Fred Weir - "Inside the Great Russian Collapse"; KCTU Calls Off Korean General Strike

Michael Eisenscher meisenscher at
Mon Jun 8 21:07:27 PDT 1998

-----Original Message----- From: Alex Chis & Claudette Begin <achis at IGC.APC.ORG> To: Multiple recipients of list COC-L <COC-L at CMSA.BERKELEY.EDU> Date: Monday, June 08, 1998 3:00 PM Subject: Fred Weir - "Inside the Great Russian Collapse"

>Johnson's Russia List
>8 June 1998
>davidjohnson at
>From: fweir at
>Date: Sun, 07 Jun 1998 18:34:03 (MSK)
>7 June 1998
>[for personal use only]
>SUNDAY FOCUS / Inside the Great Russian Collapse
>By Fred Weir. Fred Weir is Moscow correspondent for Canadian Press
>and a contributing editor of the biweekly magazine In These
>ABOUT A YEAR AGO, I asked a western economist how it was possible
>for Russia to have the world's best-performing stock exchange
>when the country was in its eighth straight year of economic
>contraction. His reply was studied and cautious, but boiled down
>to: "The market knows best."
> This year, Russia has the world's worst-performing stock
>market, and the experts are scrambling for answers. The most
>popular are a crisis of confidence stemming from the spectacular
>meltdown in Asia and President Boris Yeltsin's failure to press
>forward with structural and tax reforms. But the sheer magnitude
>of the looming Russian disaster should warn us off such
>superficial explanations. In fact, Russia has been in a
>state of creeping collapse for almost a decade - and now that a
>global storm is breaking around it there are few reserves and
>almost no institutional defenses to fall back on.
> Russia's predicament is rooted in the choices made following
>the demise of the USSR in 1991. Then, western experts advised the
>country's new leaders to merge with the global market and to
>adopt the outward forms of capitalism as quickly as possible -
>and pick up the pieces later. Very little thought was given to
>how the vast, hyper-centralized machinery of the old Soviet
>economy would actually make this transition. Much was made of
>price liberalization, the emergence of a banking sector
>and a privatization campaign that delivered more than 70 per cent
>of state-owned assets into private hands.
> Western advisers hailed the monetary stabilization of recent
>years as the crowning achievement of market reform - and this
>accomplishment is now at risk, as the beleaguered ruble
>struggles to keep its balance.
> Yeltsin's program of market reforms created what some Russian
>observers are now calling "Potemkin capitalism," a surface veneer
>that boasts active securities markets, a handful of world-class
>corporations, shops stuffed with imported goods and a few hundred
>thousand quasi-middle-class professionals bustling about mainly
>in downtown Moscow.
> Beneath this veneer lies a very different set of conditions.
>Millions of workers live almost entirely outside the cash
>economy, trapped in dying factories that seldom or never pay
>wages. Most find subsistence by growing their own food, sharing
>within extended families, bartering and by evading taxes and
>other cash obligations.
> In Ivanovo, a depressed textile town of half a million,
>about three hours from Moscow, officials say that 70 per cent of
>the population did not pay their rental or utilities charges last
>year. Twelve million Russians live north of the Arctic Circle,
>dispatched there by Soviet planners to do jobs that serve no
>rational purpose in a global economy. Severodvinsk, for example,
>is a city of a quarter of million people on the White Sea that
>still retains an enormous workforce to manufacture and maintain
>an anachronistic atomic submarine fleet.
> Unable to collect taxes from the blighted industrial
>hinterland, the Russian government has survived by ratcheting up
>its debt, which is the core of the current crisis. The Kremlin
>may default regularly on wages for public-sector workers - but
>debt-servicing, which now swallows up nearly a third of all state
>expenditures, must be fulfilled without fail. As financial
>instability deepens, the responses prescribed by the
>International Monetary Fund are to improve tax collection and
>slash spending. But increasing revenue from thousands of bankrupt
>industries and millions of impoverished individuals is a
>non-starter, while withdrawing the last dregs of the Soviet
>welfare state will only heighten the quite pronounced danger of
>social explosion this summer or fall.
> Despite many declarations over the post-Soviet years, the
>goal of creating a western-style middle class has never been
>promoted by government policy. According to Harvard University's
>Davis Center for Russian Studies, the number of small businesses
>in Russia actually dropped by 50,000, or about 7 percent, between
>1995 and 1997.
> If the Potemkin model of reform has brought no benefits to
>the majority of Russians, it has greatly enhanced the wealth of a
>tiny stratum of financiers. And they have used their wealth in
>ways that were utterly destructive for Russian national
>development. Rapid privatization handed over the jewels of the
>economy - primarily raw materials - to a handful of financial
>moguls without imposing any social obligations on them. Rather
>than invest, these new capitalists have milked the old Soviet
>infrastructure for quick profits.
> Lev Mironov, chairman of Russia's Oil and Gas Worker's
>Union, says depreciation of fixed assets in that industry -
>one of the most favored sectors - is running at a rate three
>times greater than new investment. In a massive study of the
>Russian economy last year, the Russian Academy of Sciences
>estimated that capital investment by 1995 was just 25 percent of
>the 1989 level. One of the authors of that report, economist
>Dmitri Lvov, said recently that figure now stands at 8 per cent.
> Lvov told a conference in Moscow that Russia's gross domestic
>product plunged by 83 per cent between 1991 and 1997, industrial
>output fell by 81 per cent and real unemployment rose 10-fold, to
>13 million people. At the same time, Transparency International,
>a Berlin-based think tank, rates Russia as the world's fourth
>most corrupt country, after Nigeria, Bolivia and Colombia.
>Government graft and payoffs to criminals and officials drive up
>costs at every level of business.
> Potemkin capitalism has given the new rich plenty of
>conspicuous outlets for their lucre: Moscow is now home to a
>boomlet of casinos, Mercedes-Benz dealerships, exclusive
>boutiques and up-market real estate agencies. The two-year stock
>bubble, which saw the Russian market almost triple in value, may
>be read in retrospect as an indication that the country was being
>plundered rather than as evidence of a healthy, normal market
>economy taking root.
> Last month, The Economist estimated that $200 billion has
>left the country over the past decade, or almost $2 billion per
>month - yet another measure of how rapidly Russia's seed corn
>is disappearing.
> None of this was inevitable, but it is largely the
>consequence of decisions made - often at Western urging -
>by the Yeltsin regime. The emphasis on breakneck privatization,
>slashing social spending and controlling inflation by building up
>government debt were all dictated by the International Monetary
>Fund. Much the same pattern held in the deregulation of financial
>markets, which facilitated the flight of Russian capital and the
>entry of fickle international "hot money" to speculate in the
>domestic-debt and securities markets.
> In a Western country, these abuses would be averted, or
>counteracted, by the workings of democratic government and
>protests from an aware and active civil society. But Russia's
>last feeble attempt to build genuinely independent institutions
>was violently cut short in 1993 - to Western applause -
>when Yeltsin's troops stormed and eliminated the oppositionist
>parliament. Subsequently, Yeltsin authored a new constitution
>vesting the lion's share of authority in the Kremlin. This
>concentration of power in a single office can now be seen as the
>decisive moment in creating Russia's present model of corrupt
>crony capitalism.
> At the height of the financial crisis last week, Yeltsin
>summoned his "politburo of oligarchs" - the 10 top financiers
>who are rumoured to control 50 per cent of Russia's GDP among
>them - to beg for help in restoring the state's solvency.
>There could be no better illustration of how precarious the
>situation has become: Russia's claim to stability rests upon an
>old, sometimes doddering autocrat and a tiny coterie of tycoons
>made wealthy mainly by his grace.
> Even if the current crisis is weathered, the prognosis will
>remain bleak, as long as Russia is a country where stock markets
>can boom while crucial investments in people, industry and
>infrastructure are deferred. Until solid policies are enacted to
>reverse the flow of wealth from a minuscule, unaccountable elite
>and lodge it in the heartland where millions wait with dwindling
>patience, catastrophe will be just one small shock away.
>* Alex Chis Books *
>* Alex Chis & Claudette Begin *
>* P.O. Box 2944 *
>* Fremont, CA 94536 *
>* 510-489-8554 *
>* achis at *
>* *


>Date: Sun, 7 Jun 1998 14:47:56 +1200 (NZST)
>From: rreid at (Robert Reid)
>Subject: Workers'Struggle News No.7
>Dear friends
>The following bulletin has been received from PICIS Korea as Workers
>Struggle News #7.
>As you can see the KCTU has called of the 10 June resumption of the General
>Strike after gaining significant concessions from the Korean Government. We
>will forward the official KCTU statement as soon as it is received.
>Robert Reid
>APWSL Coordinator
>Acceptance of the government's negotiation proposal.
>Cancellation of June 10 general strike!!
>Representative Meeting on June 10th will decide whether to participate in
>the tripartite commission!!
>Decisions by the 11th Central Committee Meeting of the KCTU
>1. We accept the final proposal by the government at 11 a.m. June 5.
>2. The general strike on June 10 is cancelled.
>3. As for the participation in the tripartite commission, the executive will
>put forward a proposal to the representative meeting on June 10, which will
>decide it finally.
>4. The clauses which were agreed with the government are as follows.
>- Concerning redundancy system and workers' dispatch system, we will
>discuss the
>issues labor and management raise and plans for preventing abuses.
>- The legal working week will be ruduced into 40 hours from 2000 by
>industries and
>by scales.
>- The government promises to eradicate unfair labor actions and
>punish the
>management.(Relating to concrete workplaces, there will be a special
>- 'Special Committee against Unfair Labor Actions' is set up under the
>- Talking meeting¡¤council between labor and management in each
>should be normalised and activated.
>- The tripartite commission is to be real social agreement body.
>- The current issues the KCTU raises is to be solved.(separate promise)
>5. The KCTU thinks above matters positively and will watch whether the
>will keep the promises.
>6. Concerning a few matters, the government should implement them
>before the
>representative meeting on June 10, and the meeting will decide finally
>whether to participate in the tripartite meeting. The KCTU will fight
>for implementation and accomplishment of other agreements in the commission.
>7. The KCTU opposes to plans for recovery of economic crisis by IMF
>and Kim
>Daejung government, and if the KCTU's demands are rejected unilaterally
>and the
>government tries to make us serve as a best man for foreign investment
>and pain
>sharing, we will fight.
>Robert Reid
>Asia Pacific Workers Solidarity Links
>P.O. Box 11-123
>Tel: 64-4-384 8963
>Fax: 64-4-384 8007
>E-mail: <robert at> or <rreid at>

More information about the lbo-talk mailing list