Privatization in the Soviet Union

...Much of their energy is spent criticizing one another...

...Political debate seems to swirl more around the personalities of leaders than policies or programs...

...Actions of this kind are often attributed to a Soviet "Mafia," though, as in the United States, knowledgeable people hold widely diverging views about the size, cohesion, and importance of the supposed Mafiosi...

...It would be hard to imagine a more daunting situation than that confronting leaders in the Soviet Union who recognize that the old order failed badly and something new has to be constructed...

...Of course criticizing superiors within the party brings the risk of demotion or being passed over, and we encountered people in the CPSU experiencing such costs...

...An estimate that we heard frequently during our trip has been confirmed since our return by no less an authority than Gorbachev himself: namely, that in the first quarter of this year incomes and production fell by something like 12 percent (on top of a probable decline of 3 to 4 percent or more in the latter part of 1990...

...Given the absence of an institutionalized legal system to facilitate market transactions, a work ethic, and a viable productive system, instant privatization of so concentrated an economy might produce an end result that exhibits more in common with present-day Colombia than with the mixed economies of Western Europe and North America...

...What makes the transition even more difficult is that unlike the countries of Eastern Europe, in Russia and the Soviet Union the institutions, practices, and culture of capitalism were barely established before they were destroyed by communism, practically without a trace...

...We visited a polling place on the day of the referendum on the union, observed (and photographed) the proceedings, detecting no sign of fraud or intimidation...

...indeed, it is likely that multiple claims to the same piece of property are being sold...

...as a consequence, uncertainty about the foundations of the new system of private property could not be greater...

...Fourth, the Soviets must build institutions of civil society that were also destroyed or retarded by generations of totalitarian rule: for example, a complex legal system of private property (for what can "privatization" mean without such a legal system...

...One member of the Politburo of the Communist party of the Russian republic said unequivocally that he does not care whether the Communist party survives...

...No doubt there are political prisoners still, and some residual fear, and no doubt the positive aspects of the changes are reversible...

...Take the problem of monopolies...

...Obsolete by international standards and tied into the inefficient chain of command production, it could not be less attractive to international venture capitalists...

...Indeed, the level of debate was more impressive than one typically sees in American political parties...

...We heard a senior official in the CPSU openly acknowledge that the history of communism in the Soviet Union had amounted to seventy years of failure, that the party is today without international allies and domestic support, and that it is "entirely devoid of ideas for the twenty-first century...

...Antonovich argued for a slower transition and a more defensive approach to the international market...

...Other countries have confronted these problems, usually one at a time and often over a lengthy period...

...The Russian word for "market," we were told, is the same as that for "bazaar," and apart from the general notion of bartered exchange that this latter notion conjures up, there seems to be little serious discussion of how to create and sustain a market system...

...A desire for personal leadership is exemplified in the strong sentiment in favor of presidential systems in the republics and the USSR...

...He was discussing with workers in a Soviet industrial plant the possibilities of a joint venture...

...He expressed considerable skepticism that Soviet producers could derive much benefit from joint-venture cooperation, given their inexperience and lack of leverage...

...q SUMMER • 1991 • 345 Popular Army parade, Mosul, Iraq, November 14, 1990...

...Proposals now emanating from the IMF, the World Bank, and various Western economists for immediately freeing prices, currency convertibility, and the creation of private ownership assume that these reforms could be implemented from the center...

...We saw more internal democracy in the CPSU in one week than there has been, we suspect, throughout much of its history...

...He favored a policy of "destatization," turning plants over to workers as cooperatives, to be locally managed and owned...

...The experience of a Western industrialist to whom we spoke is illustrative...

...Because the situation is historically unique, guessing about its future is necessarily just that—guessing...

...Third, in a change that has no relevant historical precedents, they have to construct a new economic system by making a transition from the failed ideas and practices of a command economy to an economy based on markets, competition, and privatization in forms not yet agreed on...

...So much for the good news...

...They are likely to enhance their own power as the center relinquishes its power, make deals with local power brokers and Mafioso bosses, and extract a huge premium from anyone who needs their cooperation...

...Although the Communist party has a radically diminished capacity for authoritative action, we were disappointed by the weakness of democratic alternatives...

...Given the tide of political events in Russia, Antonovich's program could be implemented only with a degree of coercion that would undermine its chances for success...

...Worker-owned cooperatives would have to keep their own accounts and remain solvent as the price system was freed up...

...An illustration: one couple we met is trying to buy the cooperative apartment they occupy...

...A businessman told us that "the Mafia" enjoys a monopoly on office space in Moscow...

...Party functionaries and the highest officials were subjected to volleys of criticism...

...We heard it said that people with resources are buying up huge numbers of such claims on the off-chance that some will turn out to be valid...

...Leaving the party often means losing all effective resources for communication, because there are so few resources independent of party control...

...Rumors abound that the food shortages symptomized by the notoriously long lines outside empty stores have been created artificially by Mafioso groups that have monopoly power in the transportation sector in order to ferment political SUMMER • 1991 • 343 Reports from Abroad strife...

...Yet if they don't buy the claim to the title someone else will and they may lose the apartment...

...In a long and mainly one-sided discussion, he said that transition to a market-based economy in anything less than fifteen years is a dangerous fantasy...

...At times speakers stonewalled, but they had to do so publicly and on the record, and often they were astonishingly candid in conceding the bankruptcy of communism at home and abroad, the mishandling of perestroika from start to finish, and 342 • DISSENT Reports from Abroad the need to create vastly more democratic ways of doing things if any legitimacy was to be restored to the system...

...a vigorous associational life...

...nor did we sense that anyone was afraid to say anything about anyone...

...yet this premise now seems doubtful...

...The secondary associations that Tocqueville saw as essential to democracy are still weak...

...On the question of unity, people we encountered with genuinely democratic sentiments were deeply torn...

...The problems generated by monopolies over resources, often aggravated by genuine scarcity (though it is often impossible to tell which is which in practice), are evident everywhere...

...For one thing they lack the legal machinery to make many rudimentary market transactions possible...

...When people do engage with what it entails, problems of how to move forward seem overwhelming...

...In a break with the pre-glasnost past, the speakers also included six American political scientists, all from Yale, and including ourselves...

...The speakers included not only Soviet academics, middle- to high-level government officials, and party activists of various stripes, but lawyers working on draft constitutional proposals and members of the democratic parties opposing the CPSU...

...As a consequence there is a dearth of fertile soil in which a culture of democratic politics can take root We often heard reference to the need for a "genuine leader," an "honest politician," a father figure who would solve problems...

...evidently the only way to be assured of such space is to pay U.S...

...If they could not, they must be allowed to go out of business...

...indeed, there appears to be little understanding of what a market system is...

...Their view was that in order for such a firm to succeed his corporation would have to buy the transport facilities needed to market their products wherever they would be sold as well as buy every factory supplying inputs into their production process—all the way to, and including, an iron mine in Siberia...

...They must do so with almost no experience in democratic institutions and liberties and not a great deal in the way of a democratic culture...

...After decades of fear and repression the new freedom seems to have spawned an almost cathartic need to denounce, to affirm the new political reality...

...To the sources of disarray among the democratic forces mut be added the explosive issue of nationalities...

...In contrast to the "overtaking and outstripping" rhetoric of the Khrushchev era that still seems to dominate public discussion, he argued that catching up with the West is out of the question...

...Some illustrations: We watched a production of dissident songs by Alexander Galich, which had been underground theater less than two years before...

...No country in history has ever before confronted all of these problems at once...

...Almost everyone also appears to agree that a market economy presents the only possible way out, but there is little agreement on how to create it...

...An otherwise highly sophisticated economist expressed incredulity that in the United States judges could rule on the constitutionality of economic legislation, "because they do not have economics degrees, and might make mistakes...

...A safe guess is that whoever the leaders in this Time of Troubles may turn out to be, the transition to a market economy and a relatively stable democratic regime will not take place in five hundred days...

...yet we found little detail and less agreement about how it might be achieved...

...Independent evidence to evaluate such claims is impossible to come by, but (leaving aside the question of illegal monopolies) it seems clear that monopoly control of strategic sectors and commodities is an enormous problem that will not go away with privatization...

...Although Antonovich's vision of the future is not without intellectual attractiveness, we detected no constituency for it (or for any transition that would take ten to fifteen years...

...What makes the situation so formidable is that they face not one or two large problems but at least five, all gigantic and interconnected...

...To hope for, much less to count on, less would be to underestimate the magnitude of the problems the USSR faces...

...Examples: A Soviet academic expressed an interest in translating our books but would not offer us a contract until he had secured, through barter, the paper to print them on...

...A second difficulty is that there is no real market for much of the Soviet industrial base...

...To even the most casual observer it is evident that economic conditions are shambolic...

...Indeed, in a penetrating comment, Jack Matlock, the knowledgeable (and locally popular) American ambassador, observed to us that if the Soviets were to free up the price system before breaking up the monopolies, they would create the potential for long-term Latin American—style hyperinflation...

...but for the moment the scale of the problem is vastly diminished...

...To convert the existing industrial structure to a market-based system of production requires fundamental alterations...

...Responding to questions about the lessthanencouraging Yugoslav experience with such ventures, he said that the Yugoslays' mistake had been to keep them in operation at all costs...

...Ivan Ivanovich Antonovich, number two member of the Politburo of the Russian party, is a self-styled "conservative," who was referred to by some of his critics as a neo-Stalinist very much out of step with the course of events...

...Unlike the renowned Academy of Sciences, the Academy of Social Sciences is a teaching and research institute attached to the Central Committee of the Communist party of the Soviet Union (CPSU...

...Democrats in the CPSU are in the minority, outflanked by conservatives, and on the defensive...

...Yet forces of change are in motion that do not look to be fully reversible...

...Second, they need to construct a new political system, presumably considerably more liberal and democratic than any previous one in the Soviet Union or Imperial Russia...

...Yet to scrap their antiquated equipment, organizations, and practices and start from scratch is a task far beyond the capacities of the Soviets...

...Without an integrated monopoly of this kind, they insisted, some bureaucrat or firm— upstream or downstream—could hold their own productive venture hostage at any time and for any price...

...For the changes to be accomplished, however, will probably take—this is our guess—fifteen to twenty years...

...The authority of the party is so diminished that it probably has little capacity to influence the conduct of middle-level bureaucrats...

...Any credible proposal for economic reform must include an account of how the tens of thousands of middle-level bureaucrats will be induced to cooperate in its implementation...

...At no time did we feel big brother's hand...

...1,000 per square meter into a numbered bank account in Cyprus...

...We heard candid admissions from intellectuals and party bureaucrats that perestroika had failed utterly to create the basis for a market economy while rendering inoperable the old integrated system of centrally planned production...

...Yet no individual, group, or organization in the Soviet Union has the resources to buy and refurbish the existing industrial infrastructure...

...One of the damaging consequences of the obsession of central planners with giantism is an economy in which production is often highly concentrated in a few huge sources: almost 90 percent of all machine tools, for example, come from a single producer...

...If privatization is likely to be messy and unlikely to result in the medium term in what most Westerners would recognize as a market economy, those few who oppose privatization publicly are attacked as opponents of change...

...Sometimes it is hard to see what makes them "democratic" other than their opposition to communism...

...A hundred or more ostensibly democratic parties exist outside the CPSU but, apart from agreeing that the latter must go, they seem to have little in common and to have little in the way of concrete solutions or strategies...

...Thus his strategy was gradual privatization and marketization: some existing cooperatives would persist as cooperatives, some would be bought up, some would turn out to be viable in a freer price regime, some not...

...In public and in private we listened to devastating assaults not only on the ancien regime of Stalinism, but on everything Marxism and Leninism stand for, together with the political leadership of Khrushchev, Brezhnev, and Gorbachev...

...The political discussion we witnessed often seemed to proceed from the premise that right answers do exist, which trustworthy leaders would provide...

...A return to the prerevolutionary system of property law is unthinkable...

...yet they believe that some of the most powerful advocates of breakup are also the most antidemocratic—cynical manipulators of nationalist sentiment as dangerous to democratic prospects as old-line Stalinists...

...The problem, as one Soviet economist put it, is that the Soviets are trying to create a market system after having created an industrial base that is irrelevant to a market system's operation...

...First, the collapse of 'an empire hitherto held together by force means that the leaders and people of the Soviet Union are engaged in a task that in other countries has required generations, even centuries, to accomplish: determining the external and internal boundaries of a country and the relationships between the central government and its component parts...

...In his judgment, the domestic resources to privatize the economy are nonexistent, and multinational corporations have agendas that are not consistent with what the Soviet Union needs: a refurbished and market-oriented industrial base...

...the forms, structures, and practices of business enterprise...

...But these costs, which attach to public speech in many societies in varying degrees, are a far cry from the fear of life that accompanied speaking out at the height of the totalitarian experience...

...But in response to the quicksand that has come to characterize the Soviet landscape during the last year, it is now seeking an independent identity The members of the audience, mainly academics, came from over a hundred different cities throughout the Soviet Union...

...Until recently it was a party school for training apparatchiks...

...Finally, to these problems, which are formidable if taken singly and overwhelming in combination, is added the acute crisis of the economy...

...Henrik Saxgren/2mayimPAcr VISUAL 346 • DISSENT...

...For this state of affairs many people inside and outside the party hold Gorbachev unforgivably responsible...

...They are purchasing a title that may or may not turn out to be valid if a court that is yet to be created, applying laws yet to be enacted by a parliament yet to be empowered, decides that whoever sold it to them had the right to do so...

...The desire for instant privatization is widespread and intense...

...his only hope is that it can get the Soviet Union through the immediate crisis so that genuine economic and political restructuring can begin...

...more autonomous local units of government, and so on...

...In addition, the sheer scale of the problems is so daunting that it is difficult to prescribe constructive 344 • DISSENT Reports from Abroad solutions Finally, the democratic oppositions are handicapped by the successes of communism in destroying—or at least radically truncating—the institutions of civil society...

...Glasnost is real: freedom of speech and intellectual freedoms are now taken for granted and put to use in many walks of life without visible signs of fear...

...If the party adopts a program along these lines for the Russian republic, its action will be perceived as a reactionary move designed to reverse the course of perestroika (which, partly, it would be...

...They do not want the Soviet Union held together by force...

...These include not only the democratic oppositions but even conservatives like Antonovich and Gorbachev himself...

...We listened to dinner remarks in which civil war was discussed as a real likelihood, and those present contemplated the possibility that a year from now they might find themselves on opposite sides of the barricades...

...The failed Stalinist project of creating a "new Soviet man" devastated much of family life, religious institutions, and the other civil institutions that stand between the individual and the state...