Russia Turns the Corner

Stephen Sestanovich

From Foreign Affairs, January/February 1994

Summary:  Despite apparent anarchy, Russia is passing three important tests for establishing a democracy. The military is acquiescing in the new democratic order, the old managers of the economy are losing their political grip, and the new regime has come to embody patriotism and legitimacy in the mind of the populace. A fledgling Russian republic may succeed where the Weimar Republic failed.

Stephen Sestanovich is Director of Russian and Eurasian Studies at the Center for Strategic and International Studies in Washington, D.C.

Admittedly, a military establishment that has restored its internal unity may be better able to advance its own interests in the political system as a whole. For some time to come, Russia?s leaders will feel the need (in the words of one senior minister) to "give something to the generals." The army?s ability to get its way on major issues carries with it any number of problems for a government trying to maintain a stable fiscal policy and shrink the size of the defense industry. But as long as the army operates basically as an interest group, rather than as an alternative government, the threat to democracy is limited. The military men who wanted to create an alternative government lost what may prove to have been the deciding round at the White House on October 4.

THE POLITICS OF MONEY

Russian democracy faces no task more difficult than remaking the economy bequeathed it by Soviet central planners. This is the second test for evaluating the consolidation of the new regime. In purely economic terms, last year?s results were only slightly better than those of 1992. Yet the broader political question that concerns us cannot be answered by looking at exchange rates and production trends. What matters most is whether the rigors of economic transformation are strengthening those with an illiberal, undemocratic agenda. This worry has not quite disappeared, but it is greatly diminished.

In 1992 the radical economic reforms of Yeltsin and his economic czar, acting Prime Minister Yegor Gaidar, brought into being what seemed like a particularly potent new political opposition group, the Civic Union, which was dominated by members of the old Soviet industrial elite. Its leader, Arkady Volsky, who once oversaw heavy industry for the Central Committee, tried--with real success--to give his group the aura of political inevitability. Claiming to speak for 40 percent of parliamentary deputies, Volsky said the time was past for academic experiments in economic policy; only people who knew the "smell" of factories firsthand could get things back on track.

It was hard to ignore such a challenge, and for much of 1992 Yeltsin and his colleagues explored a possible accommodation with the Civic Union. The idea was always a little dubious (there were simply too many conflicts between its program and the government?s), but there seemed no other way to broaden the political base of reform. In 1993, by contrast, a proposal for such a coalition was not even broached. What Yeltsin?s government did instead was to co-opt Soviet-style industrial managers without adopting industry?s program. Despite fits and starts, the substance of policy has remained basically reformist. The managers--above all, Prime Minister Viktor Chernomyrdin--give the government legitimacy in industrial circles and make it steadily harder for the Civic Union to speak for them.

Volsky?s idea was that economic turmoil would force the government to turn to experienced "businessmen" (as he called himself and his associates). But he never faced the conflict between those of his supporters who wanted the old economy back and those who expected to flourish in the new. Meanwhile, others better prepared to address this choice began to copy his real innovation--a political lobbying organization. Many groups now proudly claim to speak for the new Russian bourgeoisie and boast of the impact they expect to have on government policy. Perhaps the most important of these is Gaidar?s Association of Privatized and Privatizing Enterprises, formed last June while he was out of office. Gaidar and other advisers to Yeltsin have turned Volsky?s insight around: rather than use the grievances of the old economic elite to slow the pace of change, they want to identify businessmen who have succeeded in the market and make them the spokesmen for reform.

The changing role of the industrial elite was evident in the fall 1993 election campaign, in which one party after another presented itself as the voice of business. There was, of course, a very practical reason for politicians to court entrepreneurs: the campaign?s financing rules permitted extremely large corporate contributions.2 But this motive hardly diminished the significance of the change from a year earlier. In 1992 the "industrial lobby" had shaky democratic credentials; in 1993 the leading parties of business were unimpeachably the parties of reform. There were almost three times as many candidates for parliament from privatized businesses as from state-owned enterprises. In this new setting Volsky?s Civic Union lost its central role; it was spurned as an ally even by those, like economist Grigory Yavlinsky, who wanted to tap dissatisfaction with government policy.

Over the past year, as fear of the old guard?s revenge subsided, it was replaced by worries about a new form of money politics--the seemingly unrestrained drive for autonomy by Russia?s regions. Relations between the central government and the provinces are being thoroughly remade by the creation of a market economy, and the result will be a far more decentralized system of rule than Russia has ever known (probably more so than most Russians can now imagine). The living standards of the provinces will come to depend more on their natural endowments, populations, infrastructures and so forth than on subsidies, grants and decisions made in Moscow.

What unnerves Russians about this process, apart from its novelty, is the possibility that it might somehow spin out of control, that provincial assertiveness could leave the central government too weak to hold the country together. The conflict that developed last year over the nonpayment of taxes by regional governments was easy to interpret as a sign that matters were getting out of hand. Finance Minister Boris Fedorov, for one, was apocalyptic on the subject. "The state," he said, "is basically finances, money and the budget." A Russia that cannot collect taxes doesn?t exist.

Yet Russia?s federal tax crisis was much less momentous than it seemed. Like political agitation in the military, it was in part an extension of the conflict between a reformist government and a conservative parliament. The decision (or threat) to withhold taxes was typically made by a regional legislature and, just as typically, overruled or ignored by the regional executive (in most cases an appointee of the president). Yeltsin?s deputies charged that the federal parliament was actually egging on its provincial sisters in their mischief, and there was plenty of evidence to support such a view.