Contradictions transition

Simon Clarke

and

class

conflict

in

Russia

in

Centre for Comparative Labour Studies, University of Warwick For many commentators the collapse of the Soviet Union also marked the collapse of Marxism as an intellectual project. The sight of workers enthusiastically participating in the overthrow of state socialism and acclaiming the radiance of a capitalist future appeared to turn on its head the idea that capitalism is an inherently contradictory social system, which gives rise to increasingly acute class conflict whose inevitable outcome is socialism. But, while the collapse of the soviet system undoubtedly undermined Marxism (at least in its Marxist-Leninist variant) as a political ideology, its implications for Marxist theory are by no means so clear-cut. In this paper I propose to outline a Marxist explanation of the development of capitalism in Russia, which will explain the forms of class conflict on the basis of an analysis of the contradictions of Russian capitalism in transition. The purpose of the paper is not to recuperate Marxism, but to move beyond the inherent empiricism of most discussions of transition by using the tools of Marxist analysis to theorise the ambiguities of Russian capitalism. Russia has been through a period of rapid and dramatic change. When Mikhail Gorbachev came to power in 1985 prices and wages were regulated from the centre, production and exchange were in accordance with centralised plan directives, and, apart from those working in collective farms, the entire employed population worked for the state. Most prices and wages were freed from central regulation at the end of 1991, and enterprises henceforth produced not for the plan, nor for the state orders with which Gorbachev had replaced plan targets, but for commercial sale. State organisations similarly operated within the framework of budgetary constraints rather than plan directives. By 1998 only a little over a third of the labour force was employed by state enterprises and organisations, the majority of whom were working for the government or public services. Two-thirds of the remainder were working for purely private enterprises, one-third for private enterprises in which the state retained a shareholding. Privatisation and marketisation had created in the space of less than a decade what appeared superficially to be a fully fledged capitalist economy. However, the transition to capitalism had not brought with it the anticipated prosperity. Instead it had brought previously unheard-of inflation; average real wages which had fallen to about the level of the late 1960s, before the period of stagnation; a doubling of wage inequality; a fall in total employment of around a quarter and a rise of unemployment to over 13%; with a substantial number of young people and those around pension age dropping out of the labour market. To add insult to injury, workers faced short-time working, long-term lay-offs, often without pay, long delays in the payment of their wages and a rapid deterioration in the quality and scope of public services. From a Marxist perspective, we might expect the development of capitalism to be associated with the emergence of the class divisions typical of a capitalist society. Moreover, we would expect a capitalism marked by such a rapid polarisation of income and wealth to give rise to increasingly intense class-based conflicts, particularly as Russian workers had played a very active role in the destruction of the soviet system, most notably in the strike waves of 1989 and 1991 which had centred in the coal-mining regions but which reverberated throughout the Soviet Union. Russian

workers were by no means defenceless in the face of the deterioration in their living standards and their conditions of employment. Workers retained the extensive legal rights and privileges of the soviet period, to which was added the (somewhat equivocal) right to strike. In the soviet period virtually all employees were members of trade unions, and even by the end of the 1990s trade union density remained very high in the traditional sectors of the economy, although the unions penetration of the new private sector, dominant in trade and services, was low. Although the trade union federation, FNPR, claimed the participation of millions in its ritualistic days of action, and there have been regular spontaneous outbursts of militant action at a local level, the level of strike activity remained relatively low through the 1990s, falling off sharply at the end of the decade. While the reconstituted Communist Party of the Russian Federation (KPRF) was by far the largest and most successful political party, it was not a class-based party, while the self-consciously class-based parties had minimal electoral success, and FNPR was remarkably unsuccessful in transforming its huge membership into electoral support for its favoured political partners. How can a Marxist analysis explain the relative absence of overt class conflict in the face of an apparent acute polarisation of class interests? Contradictions and forms of class conflict in transition By way of introduction I will outline the theory of class and class conflict on which the analysis of this paper is based, a theory which I would unequivocally attribute to Marx, were there not so many theories already vying for such an attribution. Class is a relationship that is constituted on the basis of the social relations of production characteristic of a particular mode of production, between a class of people who labour and a class of people who appropriate without equivalent, in some form or another, a portion of the produce of that labour. The character of the class relations in any society depends on the social form of the production and appropriation of the surplus. Class relations are analytically prior to the formation of classes as social groups : there is no a priori reason why members of social classes should identify or organise themselves as such. Every class society is marked by a contradiction between the forces and social relations of production that arises as a result of the subordination of the production of goods and services for individual and social need to the production and appropriation of a surplus : the social relations of production both encourage and limit the development of the forces of production and the material, intellectual and cultural development of the labouring class which, as the collective labourer, is the active force in the development of social production. This contradiction is expressed in class conflict, but the conflicts that arise are not a simple reflection of the contradictions inherent in the particular mode of social production. The relationship between contradictions and class conflict is mediated by the institutional forms within which the social relations of production are articulated and which define the framework within which particular conflicts may or may not be generalised and unified , so that class conflict does not necessarily appear immediately as such (indeed, Marx believed that it was only in a capitalist society that class conflict did appear immediately as such). The forms of the social relations of production, and correspondingly the f orms of class conflict, differ in soviet from capitalist types of society . Both of

these systems are based on advanced technology and a high degree of socialisation of production, which is the social and material basis of the separation of the direct producers from the ownership and control of the means of production , and both rest on the delegation of control over the employment and disposition of labour to hired managers, but within quite different institutional frameworks, expressed in quite different power and property relations. The transition from a soviet to a capitalist type of society implies the transformation from social relations of production based on the centralised appropriation and redistribution of resources through the administrative-command system to the appropriation and exchange of resources on the basis of the expanded reproduction of capital. . However, this is not a revolutionary transformation in which capitalist immediately displace soviet relations of production. In particular, t he transformation of the social relations of production in Russia has taken the form of immediate and dramatic changes in the wider institutional framework within which production takes place, from plan to market, but much slower and more halting change in social relations at the workplace. Instead of acquiring the necessary means of production by delivering planned outputs, with the transition to a market economy, enterprises were suddenly required to acquire the means to purchase their means of production by the sale of their products, with the social reproduction of the enterprise being conditional, in the first instance, on its being able to cover its costs from its sales revenue, any excess of revenue over costs comprising the profit of the enterprise. Following Marxs account of the development of capitalism out of previous modes of production, we can conceptualise the transition to a market economy as a transition from the formal to the real subsumption of the production process under capital as enterprises and organisations are gradually induced or compelled to adapt the social organisation of production to the cost-minimising constraints of a capitalist economy imposed on them by the imposition of the law of value in the form of competition and budgetary constraints. However, the real subsumption of labour under capital is far from being an automatic process. The pressure of the market may give the enterprise director an incentive to subject production to the profit-maximising logic of capital, but an attempt to transform production relations is liable to provoke conflict within the enterprise. The threat of such conflict may incline the director to look outwards, to avoid or contest his (or her) subordination to the logic of capital, behind which stands the power of the state. The forms of class conflict that arise in the course of transition express the complexity of these changes. In particular, the institutional forms that articulate the conflicts that arise within the workplace continue for some time to be those inherited from the soviet system, while beyond the workplace the forms of conflict begin to aquire a radically new character. The complexity of class conflict in transition is an expression of the complex and quite specific articulation of modes of production that characterises the transition. The institutionalisation of class conflict in soviet social relations of production In every class society production takes place within particular social relations which both encourage and impede the development of the forces of production. In the

capitalist system, the reproduction of the company, which is the institutional form within which goods and services are produced and distributed, is conditional on its ability to generate a financial surplus through production and exchange in competitive markets. Competition between capitalists drives on the accumulation of capital and the development of the forces of production, but the introduction of new methods of production is associated with the cheapening, simplification and intensification of labour, in the attempt to secure a competitive advantage, and is achieved primarily through the introduction of additional production capacity and the forcible liquidation of established production facilities and the redundancy of their employees (Clarke, 1994). Soviet social relations of production were supposed to overcome the contradictions inherent in the capitalist mode of production in being based on the centralised control of the planned distribution and redistribution of productive resources. Enterprises and organisations negotiated the allocation of means of production and subsistence with the centre in exchange for the delivery of defined production targets, the surplus taking the form of the net product appropriated by the military-Party-state to secure its own expanded reproduction. The fundamental contradiction of this system lies in the separation of production and distribution which leads to a contradiction between the production and appropriation of the surplus. The central planning agencies seek to maximise the surplus in their negotiations with ministries and departments, enterprises and organisations over the allocation of resources and determination of production plans. However, the enterprises and organisations which are the units of production have an interest in minimising the surplus by inflating the resources allocated to them and reducing their planned output targets. The softer the plan that they can negotiate, the easier it is for the enterprise director and his or her line managers to induce or compel the labour force to meet the plan targets (Clarke, 1993; [Clarke, 1996 #672]). The development of the forces of production was constrained by the exploitative social relations of production, and it was this specific contradiction that underpinned the collapse of the administrative-command system. The centralised control and allocation of the surplus product by a Party-state apparatus in the hands of an unproductive ruling stratum meant that the producers had an interest not in maximising but in minimising the surplus that they produced. 1 Since neither the worker, nor the enterprise, nor even the ministry, had any rights to the surplus produced they could only reliably expand the resources at their disposal by inflating their production costs, and could only protect themselves from the exactions of the ruling stratum by concealing their productive potential. Resistance to the demands of the military-Partystate apparatus for an expanding surplus product ran through the system from top to bottom and was impervious to all attempts at reform. This fundamental contradiction defined the specific form in which class conflict was displaced within the system into a conflict over the distribution of resources within a hierarchical framework of patronage and dependence. The contradiction defines two sets of conflicts within this system: conflict over distribution and conflict over production. In the social organisation of production, workers come into direct conflict with their immediate managers, who have constantly to drive the workers on to meet
I refer here to a ruling stratum rather than an exploiting class to indicate that in the soviet system the appropriation of the surplus is for the immediate benefit of the military-Party-state apparatus, so that membership of the exploiting class is conditional on office-holding rather than being based on heritable private ownership. This is a strength of the Soviet system, to the extent that the unity of the exploiting class is directly constituted by the state, and a weakness, in that members of the exploiting class may covet a more secure basis than office for their social position ([Ticktin, 1992 #675]).
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the plan. However, in the battle for resources the workers have a common interest with their managers in seeking to acquire the largest allocation, which will facilitate the task of the manager by reducing the burden of labour and increasing the pecuniary and social wage which provide the levers of management of the labour force. Conflict over production was diffused and fragmented, the workers unity rarely extending beyond the immediate work group as this was the limit of the workers common interest in exerting their control over the pace of production, since the ability of any particular group of workers to earn their wages depended on other workers achieving their planned tasks and delivering the appropriate parts and raw materials to maintain production. The workers therefore expected the enterprise director to maintain labour discipline and the continuity of production to ensure that targets were met and bonuses earned. Conflict over distribution was solidaristic, but this solidarity was not embodied in the collective organisation of the workers but in the representation of their interests by their manager in the bureaucratic competition for resources. This alienated collectivism can be seen as the soviet equivalent of the capitalist alienation of labour in the form of the commodity ([Burawoy, 1993 #674]; Clarke, 1993; Ashwin, 1999). The coexistence of conflict and collaboration within the soviet system was reflected in the institutional and ideological forms of workers organisation. On the one hand, there was no objective basis for any attempt to build solidarity between workers above the level of the immediate work group, so there was no tendency within the soviet system towards the spontaneous development of collective workers organisation. On the other hand, there was a deep resentment against the system as a whole which occasionally found expression in spontaneous eruptions of protest and which underpinned the traditional Russian rulers fear of the bunt, the insurrection, a fear which began to be realised in the period of perestroika. However, even the mass protests of the 1980s were not explicitly class-based: they were generally driven by protests at shortages of essential consumer goods (especially sugar and tobacco) and articulated protest on a branch, regional or national rather than a class basis. 2 The absence of independent workers organisation arising from below allowed the soviet trade unions to claim a monopoly in the representation of working class interests. The soviet trade unions expressed the interests of soviet workers within the limits of the soviet system. Workers may have felt some contempt for the union as the junior member of the troika of union president, party secretary and general director which ran the enterprise, they may have been aggrieved at the repressive, corrupt and discriminatory way in which it distributed the benefits at its disposal, but they nevertheless expected and enjoyed those benefits. Their principal grievances were not that the union allocated housing, vacations or kindergarten places, but that it did not allocate them more equitably and more generously. Meanwhile, it would probably never have occurred to workers that the union might represent their collective interests as workers. For this they looked to their line managers and the director of the enterprise, whose skills in negotiating and otherwise working the system could have the biggest impact on the working conditions and living standards of those who worked in the enterprise. A good shop chief or director was one who had influence upstairs and who was firm but fair, able to ensure that those who were willing to work would receive good wages and enjoy good living and working conditions. The solution to poor wages and working conditions was the removal of the responsible
Although the roots of the 1989 miners strike lay in workplace grievances, the generalisation and resolution of the strikes was not class-based but was articulated by branch, local and regional authorities on the basis of demands regarding the allocation of resources within the system ( Clarke et al., 1995, Chapter One).
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manager, a task entrusted to the vigilance of the Party Committee in accordance with Lenins prescription cadres determine everything, but one which workers increasingly took upon themselves in the last years of the soviet system, encouraged by Gorbachevs 1987 appeal to put on the pressure for perestroika from below. The interests of workers in the workplace were represented within the system primarily by their line managers, and their demands channelled through administrative structures. In this way conflict between workers and management was expressed in the form of conflict within the administration of the enterprise or, if the grievance was taken up by the general director in negotiation with the higher authorities, between the enterprise and higher authorities. The articulation and resolution of conflict between workers and management was therefore intimately connected with conflict within the administration and the administrative-command system, in which this coexistence of conflict within each unit and solidarity in relation to higher bodies was reproduced at every level. This provided what was essentially a bureaucratic-paternalist system of conflict resolution, within a hierarchical authoritarian structure, based on the exclusion of any forms of independent worker representation. Although this exclusion was reinforced by ruthless repression until the late 1980s, it was already inscribed in the social form of soviet production which imposed patterns of conflict that constituted barriers to the development of a wider class solidarity. This was why the withdrawal of the repressive apparatus under Gorbachev did not lead to a radical change in the forms of workplace conflict. Workers still looked to their managers to represent their interests, and if their managers failed them they sought not to change the system but to replace the manager. Within the soviet system, individual workers and brigades competed for resources within the shop, while uniting behind the shop chief in the competition for resources within the enterprise. Enterprises competed for resources from the ministry, while uniting in the competition for resources with other ministries. The unity of the system as a whole depended on the ability of the centre to retain ultimate control over the distribution of resources, but at the same time it was this centralised control of distribution that was the principal barrier to the expanded reproduction of the system. It was this contradiction that determined that Gorbachevs attempt to reform the system by giving enterprises greater independence inevitably led to its disintegration, as the loss of control of production led to the loss of control of supply on which the system depended, opening up new divisions and unleashing new patterns of conflict. The inability further to increase the quantity and regulate the quality of the surplus eventually undermined the expanded reproduction of the system. The attempts to reform the system from above in order to increase the rate of exploitation only opened up the underlying contradiction between the role of the collective labourer as direct producer and the role of the collective labourer as object of exploitation. However this contradiction did not appear directly, in the form of class polarisation and self-conscious class struggle, but in the form of the continued disintegration of the system, as subordinate levels sought to harness popular discontent to wrest resources and to achieve their own independence from those above. The struggle to secure the independence of the enterprise from its subordination to the ministerial system was represented as a struggle of the labour collective, usually personified by the enterprise director, to secure to itself the full fruits of its labour, identified with the revenue that would be

obtained by the sale of the product at a (world) market price (while continuing to pay for supplies and basic means of subsistence at low state prices) . Its result was the collapse of the administrative-command system and the transition to market relations. Transformation of the social relations of production. The transformation of the social relations of production in Russia has taken place not through the revolutionary overthrow of one class by another, but on the basis of the unfolding of the internal contradictions of the soviet system of social production. The soviet system was undermined as the states monopoly of distribution was eroded by the expansion of market relations. Market relations were not an external solvent, but had developed within the soviet system as individuals, enterprises and organisations sought to make good the deficiencies of the system of planned distribution and which were then encouraged in the period of perestroika as the last hope of reforming the system (there is an obvious analogy with the role of the market in the transition from feudalism to capitalism). The radical reforms that culminated in the freeing of most prices from state control in January 1992 were the consequence rather than the cause of the destruction of the soviet system, the end point rather than the beginning of the transition to a market economy as enterprises demanded their independence and it came to be recognised that a centrally planned market economy was a contradiction in terms ([Clarke, 1996 #672]). The final collapse of the system towards the end of 1991 transformed the external environment in which enterprises and organisations had to secure their own reproduction. They could no longer obtain means of production nor the money to pay wages and to maintain social and welfare expenditure on the basis of centralised allocations which they received in exchange for promised deliveries of planned outputs. Henceforth they would in principle have to earn sufficient money from the sale of goods and services to enable them to pay their wages and buy supplies (expenditure on public services was similarly confined within increasingly tight cash limits). If they wanted to attract funds for investment to take advantage of new market opportunities, they would have to make a profit because, unlike state investment allocations which were repaid with plan deliveries, loans had to be repaid out of net monetary revenues, with interest. In this sense, the end of state allocations immediately marked a transition to capitalism as the social reproduction of enterprises and organisations had been made subject to their reproduction as forms of capital. Enterprise directors, with the support of their labour collectives, had sought to free themselves from the administrative-command system so that they could appropriate the surplus in the form of profit. However, although the reproduction of enterprises and organisations was subordinated to the constraints of the market, their freedom from state control did not enable them to appropriate the surplus, as they had anticipated. The bulk of the shrinking surplus did not take the form of enterprise profits, but was appropriated by the state in the form of taxation, and by monopolistic financial and commercial intermediaries (including the suppliers of fuel and energy), which arose out of the privatisation of former state functions and which owed their monopoly position to the continued support of state and/or criminal forces. The oligarchs who headed these structures consolidated their position by integrating their financial and trading activities into the circuits of global capital and securing the endorsement of transnational corporations and the international financial institutions. This was the basis of the system of crony capitalism, based on the integration of state, criminal and capitalist structures, united by their common interest in the monopolistic appropriation

of a surplus, but divided by their competition over the distribution of the spoils. In place of Gosplan and the Communist Party, the system of surplus appropriation was now enforced by the Bankruptcy Administration and the Tax Police, backed up by the renamed KGB and private security services. Enterprises and organisations were subordinated to the logic of capital not only as a consequence of the anonymous force of the market, but also as a result of the pressure of fiscal, capitalist and criminal institutions. In addition to their immediate costs of production, enterprises and organisations had to meet the demands of the tax authorities, monopolistic energy and raw material suppliers, the escalating costs of commercial credit and the commissions of commercial intermediaries. The burden of forced exactions imposed on enterprises and organisations in the market economy was often much greater than that under which they had laboured in the soviet system, while they had even less capacity than in the past to increase the surplus produced. The collapse of the soviet system in the first instance intensified the traditional problems faced by the enterprise as supply chains were broken. Enterprises had lost access to markets in other Soviet Republics, while state orders had been sharply cut back and many traditional customers did not have the money to pay as working capital was eroded by inflation and access to credit restricted by the limited development of financial institutions and the governments attempt to contain inflation by tight monetary policy. The immediate priority of enterprise directors was to secure sources of supply, open up markets and get sufficient credit to sustain production, using the traditional skills and connections of the soviet enterprise director. The immediate result was that production continued in the traditional way ([Burawoy, 1993 #674]). During 1992 enterprises resisted the depradations of the state and new financial and commercial intermediaries by leaving their bills unpaid and came to terms with the logic of the market not by transforming what Michael Burawoy calls relations in production ([Burawoy, 1985 #676]) but by evading its strictures in spontaneously creating their own credit in the form of inter-enterprise debt. While the radical reformers pressed for enterprises to be disciplined by maintaining tight credit and enforcing bankruptcy legislation, the government was forced to concede by easing credit restrictions in the summer of 1992, not so much because of the political strength of enterprise directors as because of the risk of precipitating a devastating chain of closures. For the same reason, bankruptcy remained an idle threat. The struggle around the provision of credit for a market economy was complemented by the struggle over privatisation ([Clarke, 1992 #547]), the outcome of which again considerably softened the subordination of production to the logic of capital. On the one hand, the majority of the shares of most enterprises were put in the hands of management and the labour force, so that the enterprise did not come under pressure from outside shareholders to pay dividends.3 On the other hand, the valuation of enterprises for privatisation effectively wrote off the value of their existing land, stocks and fixed assets, so that they had only to cover their current costs out of their revenues. When we also take into account the high rate of inflation, without any system of inflation-accounting, and the fact that energy prices continued to be controlled until July 1993, it was very difficult for an enterprise not to make a profit.4
In 1997 dividends accounted for 0.2% of the monetary expenditure of large and medium enterprises, while wages accounted for 8.5% and taxation for 7.2% ([Goskomstat, 1999 #653], Table 22.34).
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In 1992 93% of industrial enterprises were profitable, a figure which had fallen to 51% by 1998. In 1992, taxation accounted for 28% of net profits, rising to 61% of a relatively smaller total in 1994. In 1998, by which time net profits in the economy were negative, direct taxation of profits amounted to 3.6% of GDP.
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Thus the problem most enterprises faced initially appeared to be a problem of liquidity rather than profitability and the priority of directors was to secure credits rather than to cut costs. While the line of least resistance for enterprise directors was to use their traditional connections and traditional lobbying skills to secure subsidies and credit, to open up new markets and new sources of supply, and to maintain liquidity by defaulting on payments due, they had an incentive to reduce labour costs. Although wages account for only about 12% of the total costs of industry (including amortisation), they account for the bulk of the payments which have to be made in cash so that even profitable enterprises have an incentive to reduce these costs if they face a liquidity squeeze. However, the existing social relations in production presented barriers to any attempt radically to change methods of production, the intensity of labour and staffing levels in order to cut wage costs. The enterprise director would have to elicit the co-operation of line managers, and line managers the co-operation of their core workers to change the social organisation of production, a task which is extremely difficult when there is little or no money to lubricate the bargaining process, while confrontation risks unleashing dangerous conflicts which can threaten management control and spill over beyond the enterprise. This is one reason why the vast majority of what little investment has taken place in post-soviet Russia has taken the form of product innovation rather than process innovation ([Clarke, 2000 #677].5 Thus, the subsumption of enterprises and organisations under capital was initially purely formal: the social organisation of production within the enterprise had not been changed at all. The management structure was still oriented to the achievement of production targets with little regard for costs. The core of the management team still comprised the enterprise director, chief engineer and shop chiefs, while the economic, finance and personnel departments were peripheral services whose only function in the past had been to collate figures and prepare reports for higher authorities. The most common change in the management structure was the addition of a marketing department, charged with disposing of the product. As the pressure of the market increased and enterprises came up against the threat of insolvency, the emerging contradiction between the forces and the social relations of production was reflected in new lines of conflict within the enterprise, as production managers continued to seek to maintain their full production capacity, while the subordination of production to profit was expressed in the accounting balances of the economic and financial departments and the demands of creditors. As far as production managers were concerned, it was the job of the new marketing departments to sell all that they could produce and the job of the finance department to find the means to buy the supplies and equipment and pay the workers they needed to continue in production. As far as the marketing and financial services were concerned, it was the task of the production managers to produce goods and services of a quality and at a cost that could be sold at a profit. However, while the new economic logic might be on the side of the marketing and financial services, the political logic remained on the side
Investment fell by three-quarters in the first five years of reform, so that by 1997 only 5% of the capital stock had been installed since 1991 ([Goskomstat, 1998 #438]). Fewer than 10% of technical innovations reported to Goskomstat had the reduction of labour costs as one of their aims, while more than a third aimed to improve quality and more than three-quarters to expand the product range ([Goskomstat, 1999 #653]). Most acquisitions of industrial enterprises were with a view to strengthening monopoly positions, not for productive investment. The main exception is foreign direct investment in industries oriented to consumer markets, particularly industries such as food-processing and pharmaceuticals. Foreign direct investment peaked at $5.3 billion in 1997. In 1998 fuel and energy accounted for 40% and food processing for 31% of foreign investment in industry.
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of production managers, who could, in the event of an overt conflict, appeal to their workers for support around their common interest in maintaining production, wages and employment. It falls to the enterprise director to reconcile the conflicting demands of production and finance. The priority of the director is to retain his (occasionally her) position as director. Even if they are primarily rent-seekers, it is their position as director that gives them social status and a political platform and enables them to enrich themselves by tapping various income flows. It is extremely difficult, even for the legal owner of the enterprise, to displace an enterprise director if he has the support of his management team, his labour force and the local or regional administration. The priority of enterprise directors in the new environment was therefore not the maximisation of profits, but the avoidance of internal conflict and the survival of the enterprise as a productive social organisation. Rather than risk confrontation with workers and line managers, directors continued to manage production passively, even if that meant cutting production levels in response to falling sales and shortages of supplies, allowing inflation to erode the real value of wages, delaying the payment of wages indefinitely when money was scarce and allowing employment to fall by natural wastage (Clarke, 1999, Chapter Two). As real wages fell, lay-offs increased and wages remained unpaid management relied even more heavily on the good-will of their workers to ensure the survival of the enterprise than they had in the soviet system, making it even more dangerous to try radically to transform the social organisation of production. The directors of more prosperous enterprises had even less reason to take such risks.6 Radical change was largely confined to those rare cases in which relations in production could be transformed in the course of an investment programme which promised significant increases in both profits and wages, a programme which normally depended on foreign investment and usually foreign ownership and management. Workers tended to respond in traditional ways, bargaining with managers for individual amelioration or improvement or using their personal connections to find a better job elsewhere while looking to their managers to represent their collective interests. However difficult the situation might become, workers have passively suffered falling real wages, lay-offs, short-time working and even the extended non-payment of wages so long as they have believed that their managers were doing the best that they could for them, and line managers and enterprise directors have gone out of their way to sustain that belief. Line managers share the workers interest in ensuring continued production, often eliciting the co-operation of the workforce in the search for work, perhaps encouraging their workers to look for orders on the side or turning a blind eye to the misappropriation of enterprise resources, and enlisting the support of workers, even to the extent of encouraging them to strike, in the traditional competition for resources within the enterprise or the traditional battle to replace a failing director. The director, meanwhile, would try to deflect the anger of the employees at low pay or the failure to receive their wages by blaming the failure of the enterprise on external forces (the government and the financial and commercial intermediaries whose taxes, profits and commissions bled the enterprise dry), and would try to secure the support of the labour force in his attempts to find a way out of the crisis by appealing to local, regional and national government for state support, relying on traditional methods of lobbying. Thus, just as in the soviet system, internal conflict over the production of a

The support of the labour collective could also be crucial for the enterprise director in the event of a struggle for control of the enterprise, usually involving outside shareholders and the local authorities ([Clarke, 1995 #598]).
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surplus continued to be displaced upwards into demands on the state in a continuation of soviet forms of class conflict within the new economic environment.7 As in the soviet period, while enterprise directors may have had a common interest in resisting the impact of shock therapy, they were also divided by their competition for limited resources. For example, in the battle for the budget, directors seeking subsidies competed with each other for shares of a rapidly diminishing cake, while their interests came into conflict with those directors who did not receive subsidies and whose priority was a reduction in the burden of taxes. Enterprises in exporting branches (oil and gas, metallurgy) benefited from a strong rouble, while those facing foreign competition on the domestic market (engineering, food-processing) would benefit from devaluation or protection. Such divisions of interest meant that attempts to organise a coherent centre-left opposition based on a corporatist development strategy never got off the ground.8 However, just as in the soviet period, the project of the radical reformers was subverted not by organised political opposition, but by the cumulative effects of the fragmented resistance and lobbying efforts of enterprise directors which set limits to how far the government could press its strategy of shock therapy. These limits were set socially and politically, as enterprise directors enlisted the backing of their employees, and often of the local and regional administration, in support of their demands for relief, but there were also economic limits: if the majority of enterprises and organisations run up debts, the government cannot bankrupt them all without precipitating complete economic collapse. The result was that the government had to temper the zeal of the radical reformers to subordinate society to the logic of capital with some recognition of the limits to such a project set by the reluctance of directors to submit to such a subordination, a reluctance which was in turn partially a reflection of the resistance of their employees to an intensification of their exploitation. The outcome of the fragmented struggles over the transformation of the social relations of production was a pragmatic and vacillating government policy in which radical ambition was regularly checked by the effects of diffuse resistance and the supposedly anonymous mechanisms of market regulation were modified, superseded or contradicted by a discretionary system of regulation which was based on the recreation of traditional structures of lobbying. When the vast majority of enterprises are technically insolvent, it becomes a political decision which will be bankrupted and which will be allowed to continue trading. When the majority of enterprises need state support to remain in business, it becomes a political question which will receive such support. Crony capitalism is the heir to the soviet forms of surplus appropriation and the complement of the reproduction of soviet social relations in production. The barriers to the transformation of the relations in production limit the extent to which surplus can be appropriated through the productive employment of wage labour, by increasing the productivity of labour. Rather than seeking outlets in productive investment, capital in Russia is invested in the acquisition of monopoly powers through which to appropriate
This is analogous to the forms of class conflict associated with the development of capitalism in the early nineteenth century, when manufacturers enlisted the support of their hands in their struggle against the capitalists, the bankers who exploited their control of the issue of the currency to enrich themselves at the expense of the productive classes (Clarke, 1988).
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In their quest for social partnership, the trade unions played a leading role in such attempts, constituting the main organisational and political base of Arkady Volskiis Union of Industrialists and Entrepreneurs between 1992 and 1995, and then of the attempt of Luzhkov and Primakov to produce a winning centre-left coalition in the 1999 duma election ([Clarke, 2000 #668]).
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economic rents, primarily deriving from interest rate differentials and from the disparity between the costs of production and world market prices of fuel, energy and raw materials, while surplus capital flows offshore. While the soviet system of surplus appropriation was based on the control of supplies, the crony capitalist system of extortion of the surplus is based on the fiscal powers of the state and the control of money and credit so that debt becomes the lever of influence which can be exerted on formally private and independent enterprises by their creditors, the most prominent of which are the state, commercial banks and energy producers. Conclusion Post-Soviet Russia presents us with a hybrid form of capitalism in which, behind the facade of a capitalist market economy, the institutions of the soviet regime have been integrated into the world capitalist system. The development of capitalism in Russia has been based not on the real subsumption of labour under capital and the transformation of the social relations in production, but on the capitalisation of the soviet forms of surplus appropriation through the privatisation of the monopoly powers of the soviet state. This development of capitalism has been based on the interaction between the development of the internal contradictions of the soviet system and the integration of the Russian economy into global capitalism. The economic rents derived from the export of raw materials, primarily fuels and metals, which had formerly accrued to the soviet state through its monopoly of foreign trade, have been appropriated by global trading corporations and their Russian allies,9 while the Russian commercial banks and their international partners have appropriated a growing proportion of tax revenue as the price of funding the budget deficit.10 Meanwhile, the system has accommodated the reproduction of soviet relations in production by directly and indirectly subsidising loss-making enterprises and tolerating non-payment of taxes and debts in order to sustain production, incomes and employment ([Gaddy, 1998 #477]). Those enterprises selected for survival are not those which have the best prospects of profitability, but those which have the best connections and best lobbying capabilities. In this context the contradiction between labour and capital does not appear directly in the form of a conflict between workers and their immediate employers, but appears in the form of a conflict between the labour collective, the workers represented by their employer, and the state and new capitalist structures which are the principal forms in which capital confronts them. The alliance between workers and management is expressed in the trade union strategy of social partnership, in which the trade unions have tried to unite workers and management at the level of the enterprise, branch, region and the Russian Federation in a tactical coalition to express their putative common interests in the regeneration of the productive economy through a programme of state investment. This alliance is not just an opportunistic act of betrayal of the
In 1997, the industries controlled by the oligarchs (electricity generation, oil and gas and nonferrous metal production) accounted for a bit over a third of industrial production, but they accounted for almost three-quarters of total net declared industrial profits, amounting to 2.5% of GDP. The officially recorded exports of minerals and metals amounted to over 15% of GDP in 1997, although one can only guess at the additional revenue accrued offshore from their sale.
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The deficit on the consolidated budget increased from 1.3% of GDP in 1990 to 10.7% in 1994, before falling back to 3.6% in 1998. This was financed primarily by borrowing from the international financial institutions and by high-interest short-term borrowing from the financial sector, the cost of servicing which amounted to 4% of GDP, exceeding the size of the current deficit (and the total taxation of profits) by 1998.
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workers by the trade union leadership, since it expresses the real stage of development of the social relations of production in Russia in transition ([Clarke, 2001 #678]). Social partnership derives from the alienated collectivism of the workplace that underpins workers identification of managers as representative of the collective interest and external forces (government, banks, criminal intermediaries, foreigners) as the source of their misfortune. Alienated collectivism is as much a feature of the more militant action which arises when workers lose confidence in the beneficence of their director. Wage delays have been the most potent source of such overt conflict, often provoking spontaneous strikes on the part of the workers of a single workgroup or shop, which might develop into more extreme action such as a hunger-strike or a blockade of roads or rail tracks. Such actions are rarely generalised, and usually result in those directly involved in the action receiving some or all of their wages and returning to work. In branches still dependent on state funding, such as coal-mining, the military-industrial complex, health and education, the branch trade union, in covert alliance with management, may take the dispute in hand and generalise it on a branch, rather than a class, basis, in which case the government becomes the primary target of the workers demands, which may be supported by wider strike action to press the government to meet its obligations. In privatised enterprises, small-scale conflicts are normally bought off or stifled. In those cases in which a conflict has been generalised to the enterprise as a whole, it usually turns out that the workers have the tacit support of line managers and the unifying demand of the conflict is typically the replacement of the director by somebody with good political and/or financial connections who could secure external funds. More recently, as state funds have dried up, the typical demand has been for the bankruptcy of the enterprise and its sale to a proper owner, an investor who would bring in the needed money to pay the workers wages and provide the new (imported) equipment that would enable them to survive, or even to thrive, in a market economy. Thus the internal struggle for control of the enterprise could merge with a struggle over ownership. The arrival of a new director or owner, however, rarely did anything to resolve the contradiction within which the enterprise was confined but merely paved the way for another round of conflict. Such localised conflicts undoubtedly have a resonance and tend to enjoy widespread public support, which is a barrier to their resolution by the use of force, but there are rarely any grounds for their generalisation on a class basis. They demand not workers power, but a new owner or director who will pay their wages. Indeed, the ideology of the leading leftist political party, the Russian Communist Workers Party (RKRP), and its associated trade union organisation, Zashchita, tends to combine nationalist with anti-capitalist rhetoric, expressing the solidarity of workers with patriotic Russian enterprise directors against foreign (and Jewish) capitalists. As in the soviet period, workers have tended to look to their own resources and their own connections to get themselves through the crisis. The collective mobilisation of workers has tended to be confined within traditional channels, supporting the lobbying of the shop chief, enterprise director or branch structures, to the extent of engaging in strike action, or has focused on the struggle for control between management factions and between contending owners, with the workers organised behind one or another party to the struggle. The outcome of these conflicts rarely leads to any radical change in the workers situation, so the main response to a deteriorating situation has been one

of individual exit rather than collective voice, expressed in high labour turnover despite rising unemployment. The result is that those able to get a better job find their own solutions, while those who remain in the impoverished enterprises are increasingly those with nowhere else to go, but the absence of any alternative makes them afraid for their jobs and reluctant to risk engaging in unsanctioned collective action. The system of crony capitalism is inherently unstable, since the separation of capital from the sphere of production implies the progressive and fairly rapid erosion of the productive base of the economy which is the source of the resources expropriated by the criminal-capitalist structures. The pessimistic view of the future for Russias hybrid capitalism foresees continued economic decline and social polarisation providing fertile ground for neo-fascist mobilisation. The more optimistic prospect notes that, while production and employment has fallen rapidly in the least successful enterprises in declining industries (light industry, engineering, agriculture), the penetration of capital into production has been developing most rapidly in the exporting branches of production (fuel and energy, metallurgy) and in labour-intensive import-substituting branches, such as food processing, with foreign investment playing a leading role. As capital penetrates production we might expect class conflict to take on characteristically capitalist forms. But these are likely to be the forms typical of a polarised capitalist society in which those working in depressed industries are cowed by the threat of unemployment and too demoralised to act, while those in the more prosperous industries are grateful for their good fortune in having a well-paid and reasonably secure job. The prospective future of Russian capitalism, for good or ill, is all too familiar!