Moscow Diary

John Lloyd

Let us suppose that Russia is no less a democratic state than any usually referred to in this way; let us, that is, overlook the fact that its democratic periods resemble the tiny windows set in the wall of a Russian church; and with this excised from our minds, let us consider the past year. A new government takes over, with a clearly defined economic team headed by Yegor Gaidar, a son and grandson of famous and privileged Communists, an academic said to be the star of his generation, a former senior editor of Kommunist, the CP’s main theoretical journal, and of Pravda, the Party’s daily paper. The declared aim of this government is to push the country into a market economy as soon as may be. It points approvingly to the Polish ‘model’ pioneered by Leszek Balczerowicz, deputy prime minister in charge of finances in Poland’s first post-Communist government – and even brings Mr Balczerowicz over from Poland to give his blessing.

In deep midwinter, the same government liberates the prices of most consumer products; it insists they will probably double even after it is clear to everyone that they have already gone up by some 500 per cent and are still rising. It liberates trade, filling the streets of Moscow with armies of people selling contraband, or their spare pairs of shoes: this combination of paupers and mafiosi brings despondency to the hearts of most Russians.

The Government starts to privatise state shops and small businesses. In Moscow and St Petersburg, these are almost all acquired by their workers and managers, who continue, on the whole, to operate them in the same shoddy, corrupt, rude fashion as before, when everything could be blamed on the Communist Party: the more energetic ones set their sights on the foreign currency market, pricing their goods way beyond most Russians’ ability to pay. In the showcase city of Nizhny Novgorod, the Government initiates privatisation by auction, in association with the local authorities and with the assistance of the International Finance Corporation (an arm of the World Bank). At the auction, protesting workers outside the sale-room see people they regard as mafiosi sweep in to buy up their shops. When Gaidar comes to bless the first auction, his small army of bodyguards knock some of the women protesters flying.

Released from price controls, inflation rockets (which was expected) and continues to climb (which was not). By the end of this year, it reached 35 per cent a month – which means that each month’s pay packet is worth two-thirds of the previous one. Hyperinflation at 50 per cent a month is said to be all but inevitable. The rouble, pegged three years ago at 0.6 against the dollar, is now exchanging at between 400 and 500.

Most things which would improve life stop or run down. The only signs of movement in the housing sector are the ring of dachas being built by the rich around each big city and the foreign-style houses for foreigners built by foreign companies in the better parts of Moscow – with ex-paratroopers on the gates, security fences, searchlights and German shepherds. The roads are not repaired, nor are public buildings: buses and underground trains are not replaced; façades crumble, hidden in some cases by hoardings advertising Western luxuries that most Russians cannot afford, or commodity exchanges which they hold responsible for raising prices.

Increasingly, the Government surrounds itself with a circle of foreign advisers – both individuals and institutions. Outside government offices, limousines drop young men wearing smart suits and women with laptops who lope into the dim chambers of the Russian bureaucracy and demand vast and usually unavailable amounts of information, in English, from untrained assistants. All of them say the reforms must go faster, and as the policies they push end in manifest failure they cover their backs by blaming the Russians.

In every city, but most of all in Moscow and Petersburg, the rich flaunt themselves in hard-currency bars, shops, restaurants and on the streets. Urchins come up to beg in near-rags, and old men and women, literally dying on their feet, stand with their hands out-stretched at the entrance to the Metro stations where the blasts of hot air come up. Most people are shabby and smell. On television, young reformers talk about better times to come.

Had this been a democratic country in the usual sense, and these things nonetheless happened, the Gaidar Government would have fallen months ago. The stability of any country, even one as conservative and solid as Britain, would have been shaken. There would be talk, and maybe more than talk, of an authoritarian take-over. Far Left and Right would be hugely strengthened, both within the parties of the democratic left and right and outside of them. Strikes and demonstrations would be commonplace. Attacks on identifiable immigrant groups would escalate. The rich would fear for their property, the poor for their jobs.

In Russia, these past two weeks, a kind of parliament (the Congress of Peoples’ Deputies) was convened and nearly re-elected Gaidar as prime minister. He failed by 18 votes among over nine hundred cast. He was not mobbed by angry demonstrators in the street, and lived, as far as one could tell, peacefully, in the small two-bedroom apartment he has occupied for some time; he refused a much flashier residence in order not to irritate the populace even more than he normally does. When rival supporters of Yeltsin and the Nationalist-Communists found themselves a few yards apart on Manezh Square under the walls of the Kremlin, they merely shouted insults at each other and the Moscow militia had little trouble keeping them apart.

On a Saturday, half-way through the Congress, I went to the new Expo Centre by the Moscow River to watch the auction of Cold Storage Facility No 12, the second Moscow enterprise to be handed over to the citizens. The first was the Bolshevik Cake Factory, put up for sale two days before. The day after that, Boris Yeltsin promised war on the Congress and a referendum of ‘trust’. The trading, brisk the first day, had fallen away sharply. More significantly, the price on the secondary market of the 10,000-rouble privatisation cheques which each citizen is given as a hand-out, and which many are trading for cash, dropped from around seven thousand roubles to around three thousand. The Russian ‘market economy’ is linked terribly closely to the Kremlin; it was this link that Gaidar wished to undo but which, in the end, was his undoing, in spite of his courage and cleverness.

At around nine in the morning, the manager of Cold Storage Facility No 12 (which makes sausages) told the largely female queue waiting to get in that ‘the more people own property the less danger there is that we will return to the old system,’ cut the ribbon and let in the crowd. Before them at desks were young women who had been trained to smile and to answer their questions on how to exchange their vouchers for shares in the company. It turned out that most, if not all, were Facility employees. When asked, they said that they had been invited by the manager to get there early and buy shares, so that the stock – 51 per cent of which, because of the way the company had been incorporated, was already in the hands of management and workers – would be even more fully controlled by the people who worked there.

The system, elaborated by Crédit Suisse First Boston, whose executives prowled around smiling at the crowd, worked well, although the proceedings were disturbed by a young man who angrily insisted on getting his money back on the voucher he had exchanged two days before for shares in the Bolshevik Cake Factory. The CSFB people were upset by this glitch, explaining with rather forced mirth that he had been back each day and that his wife had put him up to it. If so, she must have put the fear of hell into him: he buttonholed everyone with a vehemence, and persistence, which could not be dealt with discreetly.

The success of these pioneering runs in privatisation is essential if the reforming government is to get some momentum behind its schemes for ‘de-statising’ the country. As an exercise in economic democracy, however, they are clearly flawed. The managers involved had all been doubtful about the exercise, protesting that to give out shares would entail ceding control of the enterprise to people whom they could not trust to act as responsible owners. Since the workers, who hold the majority of shares, are free to sell them, these managers see themselves in time being reduced to a minority shareholding and losing the power which they have effectively had since the collapse of central authority left them masters of the enterprises. Hence the efforts to bring the shares back home: Russian managers, like public-sector managers everywhere, define the company’s interests in different terms from private-sector managers.

Still, it was happening. What had taken decades, even centuries, in the established capitalist countries was being achieved at a stroke. Even as the debates in the Congress were raging and the fate of the government which had produced the privatisation plan was in the balance, Mr Sergei Fillipov, chairman of the Parliament’s Privatisation Committee and a radical supporter of reform, told me that the same hardliners who inveighed against the market in the Congress would quietly come to him for advice on how to invest. The hidden hand is tugging away at the old ideology, prising it loose from its statist foundations.

This is the year in which Russia came to market. It ended with the ousting of Yegor Gaidar, as he had forecast a year ago – a political victim of the very processes he had unleashed. I saw Mr Gaidar briefly after he went: he had already taken over as director of the Institute for the Problems of the Transitional Period, a transmogrification of the former Institute for Economic Policy. I took him some papers which his aide, Vladimir Mau, had asked me for. He was clearly settling down for a spell of academic life with relish. ‘I’m not too pessimistic,’ he said. ‘There are certain realities of life which will impose themselves.’

‘It’s all quite normal,’ said Boris Yeltsin, in a remark widely interpreted as putting a brave face on a bad fortnight, at the end of which he had lost his prime minister – but perhaps after all, it was a reasonable judgment. The striking thing is how normal everything that is happening now in Russia seems to be. The punishing drop in living standards, the drastic shrinkage in Russian power, the sudden excision from the motherland of Russians living in the former Soviet states – all this has been absorbed and contained. The famed and self-advertised virtue of the Russians – their doleful capacity to take punishment and carry on – would appear to be borne out.

The market creeps up, not just on the Congress but on every citizen’s life. It is a very ugly and disruptive process. It breaks into the cocoons of security and comfort which Soviet life permitted, and even encouraged. It forces Russians to regard themselves as economic actors rather than passive takers, with the attendant discomforts of choice and decision. It evicts the intelligentsia from their cosy philosophical space and confronts them with the urgent task of using their brains to make a living. It favours the cunning, the ruthless and the well-connected.

The response has been to punish the Government, or rather its leader. Miraculously, at least by contrast with what both foreigners and Russians had feared, the democratic safety valve has provided a release for the bitterness and fear of daily life, channelling them into animosity against the President. In most things, the drama lies in the lack of drama: excitement is confined to the chambers of the Congress and the columns of the press.

Yet the quotation Yeltsin took from Pushkin in his opening speech to the Congress hangs over everything: ‘I fear a Russian revolt, without pity or limit.’ It’s a famous tag – from Pushkin’s description of the Pugachev Uprising, one of the great peasant outbursts against drudgery and enslavement – and is being taken as a warning of what may happen as the store of resentment increases by the day. But the Russian ‘masses’ are no longer peasants. City-dwellers for two or more generations, they are tapping computers, sampling new consumer goods and reading about ‘their’ Miss World who has just won a contest in South Africa. As they switch to more profit-oriented college courses, taking evening classes in accountancy and business English, they appear hugely uninterested in politics. When asked why, they will say that they prefer to rely on themselves. A good enough motto on which to end the year.