workers by mounting an anti-co-op campaign...

...Clearly, such pseudo-free-market steps would leave the hapless Soviet consumer (there's a misnomer for you...

...The state-owned vending stalls have vanished to make room for these misbegotten children of Adam Smith...

...Says Mikhail Poltoranin, a radical deputy in the new Soviet legislature, "I wasn't surprised to learn that the UWF's coordinating committee included quite a constellation of Leningrad's apparat officials," among them the head of the District Party Committee...

...And in New Jersey, where auto insurance rates were a key issue in last November's gubernatorial race, an ad for Democratic candidate Jim Florio (the winner) thundered that his opponent "would let insurance companies charge whatever they want...

...So declared an outspoken Muscovite, discussing the fall of the Berlin Wall on a crowded street in the heart of the Soviet capital...

...To complicate things further, many of the mines are unprofitable only because the state makes them sell their output at artificially low prices...

...The old hard-core Communist establishment, its power and privileges threatened, certainly has no qualms about manipulating the population's real or perceived resentment against the self-enriching...

...Ironically, before perestroika ordinary Soviet folks used to grumble that everything was a mess because there weren't any owners—no one to profit from doing things well...

...And, increasingly, they do understand—young people in particular...

...Asked about measures needed to revitalize the economy, 40 percent gave answers that the poll taker described, none too precisely, as craving "the return of a 'strong hand' " and 25 percent—a significant figure for a population that has had Communist ideology drummed into it for seven decades—were in favor of free markets...

...The Poles saw this very well when they opposed the price hikes pushed by the Communist regime: last August, the Solidarity-controlled Senate said that the government's "free-market" measures were "misnamed," since they were not coupled with "introduction of other market mechanisms," especially by an end to the state monopoly on the procurement of seeds, machinery, and fertilizers...

...Other sources claim that at the Front's first congress, black limousines outnumbered the buses carrying the real live workers...

...In a normal marketplace, someone else would open another vending stall nearby and sell better and cheaper rolls...

...Gorbachev said that, being himself of working-class origin, he knew the opinions and moods of Soviet workers and felt sure that they would not "support those . . . who want to start making our society capitalist...

...One may ask, as did economist Edwin Dolan in Reason magazine last July, whether lifting price controls while the bulk of the Soviet economy remains in the hands of state-run leviathans can do anything except unleash inflation, forcing the populace to pay 12 THE AMERICAN SPECTATOR MARCH 1990 for the bureaucrats' ineptitude and greed...

...But these average folks have yet to benefit from the growth of cooperatives...

...Still, there's no getting around the fact that complaints about cooperatives pursuing profits instead of meeting human needs are quite common, even without prodding from disgruntled party honchos...

...The rest of the longshoremen didn't want to hang their luckier comrades, only to be paid at piece-work rates too—except that the port's salary funds had run dry...

...at the same time, many of those who wanted the state to help co-ops also wanted stricter controls over their activity...

...Supplying the market with goods and making a profit are seen as mutually antagonistic rather than complementary...

...Moscow News commentator Vladimir Gurevich summed up current attitudes: everyone is for the market when it's to his advantage...

...Some see co-operators (whom they alsocall, uneuphemistically, businessmen and entrepreneurs) as bloodsuckers and crooks...

...The discrepancy may be due to the fact that this poll included small towns, where material deprivation is far more severe...

...As Kruglyanskaya points out in her Izvestia piece, ruminations on ways to instill a sense of ownership in people ring quite hollow when people are not allowed to be owners...

...Anyone who thinks perestroika is a story of aforward-looking government trying to impose a market economy on a backward people would do well to look at an article in the March 5, 1989, New York Times about Soviet private clinics...

...But in a society of extreme scarcity, why compete for the same turf when one can sell, say, T-shirts instead...

...In fact, the decline started long before Gorbachevcame to power...

...Private enterprise" in the Soviet Union today is a vendor at a train station selling raisin rolls at fifty-five kopecks each—about three times the state-fixed price—with two measly raisins per roll...

...Apron strings" seems too cozy a metaphor—but it fits the theory...

...New York magazine political commentator Joe Klein opines that a populace used to being "swaddled by the system" is the main obstacle to East bloc economic reform: "Even in the most repressive Communist regimes, workers receive significant compensations that are almost always overlooked by Westerners: They are guaranteed employment, housing and health care (however primitive), stable prices, and .. . relief from the anxiety of competition...

...The replies of the leaders, who still bristle at the words "private property," were meaningless and evasive...

...Health officials accused the doctors of gouging their customers," writes Times correspondent Esther B. Fein, "and the doctors retorted that the authorities had been shamed by the success and quality of cooperative medicine...

...Also in Izvestia, a Soviet journalist with the odd name E. Gonzalez writes: "Cooperative enterprise does have plenty of enemies...

...others, as "smart, dynamic people who want to work, make money, and live decently...

...A group calling itself the United Workers' Front, launched last July, calls for an end to economic reform, a price freeze, and a ban on private businesses...

...But pay scales are a trifle compared to the minefield of price deregulation, which nearly everyone recognizes as a necessary step toward economic recovery...

...Indeed," writes Gonzalez, "a person either reads or hears almost on a daily basis that the people reject cooperative enterprise...

...What is encouraging is that a third of those surveyed, primarily those with higher education, share the view that the government should simply stay out of the way and let the cooperatives do their job...

...Izvestia writer I. Kruglyanskaya argues that it is ridiculous to blame the businessman for selling his goods at the highest price he can get: that's the law of the market, and if prices are too high, people should complain about policies that breed scarcity, not about greedy cooperators...

...One might respond by saying: if you don't like the goods, don't buy them...

...In the late 1780s, French urban workers demanded to be protected from competition with non-guild laborers, and the deregulation of bread prices sparked riots in the cities and the countryside...

...But evidence suggests that the Workers' Front is something else altogether: a front for apparatchiks trying to fight back...

...the hardworking "co-operators," or small entrepreneurs, are a target of virulent resentment...

...His listeners seemed to approve...

...True, the strikers balked at supporting denationalization—except at those mines that bring profits anddo not need state subsidies...

...A former Soviet political prisoner recently back from a trip to the USSR reports that, in meetings with old dissident friends, he found democratic capitalists where a mere four years ago he had left democratic socialists...

...In this Wonderland, tying pay to output often means that workers will be penalized for not meeting production quotas through no fault of their own—because of antiquated or malfunctioning equipment, shortages of raw materials, and so on...

...But, says Moscow writer Anatoly Strelyany, "Capitalism, even if you call it . . . 'Dutch' or `Swedish socialism,' is still capitalism, that is, a normal way of life that does not debase human dignity...

...in the other cities, including Moscow and Leningrad, supporters and opponents of cooperatives were almost evenly divided, with those in favor having a slight edge...

...And there will be for a long time, with entry into the market often restricted by official corruption (which reinforces the popular view of the co-ops' high earnings as ill-gotten gains...

...A survey he cites, conducted in ten large cities by the USSR Academy of Sciences Sociology Institute, shows a society sharply polarized on the issue...