From the article of 'Petrel'
No.571 / February 25 1996
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The Russian Politics and Economy
in a Great Confusion
The recent situation in Russia
on the eve of the presidential election
(By Ken'ichi Suzuki)
In Russia, major presidential candidates announced their candidacy for a presidential election, which is to be held in June 16 this year. Although the Russian people's attention is focusing on the presidential campaign, Russia still has not been able to get out from its serious economic crisis. We present a brief report about the recent situation in Russia.
1.Major presidential candidates.
At present, those who announced their candidacy are the incumbent Russian President Boris Yeltsin, the Communist Party leader, Gennady Zyuganov, the reformist, Grigory Yavlinsky, the ultranationalist Liberal Democratic Party leader, Vladimir Zhirinovsky, the nationalist Alxander Lebed. In addition, the former Soviet President Mikhail Gorbachev is highly ambitious for the President, but it is difficult for him to get out from a position of a hasbeen.
For the time being, the presidential election will develop between Yeltsin and Zyuganov, but there is a possibility that Zyuganov will unite with Lebed because Zyuganov lacks a charismatic character. It is said that is why Zyuganov announces himself as a patriot not as a communist.
Anyway, since the presidential election day will be in a few months, they will take various political tactics causing coalition and seperation among political groups. Therefore, forecasting who will be the President at this stage is meaningless. We have to say that Russian workers are forced to select a fruitless choice among those candidates.
We would like to introduce a comment which describes the present political situation properly; You can't tell what differenciates Yeltsin from Zyuganov because they are part of the Russian establishment. Mr.Yeltsin would utter the threat of communism. But this is for the West. If he emphasizes it too much, he would lose the support of the Communist followers. Mr.Yeltsin's domestic slogans --establishing order, social justice and uinfication of the great Russia, etc.--are also Mr.Zyuganov's slogans." (Lylia Schuftsuwa, the Carnegie Foundation reseacher, quoted from Asahi Shimbun, February 16).
2. The confused economy.
Although Yeltsin had saved Russia from its crisis at the August coup d'etat, he has lost his popularity. On the other hand, Zyuganov has got strong support, though the Communist party had provoked people's antipathy. Clearly Russia's serious economic crisis has brought this turnaround. It is quite natural that people get angry at the government authorities because the Russian economy is bogged down and the life of the people is getting worse and worse during the past five years since the economic reforms started.
First, we look at the Russian economy on the whole. The annual economic growth rate by GDP(gross domestic product) is minus 5 % in 1991--the year of the collapse of the Soviet Union--compared with the previous year, but minus 14.5 % in 1992, the first year of the reform." After having minus double-digit growth rate for two consecutive years, they managed to get minus 4 % in 1995. It is estimated to be minus 3 % or 4 % in 1996, which figures might be the bottom line, though some experts estimate it would be minus 7 to 8 % and OECD estimates it minus 5 %.
The inflation rate showed 2500 % in 1992, but it became 130 % in 1995, calming down from the hyper-inflation. The monthly inflation rate was 3.2 % in December last year, the lowest rate since the reform" started. We cannot say these figures are normal, yet they are getting down in those years.
As a whole, Russian economy seems to be recovering, but actually we cannot be optimistic about it. First, look at the industrial structure. Industrial production growth rate showed just minus 3.3 % last year, though it is the average figure with a wide range of difference among industries.
Food, light and machinery industry output have dropped more than half from the 1990 level, especially light industry output has fallen to about 20 % of the level in 1991. Relatively light-damaged energy industry is given considerable weight in Russian economy. For instance, the share of energy industry in the GDP of Russia rose from 9 % of 1990 to 17 % of 1994, in the investment it rose from 14 % to 30 %, in the acquisition of foreign money it rose from 23 % to 45 %, each of them approximately doubled." (by Weekly World Report, February 20 issue)
Russia is, so to speak, degraded to a developing country", earning foreign money mainly by its energy industry. In other words, Russia is living from hand to mouth by selling its natural resources.
At the same time, we should be aware that all of the energy output in Russia has been declined continuously since the latter half of the eighties. For instance, the crude oil output in 1994 was 317 million tons, which was 56 % of 1987, the highest output year. The coal output was 63.8 % of the highest output year, though the electric power (81.0 %) and natural gas (94.4 %) showed relatively low reduction. We should say that the energy output has never been put the brakes on the reduction except for the natural gas.
As we often pointed out, the decline of Russian industry was caused by various and mixed factors such as the collapse of the industrial chain" or interdependency owing to the fall of the Soviet Union, overage production facilities, lack of investment. It is obvious that what those distorted industrial structure would bring about. The collapse of the light industry and the food industry which are connected directry with the people's living have resulted in the situation that people have to depend on the imported goods as far as the daily necessities concerns. As a result, although foods and consumer products are provided plentifully and in a wide variety by importing, the price of those goods have been extremely rosen owing to the inflation. Naturally, the gap between the rich who can buy the expensive goods and the poor who cannot buy them have been enlarged. One of the reason why the inflation rate has declined was that the decrease of people's income following the reducement of the domestic consumption (For estimated 35 million pensioners, expensive foods are beyond their reach). In this connection, the nation's real disposable income of the last year dropped by 13 % from the previous year level. This figure is the greatest fall since the reform" started, and the sale of retail trade dropped by 7 % and the sale of pay service dropped by 16 % respectively. These figures would explain the reason why Yeltsin government party and reformists retreated in the last year's general election and explain a part of the secret why the communist party took great stride in the election.
3. Tax arrears of enterprises.
Another big problem is that Russian enterprises have huge tax in arrears and they shift the blame on workers as a form of unpaid wages. The sum of arrears Russian enterprises have was 244.3 trillion ruble (about 5.5 trillion yen) as of December 1 last year. Not only the enormous sum of money but also its contents matter. Formerly debts among enterprises occupied for the most part, but recently tax arrears have been conspicuous.
Debts among enterprises have kept on expanding as a result of postponing payment of the debts because in hyper-inflation circumstances, real debts amount would get smaller as time passes. The proportion of debts among enterprises in total arrears was 60 % in 1994. The same ratio dropped to 45 % on and after September 1995 resulted from taking advance payment system in a business deal and from the introduction of paying by draft in some areas.
On the contrary, arrears of corporation taxes and value-added taxes and nonpayment of social insurance such as pensions have been increasing. The proportion of these arrears in the total arrears, which was about 20 % in January, 1995, increased to 26.4 % by the last December. When former deputy prime minister Chubais, who was in charge of economic reform, made a list of tax arrears at the end of the year, only 65 manufacturing enterprises (including 42 fuel and energy, 12 railway, 6 automobil and 5 metal enterprises) occupied 13.2 trillion ruble arrears, which was 44 % of total arrears of manufacturing industry. Nizhnivald Oil and Gas, which was the largest arrearer and an enterprise under the control of Gasplom (Prime Minister Chernomyrdin comes from it), had 1.1 trillion ruble tax arrears put high in the rank. Chubais was relieved of his post in the latest Cabinet reshuffle and an ex-president of Volga motor corp Kadachinikov succeeded to his post. Volga Motor Corp put 6th arrearer in the rank, having 684 billion ruble arrears. Thus huge enterprises put high in the rank of arrearers.
Though Chubais gave Nizhnivald Oil and Gas a tax inspection and tried to collect tax arrears severely, eventually it paid only half the amount, 531.2 billion ruble, after fuel and energy ministery sent a petition to Yeltsin. Other companies which were afraid of the tax inspection paid only half the tax arrears by the end of the last year. That is to say so many giant enterprises would not pay tax arrears although they are able to pay them. One of the presidents of such enterprises could be inaugurated as a First Deputy Prime Minister--that shows the distortion of the present Russian economy," said Afanasyev of the Working Center for Economic Reforms, Collecting taxes from the huge enterprises are now despairing because Chubais was dismissed from the deputy premier last month." (Asahi Shimbun, February 15)
4. Increasing unpaid wages.
Obviously these tax arrears bring stagnation of national revenues. The execution rate to the revenue of the last year's national budget was 83 %, mainly due to the tax arrears (however, the execution rate to the budget expenditure was lower, 66 %, which seems to be brought mainly by the pressure of IMF demanding to cut down the budget deficit and an inflation rate.) As a result, delayed payment of government employees' wages became the normal condition and in the enterprises in the red, thus the sum of unpaid wages are increasing. Some reports say unpaid wages last year grew 3.2 times as much as the previous year's sum. Increasing number of officers in the National Tax Administration Agency and Tax Revenue Police who are to collect taxes from the enterprises work as tax consultants" and teach how to evade tax as a side job or as a main job, due to their low and even unpaid regular wages. It is estimated that tens of million workers in Russia are suffering from 3 to 4 months' unpaid wages. No wonder 500,000 coal workers and teachers nationwide went on strike through the end of January,calling, Pay our wages, if government has money for the Chechen War."
As we mentioned earlier, all kinds of sacrifice caused by the bourgeois reform" are forced to the general public, causing nationwide workers and people get angry furiously. Every presidential candidate is confronted with these anger though none of them can meet their real demands. Yeltsin promised to pay coal workers one trillion ruble out of unpaid wages by the end of February and expend 9.4 trillion ruble for coal industry as financial aid by the end of this year. He also pledged to increase the minimum wage, pension and scholarship by 20 % in order to get an advantage over other candidates in the presidential election. Obviously, his intension is to get pensioners who support the Communist party and get the youth's support. It is apparent that the public look these transparent vote-catching policy cooly, and the financial authorities declare bluntly that the government has no money to give such a big feast. If he put his pledge" into practice, financial deficit will swell up again, inflation rate will rise sharply. In addition, the West's financing of 9.9 billion dollars which are led by IMF could be suspended.
Russian economic reforms, which have drawn its immanent bourgeois contradiction out at a stretch to the surface, are not set on its way, contrary to the reformists' expectations. No one can tell definitely how the deepened economic contradiction and the socially blocked situation open the way. In Russia, you cannot tell what will happen tomorrow. Only organization of the working class and united workers' class struggle will open the way to the real solution.
(By Ken'ichi Suzuki)