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ECONOMIC REFORMS IN RUSSIA: FIFTEEN YEARS AFTER

English

Mikhail Voeykov,
Professor at the Institute of Economics in Russian Academy of Sciences

ECONOMIC REFORMS IN RUSSIA:
FIFTEEN YEARS AFTER

Today Russia is a poor country. Its poverty can be seen not only in the severe economic crisis and chronic shortage of financial assets, but also in the poverty of its social and economic thinking. Today there is no adequate theory in the country to evaluate what is happening in the social and economic transformation. Many books are published on the problems of economic reform and crisis in Russia but almost all of them are empirical. What is produced on this theme can be divided into two categories. The first is represented by countless works of an apologetic character in favor of a market civilization and the necessity of its promotion. The second, a considerably smaller group, consists of works where more or less reasonable measures of painless market transformation are developed. There is also some literature, which generally rejects the necessity of any transformation and searches for a special path for Russia. But this category of the literature does not concern itself with the actual issue of transformation.

At the same time there is practically no literature in which the methodological and theoretical problems of contemporary transformation, its place in the historical development of Russia, and uniformities in the transition process with other countries are investigated. Today explicitly there is no theory which describes and explains the Russian transformation. Therefore many fundamental questions about the modern transformation process in Russia remain unclear. For example, such issues as whether the modern transformation is objectively necessary or whether it is a product of someone’s subjective will? Is there really a process of change from socialism to capitalism? Is it capitalism that is being built in modern Russia? Is it possible to so simply change the social structure? What is actually changing? Is there a change in the socio- economic structure of Russia?

In this paper an attempt is made to develop some elements of such a theory. But first we must briefly describe transformation process itself.

1

In the last few years (down to financial crisis of August 1998) the Russian government has persistently convinced its citizens that some stabilization had almost been reached or, as it was defined by one minister of that time, “in some branches [of the economy] we can observe individual indicators which show the possibility of potential growth.” But the principal emphasis in these propaganda efforts was put on tendencies towards financial stabilization, low inflation, a less steep fall of the rouble against the dollar. But all these indicators continued to worsen, though the speed of their deterioration began to decline. Inflation in consumer prices in 1997 was approximately 12 % as against 22 % in 1996 although in 1998 it rose to 84.4 %, and in 1999 it was 36,5 %, in 2000 – 20,2 %, in 2001 – 18,6 %, in 2002 – 15,1 %, in 2003 – 12 %, 2005 (January-November) – 11,3 %. (See the table 1 for basic indicators of Russian development).

[1]

Consumer price inflation in the Soviet period was so insignificant or unusual an occurrence that only a few investigators showed any interest in it. Today inflation in Russia is a very serious problem for the majority of the population.

Table 1 Russian Basic Socio-Economic Indicators as a % of Preceding Year

1995

1996

1997

2000

2005*

1. value of internal product

95.9

96.5

100.8

108.3

106,2

2. change in industrial

production

97

96

102

112

105,5

3. investment in basic capital

90

82

95

117

112.4

4. agricultural production

92

94.9

101.3

107.7

100.7

5. internal trade turnover

93

96

102

131.8

127,9

6. average monthly wage

72

106

105

121

112,2

7. number of unemployed

117

113

112

77

94,6

8. growth of consumer prices

231

121.8

111

120,2

115,4

* data for January – November 2005

During the 1990s the Russian economy has been in a tight and prolonged economic, social and political crisis. Let us consider, to what this crisis consists of.

The majority of the Russian people are living in an ever-worsening condition. This is shown in statistical indicators which impartially record the sharp deterioration in the economic situation of the mass of the working people over the last ten years of monetarist reforms. If we take the most common indexes which concretely describe the position of the workers then their dynamics appear as follows. The birth rate between 1989 and 1999 fell from 14.6 to 8.5 per 1000 population, while the death rate for the same years rose from 10.7 to 14.9 per 1000. As a result the natural decline in population of the country (i.e. ignoring migration) for the reform years has been (in thousands): 1992 — 219.8; 1993 — 750.3; 1994 — 893.2; 1995 — 840.0; 1996 — 824.5; 1997 — 755.9; 1998 — 705.1; 1999 — 929.6; 2000 – 958.5; 2001 – 943.2; 2002 – 935.3; 2003 – 888.5. Thus after 12 years of market reforms the natural decline in population of the country amounted to almost 9.5 million people. This is equal to the population of some European countries, for example, Belgium. To put the point polemically, if such reforms had been carried out in Belgium, its population could have died out.

It is curious to note that Russian official statistics began from 1996 to sharply underestimate the negative tendencies and even to backdate changes in the figures. Thus in 1996 it was reckoned that the natural decline in population of the country in 1994 was not 893.2 thousand, as was announced earlier, but 869.7 thousand i.e. a correction of 23.5 thousand. A more recent statistical handbook, however, restores the former figure of 893.2 thousand. But whether or not the negative tendencies are underestimated it is impossible to hide them.

Examples of such negative changes can be observed in almost any index describing the standard of living of ordinary people. For example, the consumption of basic food products per head of population for the years 1990 — 2003 fell as follows (in kg per year): meats — from 69 to 61, milk from 386 to 225, fish — from 20.3 to 14, sugar — from 47 to 26; eggs from 309 to 208 (pieces) etc. In comparison with the Soviet period there was even a reduction in the annual consumption of such items as bread — from 112 to 109 kg per year and potatoes from 117 to 86 kg per year.

Let us dwell especially on these two products. Usually a heavy dependence on the consumption of bread and potatoes is characteristic of a less developed country and indicates that the structure of popular food consumption is far from good. In the Soviet period the improvement in the structure of food consumption of the people was one of the main objectives of economic policy. How far it was successfully realised in practice is another matter. But it is indisputable that the aim was for the share in family consumption of potatoes and bread products to fall and the share of growth of meat, vegetables and fruit to rise. Thus, for example, between 1960 and 1985 consumption per person per year of potatoes decreased by 27 %, bread – by 19 %, while the consumption of meat rose by 56 %, milk — by 35 %, fish — by 82 %, vegetables — by 46 %, fruit — by 118 %. For years of liberal reforms, as we have seen, there was a drop in consumption all food products. And, the share of potatoes and bread products in popular consumption began to grow noticeably. Thus, if in 1990 the share of potatoes in total consumption (in physical units) was 11.6 %, by 1995 it already equaled 16.8 %, the share of bread also has grown from 12 % in 1990 to 15 % in 1995. The share in consumption of such products as meat was reduced from 8.6 % in 1990 to 7.9 % in 1995, fish fell similarly from 1.8 % to 1.3 % etc. Thus, it is possible to draw the general conclusion that people became not only worse fed, but also simply ate less.

This has served as a basic reason for the growth of different types of illness, the fall in average life expectancy and the increase in the death rate.

2

The principal reason for the pitiable condition of the Russian economy is undoubtedly state and official economic policy. The slogan of the Gaidar times is well known “the state should leave economy.” However, such a theoretical conception rests either on a misunderstanding or a complete lack of understanding of modern processes in society. By and large the modern state is the most powerful agent of economic relations. The state has a particular role in the regulation of work relations. Other European states legislate for minimum wages, work conditions and their protection, the number of working hours, the duration of annual holidays, the conditions of hiring and dismissal and many other aspects of the work relations. This has already become the norm of the civilized state.

However, the excessive rigidity of state regulation of labour generates many problems. In some cases it can bury the economic mechanism, creating a monolithic statisation of the economic sphere; in other cases – business can move into the illegal sphere, leading to the development of a shadow economy. The first case was characteristic of the Soviet period, the second — of today’s situation in Russia. And the present situation has arisen contrary to the desires and intentions of the Russian government which repeatedly spoke for the minimization of the economic role of the state. Today the role of the state is carried out more badly, but it is difficult to say that it is becoming any less. By and large the state is forced to govern economic relationships. This above all refers to the regulation of work relations, for these make the kernel, the centre of all other economic relations.

The key to understanding the transformation processes lies in the treatment of the work relations and the possibilities of their modification. To the extent that it is possible to change work relations then to that extent it is possible to speak about real modifications in an economic system. Therefore this paper will focus on the problem of the work relations.

3

The reforms in the country at the end of 1980s and the beginning of the 1990s focused first of all on changes in the sphere of work, on the growth of productivity, on the search for new forms of labour motivation. They were supposed to somehow change work values and in time root them firmly in society. However the whole complex of problems associated with this were not only not thought through, they were also probably simply not even understood.

Work relations are influenced by a series of factors which in general terms can be reduced to two – the historical- geographical and the technical-economic. In the process of development the first factor pays a dominant role but at the stage of post-industrial development the second factor becomes the predominant factor.

The development of work relations is fixed in peoples heads as a set of labour values, i.e. work appears to people as a necessity, a character trait, a benefit, as well as a condition of existence. Thus work values appear as a form of idealization of work relations. Work values, by virtue of this, i.e. the way that they depend on work relations, vary much more slowly than changes in external social parameters.

The character of Russian work relations and Russian work values include the historically formed components connected to geographical (climatic) conditions of agriculture, the expanse of the country, the multi-national and religious divergences and, secondly, to factors relating to the development of industry as a state form beginning with the reforms of Peter the Great, the mass industrialization of the 1930s – the core method by which the material base was formed; the ideological setting of work relations of the Soviet period (which as a whole corresponded with and developed the traditional work values of the Russian people, collectivism, mutual aid, the lack of greed, squandering, wastefulness etc.).

From the point of view of European modernization and westernisation as a whole in Russia these work values should sharply change. Thus far it has not turned out this way. In this connection the following problem occurs – is it possible for Russian work relations to become westernized after the westernisation of the material base of production? That is, if we create a modern industrial base as in the west then will such work relations also come into existence in Russia or is Russia doomed to search for its own path of development in the field of labour, as in the field of national production as a whole?

The explanation of the problem thus posed can be set out in the following terms – the closer society is situated to archaic aspects of production (agriculture, fishing, hunting etc) then all the more do we find natural-geographical factors shaping work relations and work values. At this stage of development each society differs from another in its work values just as much as it differs in its types of production. To the extent that the productive forces, industry and trade, develop, and consequently connections between countries also develop, creating a world market, then the distinctions in work values diminish and tend in the long run to almost completely disappear.

Russia today is at such a stage of development when there is an intensified process of transition in Russian work values to an all-European type. But the process is still far from being finished and, perhaps, has not even reached midway. Furthermore this in the Soviet period Russia also acquired additional peculiarities.

For example, it is impossible to deny that elements of socialist values have played a role in the shaping and functioning of the social factor. Here it is possible to refer to restrictions on work, paid holidays and hospitals, elements of industrial democracy, collective forms of work and responsibility, the brigade organization of work etc. Now much of this is overlooked by many commentators but in Russia the basic complex of elements of the democratization of work relations was first applied soon after the Russian revolution of 1917. For example, it is difficult to challenge the fact that throughout all the years of Soviet power in the country there was very insignificant social and economic differentiation of workers. The dominating elite of higher party and state bureaucrats certainly had large privileges but the number in this stratum was insignificant. Moreover it did not let divergences between the workers and their bosses develop into large-scale social conflicts. Whether it is realized or not, low social and economic differentiation among the workers was an essential peculiarity of state economic policy in work relations.

4

In spite of the fact that in the official concept of ‘state socialism’, which was accepted in the country for a long time, work and work relations had a significant place assigned to them, the form they took was distinctive. As a matter of fact work relations, which at the theoretical level were seen in terms of radical communist platitudes, were executed in practice almost as feudal relations of compulsory labour in a system based on a militarized economy. In practice work relations in the Soviet period can be described as bourgeois relations based on hired labour with elements of feudal compulsion and a covering of socialist phraseology. Such characteristics developed in the 1920s and dominated the Soviet period as a whole. In proof of this complete association of man with the state it is possible to instance theoretical statements about labour power as social property, the exclusion of the free movement of labour, the laws on criminal liability for trivial lateness at work which all endured in transformed forms as a basis for labour discipline up to the Andropov years.

But it is necessary also to note the other side of such a form of work relations: in a sense they answered or corresponded with the Russian mentality of work relations. In shaping such a type of national work values a defining role was played by the residual elements of the Russian commune (collectivism); a trust in the powers that be; the Tsar as father figure or lord; the patriarchal nature of Orthodoxy or Islam. But the fact remains that the usual type of work relations to some extent suited the majority of workers in Russia. Moreover, these work relations were also the most adequate available in the historical and objective conditions. People discovered a great advantage in a low intensity of work, a minimum responsibility for the quality of work, deep paternalism on the part of the state, dependence, and a small differentiation of earnings which all attracted them. While all this could not create great wealth it also was not burdensome, it was convenient in daily life. Therefore it is not possible to consider that the type of work relations that developed were artificial, imposed from the outside on Russian society by someone or other. They are the product of a natural course of historical development. Such a type of work relations, which was inbuilt for the last eighty years in Russia, represented what we have called patriarchal-hired labour relations with a well known portion of phraseology with a socialist colouring.

Today Russia faces the necessity of achieving the modernization or transformation of social and work relations through qualitative change. Generally speaking it is possible to consider some form of preservation or restoration of a patriarchal-hired labour type of work relations. This is possible in two forms. The first would involve the restoration of a command-administrative (‘communist’) totalitarian regime with its phraseology of respect for work but based in essence on a feudal-type labour obligation. The second variant, coming from the extreme right, again with a totalitarian regime (or in a softer authoritarian form), in which by power and circumstance would more quickly convert labour into a work obligation. We think the chances of the development of these variants are limited or, at least, it is best to hope that they are limited.

Therefore if we leave aside the possible preservation of the old set (even in some modernized form) of command-administrative work relations, then the alternative lies in one of two other forms of modernization.

The first is the model of hired labour on a West European (or more exactly Anglo-Saxon) model with work relations taking a strongly individualized form with the rigid material responsibility of the worker for the results of their labour. It is possible that such a model could be softened by a light colouring of a social partnership and the social market economy.

The second model is for conditions of various forms of property with the use of hired labour of a western type and those components of work relations which were naturally developed in the country over the whole twentieth century. At the centre of such a modernization model is the mixed type of work relations of a hired-collective character. Thus in any pattern of ownership a decisive role belongs to the work collectives and their collective organs of self-management.

In my view it is this second model which has considerable possibilities for its realization in Russia, incorporating into it what has come to us from centuries of the Russian economic mentality and what is useful from more than seventy years of Soviet power as well as what it is rational to take from West European work relations.

Earlier in “Soviet Marxism” it was considered almost indisputable that any type of work and social relations were set by the productive forces, by the technology with which workers were equipped. According to the logic of “Soviet Marxism” different relations of production could be distinguished. And since work relationships changed with production relations the result was an official ideological duality: the workers at identical enterprises in the USA, Russia and Japan should all work equally but by force of “socialist work relations” things should also be better in Russia. However, this was not confirmed by practice. Between the work relationships of the American, Russian and Japanese types there were and are essential differences.

Today Russian liberal reformers consider that if an American automobile factory is bought for Russia or a state enterprise is privatized according to a western scheme then the work relationships of such an enterprise will also be of an American or western type. There is nothing more crude than such a primitive explanation. It is necessary to recognize that the whole complex of work relationships does not depend exclusively on technological and the technical forms of production. Many components are involved right down to spiritual and moral imperatives. It should not be thought that work relationships are a simple corollary of financial stabilization and a non-deficit budget. Work relationships have an independent character which in today’s conditions in Russia is also paramount. However Russian reformers have engaged not just in the usual reforms.

The reformers began to change patterns of ownership and to create free prices. But beneath this the basis of the economic process has remained untouched. The form but not the essence of the socioeconomic structure has changed.

5

The implementation from January 1992 by the government of Russia of precisely expressed monetarist economic policy and the repeated announcements of the leaders of the policy of this period that the state should withdraw from the economy, that state regulation of the economy should be reduced to a minimum, raised the question of the expediency of any positive state policy at all in the field of the work relations. In the Soviet period the state rather rigidly governed work relations (state limitation of the working day, the minimum wage, working conditions, restrictions on child labour, relationships with trade unions etc.) in ways that are to a greater or lesser extent characteristic of all economically developed, civilized countries.

The ideology of economic liberalism, on the other hand, aimed at the maximum removal of all restrictions and exclusions in the economic sphere, including in the labour sphere. It was agreed by the ideologues that there should be a completely freely made hiring contract between the employer and the employed person. And the fewer restrictions the better. A free, unlimited labour market creates the most effective economy, according to these economic liberals. Therefore, from the point of view of these ideologues, state policy in the field of labour should be reduced to a minimum.

However, in practice the state did not manage to reduce the state regulation of labour to a minimum. Rhetorically the government tried this and even began to be less involved in concrete problems of labour. But no alternative mechanisms for the regulation of labour have appeared. A market mechanism in this area was not created. As a result of weak labour policy chaos increased in the economy. Even if it was taken to extremes then some type of state regulation of labour of the most minimal kind has always existed even with the most complete economic liberalism. Moreover in the modern world the domination of eighteenth century economic liberalism doesn’t exist in reality anywhere. There is also no completely unregulated labour market. Furthermore, it is possible to argue that the degree of civilization of a country today can, among other things, be determined by the degree of regulation of the labour market. The labour market both in terms of its form and as a concept at the end of the twentieth century has acquired a conventional form. Therefore the aspirations and assumptions of the radical reformers about the introduction into modern Russia of an effective labour created great fears through their illusions and lack of realism It created sharp differences in the rate of unemployment in the regions of the country. Thus, in 2003 unemployment in Moscow was 1.3 % of the economically active population while in the neighbouring Vladimir oblast it was 10.1 %.

It is difficult to confirm or even suppose that in the last years there have been any positive shifts in work relations. Both earlier and in the current relations to work, the dynamics of labour activity, labour discipline, and finally labour productivity all fail to meet the requirements of modern production and they lag behind the same indexes in other countries. A significant part of the workers do not work to their full extent, there are huge losses of work time. In many cases there is no observation of elementary attention to work, labour discipline, a lack of diligence and conscientiousness in the fulfillment by the worker of his work duties. The prestige of professional skill, creative work falls.

All this has noticeably aggravated in recent years, especially with the introduction of the radical economic reforms. So, for example, daily stoppage time in industry has grown from 2.1 days per worker in 1990 to 2.8 days in 1995 and in 2000 – 7.6; 2002 – 7.5; 2003 – 5.2 days. The conception and practical development of economic reforms is poorly coordinated with an understanding of the deeper bases of work relations, with an increase in the effectiveness of labour.

Numerous sociological investigations show that, despite the shattering economic changes, there is little in essence that has changed in the work relations. Thus in an investigation by the most authoritative sociological centre in Russia (VTsIOM) in March 1997 when the question ‘have there been any changes at your enterprise in the last two — three years?’ was posed the following answers were obtained (as a % of those responding): in the area of work payments 9 % considered that there were modifications of a positive kind, 43 % — of a worst kind and 28 saw no changes with 20 % not able to answer.

[2]

In the area of working conditions the corresponding figures were 5, 28, 47,20%. In the area of labour organization: 4, 34, 39,23; the observance and protection of workers rights: 3, 36, 39, 22; the relation of the administration to the workers: 5, 30, 44, 21; relations in the collective: 9, 17, 53, 21; the participation of the workers in decision making enterprise matters: 2, 26, 43, 29. Approximately the same picture emerged in other areas: trade-union work, the general order at the enterprise etc. If we take the situation as a whole and average the value of these responses across all parameters, then we get the following data: those believing that there have been changes of a positive kind  — 5.25 %; of a worse kind – 31.75 %; no significant changes  — 39.6 %; at a loss to answer 23.4. Thus, from the data analyzed it is possible to conclude that in the majority cases of workers do not see changes in enterprise relations and if they do it is for the worst. The same conclusion can be seen in the calculation of a quality of working life index which falls from 3.2 in 1991 to 2.8 in 1993, 2.7 in 1995, 2.7 in 1996 — 2.7; to 2.6 1997 — that is a worsening in these years of 0.6 points.

[3]

From this data it becomes clear that the economic transformation by destructive means rolling out across the country has in reality little affected the sphere of the work relations. These have far deeper roots in the character of work relations created by the Soviet period of industry and also in national life.

6

Today the industrial base of the Russian industry continues to remain very backward as a whole. In the last years ‘of radical transformations’ the position has become worse. Thus, the average age of industrial equipment in industry increased from 8.42 years in 1970 to 15.88 years in 1997. The deterioration of fixed capital in industry in the same year 1997 was 51.6 %, whereas in 1980 it equaled 36.2 %. The corresponding forms and organization of the work relations which depend a lot on the technological base followed a similar pattern. For many Russian enterprises Fordism is still the most advanced form of work organization.

The years of economic transformation have changed nothing in essence in the practice of the work relations except to bring into life a series of new negative forms. The result has become almost universal indifference by members of society towards productive work activity. Former work values appear to have been almost overthrown, or extremely run down, while any new forms are developing outside the real sector of the economy. The accepted solutions and “decrees” are in many respects divorced from real practice and become almost impracticable. Perhaps, it is possible to say that after 1991 the positive characteristics of the old system of labour relations essentially weakened and the negative ones noticeably strengthened.

One of principal problems which the economic system of “socialism” confronted was also, of course, the ineffective system of labour organization, its low efficiency. According to the official data in the former USSR the level of labour productivity in the national economy was 2-3 times lower than the level in the USA and in some branches the gap was 5-7 times. Today the lag in a labour productivity level from USA has at least doubled. On a yearly basis the gap was grown from 4.8 times in 1992 to 5.5 times in 1993, 6.4 in 1994; 6.6 in 1995; 6.7 in 1996 and 6.6 in 1997.

This phenomenon has many reasons. One of them, maybe the central one, is that the Soviet worker (or Russian worker – perhaps) simply did not want to work at a high labour intensity. Certainly, this is not applicable to everybody but we should not simplify the problem. Some wanted to work and worked very well. But in the majority of cases, amongst the mass of Soviet workers, there was no interest in working to high levels of intensity. The numerous sociological investigations, which were carried out at the end of the Soviet period, showed that as noted by T.I.Zaslavskaya, only a fifth of workers worked to the fullest extent.

[4]

In these terms the work motivation in the Soviet period was clearly insufficient.

With the beginning of perestroika the thesis developed that it was necessary to develop a strong work motivation. It was now said that Soviet workers were alienated from ownership of the means of production, from the results of their labour and that by virtue of this there was not a sufficient stimulus to high productivity work activity. From this it was concluded that it is necessary for all workers, for all people, to be made proprietors and then people would receive sufficient stimulus for effective work. Even the first stage of voucher privatization was ideologically based on such an argument.

In its most common or abstract form this statement is, perhaps, correct. From deep antiquity, according to the books we read, as from personnel daily experience too, we well know that work for oneself on the dacha plot, or one’s “property” as a whole produces more diligence in people. But modern production is not a personal allotment and neither are large and complicated organizations with technological, economic and social production forms and relations. Questions of ownership, that is clarifying what belongs to whom and the mutual relations connected with them can be removed to a second or even third place. In the economically developed countries from 70-90% of the working population are hired workers and not self-employed. Of course with hired labour it is well possible to work effectively. As an example we can give “McDonalds” in which, even in Russia, hired personnel work better on administrative orders than at neighboring enterprises. On the other hand, it is known that private property in land in Poland did not rescue that country from a deep crisis of its economy.

In this way the thesis put forward right from the beginning of the socio-economic transformation in Russia – that having converted all those working into proprietors, a steady and powerful incentive for work would be created, has not been well grounded. Its bankruptcy can be ascribed to at least two causes:

1. It is impossible to convert everyone into real owners. This has never occurred anywhere and it cannot be found today.

2. The experience of the developed countries proves that high productivity of labour can be achieved in conditions of a hired system of work organization.

In my view the issue has nothing to do with property. Perhaps, this is very controversial, but I will risk asserting the point, property as a scientific category is a concept of the nineteenth century. Today it is necessary to search for other labour incentives. Modern Russian privatization, however one might criticize it, to be fair proves one indisputable fact. Large and average sized enterprises, which make up (or for the present make up) the basis of Russian industry have not actually become private enterprises as a result of privatization. It is possible to completely agree with the judgement that “two-thirds of privatization i.e. formally private enterprises are under the supervision of state and labour collectives, which in practice means the concentration of a majority of property rights in the hands of the administration of the enterprises and middle levels government officials.”

[5]

Therefore little in essence has changed in such enterprises and in work relationships. This fact has been noted by many serious investigators. For example, an English analyst of Russian enterprises, Bob Arnot, draws such a conclusion: ‘the workers still adhered to the enterprise in a sense completely alien to the capitalist economy … Moreover, the relations between the worker and enterprise, as well as the relations between enterprises have not become completely market ones. As a result neither a labour market nor a goods market has emerged governed by the distribution of labour time as measured by the comparative prices of products.”

[6]

In this way the transformation of property in modern Russia has not gone down to the level of an essential modernization of work relationships in the enterprises.

Certainly there is no objection to the common thesis that personnel or private property is the best motivator of productive activity, labour — organizational and entrepreneurial. But the fact of the matter is that modern technology and organization of production is such that the connection between private property (and property generally) and labour power becomes mediated, shaded by other factors and, in a series of cases, is generally lost. Modern hired labour is not the world of property. Intellectual labour too generally falls outside the limits of property.

The error of the former Soviet system of labour motivation was that it aspired to put moral stimulus and ethical motives in the first place and to push material ones further away. Certainly, not everything was quite this straightforward. But from official “socialist” ideology it was implied that moral and patriotic labour motivation had the pre-eminent place. Of course, there is nothing wrong with moral or ethical motives. On the contrary. But they are effective only under definite economic conditions. The basic condition is the material, technical base of production. If in Russian industry almost 50% of the workers are occupied in manual labour then it is natural that material incentives should occupy a dominant place. Today, instead of the creation of a modern technical base they are trying to introduce the motivation of small property owners, probably taking as a model medieval craft organization of handicraft workers. There the proprietor was not alienated from the means of production and the product of his labour. Thus he had a strong work motivation. But is it necessary and is it possible in today’s modern industry to convert back to craft workshops? And will this mean a modernization of work relationships?

It is necessary to note that in the second stage of Russian privatization (monetary privatization) its ideologists no longer connected it with the necessity of making everyone owners but with the process of creation of “strategic owners”, i.e.. small groups of rich people, owners of enterprises. However, such an ideological journey makes it quite obvious that the radical reformers in the whole history of privatization were concerned not with real modernization of production and production relations but with the creation of a social base of support of the ruling regime. Here it is possible to refer also to the incessant hopes about the need for the cultivation of a middle class as the ostensible stabilizer of society. But it is necessary also to remind ourselves that the middle class fulfills a stabilizing role only in a prosperous society where things go well and there is good government. When the economic cycle sharply worsens, the middle classes firstly begin to shake up society, turned in a radical direction by revolutionary elements, and more often by fascist sects. Let us remind ourselves that the mass base of fascism in Germany and Italy was precisely the middle class.

The supporters of property as an inventive for work activity say that modern production through the joint-stock form creates sufficient possibilities for the strong motivation of work. But this is no more than the next myth. The ownership of shares plays practically no role in the motivation of labour.

7

With respect to the objective determination of the development of social forms, including work relations, it is impossible to deny the possibilities of subjective action of these or other institutions on paths and forms of development. There are no exceptions in the number of these institutions and governments. In the field of work relationships, in the final instance, the most significant regulation of labour itself, as well as the labour sphere, comes from the decisive role of government regulation in the economy.

The state can choose various policies for the regulation of work from rigid pressure on all work parameters to its complete elimination from this area. In Russia today we observe fewer shifts (or attempts at shifts) in national government policies towards labour relations.

The ideology of economic liberalism accompanied by the monetarism of the Russian government instead of leading to a labour policy corresponding to the real values formed over the centuries, including the rather strong influence on the national mentality of the Soviet period, generally pushed this to the back. In its place the values of entrepreneurship and rentierism have been offered.

Certainly such values are present in any society. They were there in the Soviet period though they had no official legitimacy. The values of entrepreurship and the rentier will especially be present in the new Russian society. But it is absurd and simply silly to try to substitute them for work values, for the values of diligent and quality work.

Today the whole ideology of the reconstruction of the economic structure of society is directed towards the creation of motivations for business. And absolutely nothing is done to strengthen the work motivation of the other, no less important agent of production – the hired worker who represents and will represent in the foreseeable future the overwhelming majority of the population.

The government says that it is worried about the position of needy layers of the population, above all about pensioners. It is trying to increase pensions and payments for the aged and also for invalids and war veterans and others. Certainly all of this is justified and expedient if the government really carries it out. But the case we are interested in is something different. Every possible increase in the privileges of the non-working part of the population (for example, free travel on urban transport for the pensioners) has put them in a more favorable economic position than those who work in the national economy. I do not know how it is possible to estimate differently the shock to work motivation of the essential rupture of the link between the minimum wage level and the minimum pension level. In December 1993 the minimum level of wage payments was 14,600 rubles while the minimum level of the pension was (allowing for compensating payments) 26,300 rubles. In December 1995 the respective figures were 60,500 rubles and 110,500 rubles. In 1998 the pension was approximately 400 rubles and the minimum wage 60.5 rubles. Moreover, a steady tendency can be seen in the falling share of wage payments in the structure of incomes of the population. Since 1980 this share has changed as follows:

Table 2 Share of Wage Payments in Income

1980

77.4

1994

46.4

1990

74.1

1995

39.3

1991

59.7

1996

40.7

1992

69.9

1997

38.6

1993

58.0

1998

42.4

The corresponding share of social payments and incomes from property has grown. This last item in 1998 made up 44.3% of all forms of income of the population.

While understanding the necessity of state care of the invalid groups of a society it is still necessary to remember that they do not create national wealth. And though is just to refer to these layers as socially less protected there is still a problem – who protects the workers who are creating the basis of a common well being? It is supposed, probably that they should ensure their own well being themselves. But for this purpose it is necessary to have a prosperous economy and a far-seeing state policy. Whereas for these working masses it is a huge growth in unemployment and poverty that threatens.

Thus the attempt to generate or, more precisely, the reported way of carrying out a policy of liberalization of work relations has not had any particularly positive outcomes in the labour sphere and no intelligible theoretical concept of a state labour policy has been formulated.

8

In speaking about the results of economic reforms in Russia and the possibilities of a change in the economic structure it is not possible to avoid such a fashionable issue as that of social partnership. In the literature it is asserted that a social partnership has an essential value for the stability of a socially oriented market and the normalization of work relationships. The presence of a social partnership could be evidence that noticeable modifications are taking place in the work sphere.

In theory, i.e. in the most common approach, this is certainly correct. However, it is not possible to approach the problem of understanding the social partnership and the possibilities of its creation in a mechanical way in the present conditions in Russia. It is not possible to consider that the development of market relations by themselves will present and perfect a system of social partnership. This involves something which is less simple and less obvious.

Social partnership is a product of a western model of work relationships. And the state quickly appears in this system of tripartism as the arbiter instead of an equivalent partner. Decades of struggle, the accumulation of democratic traditions of various groups, the role of the state in social compromise all went into the creation of the modern system of social partnership in the western world.

At the same time it is necessary to keep in mind the fact that it is far from the case that a system of social partnership has developed in all countries. In Japan, for example, there is not a social partnership but a system of social paternalism on the part of the state and the firm. For Russia, together with many other republics of the former USSR, a system of social partnership in its pure, western form would be barely appropriate. The basic reason for this is the traditional model of Russian work relationships.

However, for the sake of justice, it is also necessary to note that so called Reagonomics and Thatcherism which had a wide appeal in western countries in the last two decades, also essentially abrogated the social partnership. In theory and in practice the ideology of market liberalism as a whole excludes social partnership as a necessary institution of the system. It is of the essence of this economic policy that it rejects the necessity of social partnership seeing in it something which lowers the economic efficiency of production.

In modern Russia all this becomes much more complicated. It is well known that a social partnership has three sides: the state, employers and workers. In Russia while all three components of such a system exist they have not yet found adequate forms of expression, except for the state. It is not clear who should represent the businessmen. Nowadays there are some business unions and associations, frequently competing amongst themselves, associating as private businesses and as collective and even state structures.

Nor is it clear which interests or which stratums or classes the present Russian government reflects. But in any case we cannot speak of it expressing and protecting the interests of all the people.

However, the weakest link is the trade unions which until recently fulfilled the specific functions of an assistant in the administration of the enterprise, “in control of personnel.” This included in the Soviet period the trade unions undertaking some production functions (increasing the efficiency of labour) and also social, strictly trade union functions (the distribution of material help, permits for rest homes, work conditions etc.). But now trade unions have not become a real force capable of defending the worker under market conditions. Certain legal acts, prepared with the participation of the trade unions (including the Agreements on Labour and Socio-Economic problems which have been signed) do not operate as they are blocked either by the administration of the enterprises or the workers as not reflecting their vital interests.

In a word the establishment of full-blooded members of the social partnership in Russia has not taken place. The discussion of social partnership has remained only talk. All the accepted legal documents in this area are not being applied. The matter, however, is complicated by the existence of a strong state tradition in the regulation of work relations as elsewhere.

In the old Russian system the state was and, probably, will still be for a long time both the organ of the legislative governance of labour relations and the basic employer. In such conditions the passage to a system of tripartism is exceedingly difficult. Apparently, despite the attempts already made, the real embodiment of the idea of tripartism is something which lies far in the future. It is generally unreal at the moment. Moreover if we consider that the model of work relations which was developed in the Soviet period has more chance of being established in Russia today, albeit in a modernized form, then the place for social partners in it depends on this or that form of state paternalism. Here again we should look back to tradition. We cannot leave aside the fact that the state was actually the sole employer and as a corollary established a many sided paternalism under the name of “the care of the state for the people” which was a major part of official “socialist” ideology. From here derived also the specific role of trade unions, which could not be a separate point of resistance to the state or the administration of the enterprise as they were part of the state. In brief, the trade unions were one of the numerous organizations of the state, which realized paternalism in the work collectives.

Such a position is a serious obstacle to market transformations understood in their pure western liberal variant. These paternalistic structures (at regional and branch levels, and especially sat the level of the enterprise) successfully resist the government in its aim of pushing hard budget constraints. Therefore it is difficult to recognize as sufficiently realistic certain suggestions about the prompt and rapid introduction of social partnership into the Russian economy on the basis of the accelerated cultivation of a bourgeois class. All this cannot be done quickly, especially in Russian conditions. It once again attests to the fact that real changes of a deep kind have not taken place in Russia or have taken place in a very limited way.

Moreover, even if we suppose that in one year or two sufficiently full bloodied tripartite partners (i.e. mature and responsible business, powerful and consolidated trade unions, wise government) do come into existence then it would still only be possible to reach social agreement after a long period of confrontation and of class struggle as a period of showdown. Not knowing the relative power of each other the partners would not be able to come to agreement for the equilibrium point of such an agreement would be unknown. Only through social struggle (including class conflict) would the degree of power of each side in labour relations be recognized and the point of equilibrium between them be found. This is a natural process, which was found in the comparable development of labour relations for almost all countries in the West.

In its basic features this process went on in Russia. However it had one important peculiarity: the strong role of the state in regulating labour relations, the strong paternalism. After 1917 paternalism gradually turned into state totalitarianism. Therefore the problem now in Russia is this: to return to some level of paternalism which was always intrinsic to the Russian economic mentality or to copy some West-European models.

Thus the idea of tripartism has today a more immediate political rather than economic colour to it. In the real economic process, tripartism does not yet need to be considered as an essential factor of the transformation of work relations. The deeper social processes lean on, and for a long time will lean on, state paternalism.

9

Of course some changes in the country over 10 years of reforms have taken place. But, I repeat the point — these changes are not of a basic character. This can be illustrated by the problem of the middle class, which today in Russia has become very fashionable.

In the Soviet period the middle class was calculated on two different bases, education and income, each giving approximately the same result that 70 -75 % fell into this middle group. It is necessary to say that this corresponds to the order of magnitude of the middle class for economically developed western countries, which is calculated at 60-80 %. The middle class in the USSR consisted of much more than half of the population and approximately ⅔. This figure has also been obtained by some sociological investigations on the basis of the self-evaluation of the surveyed groups of the population. Thus the sociologist R.G.Gromova, on the basis of a survey of 5000 people, reported that 67% of the respondents in 1988 referred themselves as at the middle level on the basis of their material position.

[7]

Today’s middle class consists of three large groups. Firstly, there is the intelligentsia section, a part of the old middle class, which has contracted more and more. Secondly, there is the group of the former party-state bureaucracy and economic directors which has slightly transformed itself but as a whole, probably has kept its positions or even has extended them. For example, directors and top people in the former state enterprises as a whole today have remained within the framework of the middle class. Thirdly, there are the completely new people who have come from the most varied areas and spheres, directly connected with the creation of the private sector.

Now it would undoubtedly be of interest to try to define the size of the middle class in modern Russia. To define the middle class of the Soviet period we used two criteria: the distribution of incomes and education. In today’s conditions the criterion of education is not suitable for the most educated stratum today lives on a subsistence wage and cannot be put in the middle class in any way. On the other hand, in private business there are many people who do not possess a solid educational background but who on the income criteria aspire to the higher sections of the middle class. This shows that the income criterion remains the basic one. The second criterion we shall choose is social status or occupation. Thus the directors even of small private enterprises are automatically in the modern conditions of Russia put in the middle class, without relation to their education or even the legal source of income.

Thus we will consider the size of the middle class on the income criterion using the same approaches that we applied for 1989 — 1990. Thus, having calculated the size of the middle class by the income criterion, we obtain the following series of its size as a % of society at large: 1975 — 57.1 %; 1990 — 70.5 %; 1991 — 82.4 %; 1992 — 27.1 %; 1993 — 37.3 %; 1994 — 31.4 %; 1995 — 29.4 %; 1996 — 35.2 %; 1997 — 38.2 %; 1998 (July) — 38.3 %; (November) — 21.4 %; (December) — 33.2 %. In a number of instances our estimates can be confirmed by other serious sociological measurements. The All-Russia Centre for the Study of Public Opinion, (which is the most authoritative sociological organization in Russia today), gives as an indicator of the size of the “middle stratums ” for November 1997 the figure of 38%.

[8]

This almost completely coincides with our account for this year of

38.2 %.

From this data it is possible to draw the conclusion that the numerous laments concerning the “non emerging” middle class, that during the Russian reforms it “was not possible” to generate an average class are real only to a small degree. From the above data it is clear that in modern Russia there is a middle class. But, of course, this middle class today is not very big and has no clear development perspective. Moreover, it is quite possible to state, that any part of middle class has appeared due to the Russian reforms. And from its dynamics probably does not only the social quality of the middle class depend but also society as a whole.

10

In summarizing the results of the changes in Russia we must look at what is actually happening. It is well known that M.Gorbachev began the transformation in 1985 as a process of reforms. But at the beginning of the 1990s it became clear that the earlier reforms were developing beyond this, becoming so radical that in essence they made necessary a complete renewal of the economic and political basis of society. As a matter of fact talk should have been about modernization. But Gorbachev and his circle continued to talk about reforms (by the way Yeltsin and his circle also speak about reforms as though continuing the Gorbachev approach), only badly understanding what they had started to reform. The process of change has acquired a spontaneous and radical form control of which has been lost. Its form developed as a complete surprise for everyone.

Coming after Gorbachev were new people who announced that these changes were revolutionary. On this basis these new people are trying to change the economic and political base of society and its social structure. Formally there was a change of elite about which they had no doubts and problems for the old governors were expelled and they took over control of the rudder themselves.

So, it is interesting to examine how serious the changes were and if they could be treated as a basic change in the socioeconomic structure. Certainly, the process of change is still not fixed and it is impossible to draw any final conclusions today. But there is enough material for an analysis nevertheless.

Thus we shall consider the different elements of change. Let us begin with that of a change in the elite. Of course, at the head of the country there are now many other people. But is the simple change of one man for another a change of elite? I think that the answer is no. A change of an elite means the arrival in power of a different group. In Russia such a change has not taken place. For the first time after 1991 a certain number of university professors and journalists (though we should note that it was a very small number) tried to take a share of power but rather quickly withdrew. Therefore for all practical purposes we find the same party-state nomenklatura in authority which had been there throughout all the years of the Brezhnev period although now under another name. Even many of the personnel have remained or have returned to the same positions. Therefore, by a considerable extent there has been no essential change of the elite in the country.

Now we shall look at the economic basis of society. In the old “socialist” society this basis was formed through public or, more precisely, state ownership of the means of production. Today we speak about the necessity of private property and have even renamed almost 80 % of the enterprises as joint-stock companies. But despite such a renaming little has essentially changed other than that the directors of these enterprises have obtained unlimited possibilities to do want they want or can. No essential difference can be found between the abandoned old state enterprise forms and the new joint-stock enterprises. The pattern of non-payments, idle times, losses etc. at these and other enterprises are completely identical. The joint-stock enterprises have also not created new classes or stratums of society.

The directors, white-collar workers, shop floor workers continue to regard themselves as if they were state employees servants, the basic claims are made to the state. The director (or owner) of an unprofitable joint-stock enterprise cannot sell off the property of a non-viable enterprise and free the capital to invest in a more profitable concern. The director has his hands tied by a hundred threads, which also make up the economic base of society. The economic base essentially remains as of old.

The social structure of society also has varied insignificantly. A class of capitalists has not appeared in a noticeable number. On the most optimistic estimate it does not exceed 8 % of the population. This so-called the middle class basically reproduces the old Soviet nomenklatura.

There remain the political bases of society, which really have undergone noticeable changes. But here it is also possible to make two stipulations. Firstly — for the present it is not absolutely clear where the process of political modification will stop. For last 10 years we have convinced ourselves that these political changes can go in different ways. Secondly – in order to precisely define the degree and direction of the political changes it is necessary also to precisely determine a reference point for them, And until now what kind of society the Soviet Union was has not been well understood and it is impossible to accept that the names given to it by its leaders were legitimate. In this way, while there are certainly changes, these changes do not have such a radical character as to allow us to treat them as a basic change in the socio-economic structure.

* * *

Today Russia is passing through a wave of transformation experienced in the 1960s and 1970s by European countries. During this period these countries mastered the scientific and technical revolution, new technological means of production, shaped by a new social structure. We could say, on the other hand, that in terms of its social structure the Soviet Union had overtaken many countries and already in the 1950s had a social structure with a minimization and diminution of class distinction and social stratification which is characteristic of modern conditions in western countries. But in the technological and industrial area it sharply lagged behind West. Therefore a transformation was objectively necessary. However the historical form of this has been unexpected and poorly related to what is needed. Thus what we see nowadays are sharp and short-term modifications of political forms which in practice barely affect the economic basis of society.


[1]

Here and elsewhere all figures, unless otherwise noted, are taken from the official publications of the State Committee of the Russian Federation for statistics (Goskomstat)

[2]

Ekonomicheskie i sotsial’nuie peremenui: monitoring obshchestvennogo mneniya. Informastionnuii bulleten’ VTsIOMa, 1997, no. 3, p. 34.

[3]

Op cit., p.23.

[4]

See Nauka v SSSR, 1987, no. 5, p.118. A survey of 120 industrial enterprises undertaken by Institute of Sociological Investigation of the Academy of Sciences of the USSSR in 1987-1988 (under the direction of N.V.Andreenkova) showed that 23.8% of workers in these enterprises were fully stretched by their work while 57.8% could work better and significantly better. See Materialui vsesouznogo monitoringa po voprosam sotsial’no-ekonomicheskogo razvitiya promuishlennuilkh predpriyatii. Moscow, 1988, p. 17.)

[5]

A.Buzagalin, A.Kolganov, P.Shul’ts, Al’ternativui modernizatsii rossiiskoi ekonomiki, Moscow, 1997, p. 33.

[6]

B.Arnot, ‘Sotslia’no-ekonomicheskoe polozhenie tryda v perekhodnui period: nekotoruie kommentarii’ in M.I.Voeykov ed., Ekonomicheckoe polozhenie Rossii i trudovuie otnosheniya, Moscow, 1996, p. 70.

[7]

R.G.Gromova, ‘Sotsial’naya mobil’nost’ v Rossii: 1985-1993 godui,’ Sotsiologicheskii zhurnal, 1998, no. 1-2, p. 33.

[8]

Monitoring obshschestvennogo mneniya: ekonomicheskie I sotsial’nuie peremenui, 1998, no. 2, p. 10.