Vladimir Putin is facing a crisis and opposition in the streets after more than two decades in power. His rule is the story of how the Soviet ruling class fought to maintain its power while the political order collapsed around it.
After the breakup of Stalinist Russia in 1991, the mainstream argument goes, Russian president Boris Yeltsin pursued a brief period of democracy and free market capitalism. Then along came Putin, the former KGB secret policeman, who built an authoritarian regime, trampled on free enterprise and launched a new Cold War. And today, through an army of bots spreading fake news, Putin and his clique of spooks are undermining Western democracy. If that sounds crude or ridiculous, that’s because liberal takes on Russia are.
Putin is very much a product of the political system created in Russia after the collapse of the Soviet Union in 1991. Rather than breaking with the “democrat” Yeltsin, Putin built on his regime’s authoritarianism, its close connections between the state and big business, and its imperialist foreign policy.
Most commentators—including a majority on the left—think the breakup of the Soviet Union in 1989-1991 represented a “restoration of capitalism” in Russia and the other 15 republics. The nauseating term “post socialism”, popular in academic studies of Russia and Eastern Europe, exemplifies this view. In reality, it represented a side step from one form of capitalism to another. Understanding this is vital to navigating through the partial snapshots and glib liberal punditry about Putin and Russia in the mainstream media.
The Russian Revolution of 1917 was a socialist revolution where ordinary people set up their own democratic bodies, the workers’ councils or “soviets”, and seized political power. But a combination of international isolation and five years of civil war had hollowed out the soviets, while leaving the Bolshevik revolutionary party in charge of a vast bureaucracy. By 1928, the state bureaucracy had transformed itself into a new ruling class, with Joseph Stalin at the helm. A full-blooded counter-revolution swept away the last vestiges of workers’ control and the revolution’s other gains, for example, around women’s and gay rights.
The Soviet Union had become a state capitalist country, with the same class divisions as Western capitalism. There was a divide between the working class and those who own or control the “means of production”, the factories and machinery, offices and equipment, infrastructure and so on. And the Stalinist bureaucracy behaved in a similar way to private capitalists. Bosses exploit workers in order to get their hands on profit, but that’s not just because they are greedy. The capitalist system is driven forward by competition, which acts as a coercive force on individual capitalists. If a boss didn’t seek to maximise profits, they’d be driven out of business by rivals. This leads to a system where everything is subordinated to profit maximisation—or as Karl Marx put it, “production for production sake, accumulation for accumulation sake”.
It’s true that there wasn’t much, if any market competition within state capitalist economies. But Stalinist Russia faced international military and economic competition from rival imperialist powers, particularly the US during the Cold War. Various statements from the Stalinist top brass show they were keenly aware of this dynamic. Internal growth could not overcome the international pressure for more capital accumulation, and Russian state capitalism continually crashed against the limits of capital accumulation set by its national economy.
By the 1970s, it was in the throes of profound stagnation, which provoked splits within the bureaucracy between “reformers” and “conservatives”. The first group wanted to introduce some internal market measures to make state capitalism more efficient. The second feared any changes would threaten their whole system. Finally in 1984, as a recognition of the crisis, Mikhail Gorbachev was appointed Communist Party boss and embarked on “glasnost” (openness) and “perestroika” (reconstruction). But the bureaucracy’s attempts at reform were too little, too late. And their inability to solve the crisis provoked further splits and unleashed forces at the base of society who began openly questioning their rule.
From 1985 Putin had been a KGB officer in Dresden, East Germany, one of the most hardline of the Stalinist regimes. He worked side by side with the Stasi secret police, but it’s wrong to see him as an ideologically committed or conservative Stalinist. By 1991, Putin was back in Leningrad (St Petersburg) and working for the mayoralty under Anatoly Sobchack. The two had worked together at Leningrad’s law school. Sobchack is often portrayed as a “democrat”, but was really a hanger-on of the bureaucracy who supported its reform wing. He would play an important role both as Putin’s political mentor and the architect of authoritarianism structures in the Russian state. Putin was Sobchak’s right hand man and worked to bring private investment into St Petersburg. Schemes including the local authority setting up “public private partnerships”.
In August 1991 an alliance of conservative sections of the Soviet bureaucracy, KGB units and local Communist Party bosses in Azerbaijan, Belarus, Kazakhstan, Kyrgyzstan, Tajikistan, Turkmenistan and Uzbekistan launched a coup to oust Gorbachev. In Moscow reformer Yeltsin, who had been elected president of the Russian part of the Soviet Union in 1990, positioned himself at the head of the opposition on the streets. In St Petersburg, Sobchack and Putin worked side by side successfully to ensure the loyalty of the local police and militia to the state.
Support for the coup crumbled after three days, precipitating the breakup of the Soviet Union into Russia and 15 other republics. What happened next is the story of how the old ruling class fought to maintain its class power, despite the downfall of its ruling party. Chris Harman, the long-time editor of Socialist Worker newspaper argued in 1990, “The old people at the top raved about betrayal and even on occasions fantasised about telling their police to open fire. But key structures below them were already run by people who, at least privately, accepted the new multinational capitalist common sense.”
Putin was part of those “key structures below them”. While the political setup changed, social relations between bosses and workers didn’t. The transition saw Communist politicians become “democratic” politicians. The mangers of state-owned companies became the managers—and sometimes owners—of newly privatised companies. In some countries opposition movements and capitalist newcomers were part of the new setup. But whether the new states were ruled by “reformed” Stalinist bureaucrats, liberal democrats or a combination of the two, the governments all accepted the logic of global capitalism. And, with some exceptions, they pursued vicious free market policies which involved rapid liberalisation of prices and trade and mass privatisation of state-owned companies.
However, the transition from state capitalism to free market capitalism played out differently in each country. Some free market poster children in the former Eastern Bloc, such as Poland, saw the growth of new private companies in the 1990s. The Russian economy, in contrast, relied much more heavily on the old state sector and newly-privatised industries. For example, new companies accounted for 55-65 percent of new value added in the Czech Republic, Hungary and Lithuania. Russia and other former Soviet republics languished far behind at between 10-20 percent.
That’s because privatisation in Russia fuelled the rise of a small number of “oligarchs”, super-rich and politically-connected businessmen. And once they had control, they sought to protect their political power and market share from new comers. Under the supervision of Harvard university economist Jeffrey Sachs, Russia pursued the largest privatisation programme in world history. The new finance minister Anatoly Chubais, a former Communist Party politician, sold off 800 companies in just one month. By the end of the 1990s, 77 percent of large and medium-sized companies and 82 percent of small companies were in private hands. Chubais summed up the process saying “every enterprise torn out of the state and transferred into private hands is the way of destroying Communism”. “At that stage it didn’t matter at all to whom these enterprises went, who was getting the property,” he explained.
The programme came in two waves—each wave, with greater intensity, concentrated wealth and power in the hands of the oligarchs. The first involved “voucher privatisation”. For a small fee of 25 roubles, ordinary citizens were given vouchers that had a nominal value of 10,000 roubles. These could then be used to buy shares in state-owned companies or be sold on at exchanges. The second wave, known as the “loans for shares” programme, allowed the super-rich to gain hold of oil and gas, metals and other strategic sectors of the economy.
Harman’s “key structures from below” had already been positioning themselves to profit after the downfall. Viktor Chernomyrdin, for example, had served as Stalinist Russia’s minister for gas industries. In 1990 he transformed the gas industry into a single company, Gazprom, with himself as the first chairman. And then in 1994, the company was virtually given away for $250 million as part of the voucher privatisation. Two years later it had a share price valuation of around around $37 billion in the US. He went on to serve as Yeltsin’s deputy prime minister and by 2001 was a billionaire. The old guard tended to be concentrated in the traditional sectors. The new private capitalists were more involved in private banking and the media, but they too had benefited from close connections with the state.
As the oligarchs grabbed money, Yeltsin grabbed more power for himself to consolidate the new model of capital accumulation. The old splits within the bureaucracy had carried through into the new Russia. The Russian parliament had been elected in 1990, when it had still been part of the Soviet Union, with a combination of independents and Communists. The market transition and privatisation programme had unleashed a profound social crisis and weakened the state. GDP fell through the floor, the military industrial complex was severely hit, and ordinary people paid the price with unpaid wages, unemployment and impoverishment. The “wild west capitalism” encouraged corruption and organised crime. By 1993 Yeltsin and the parliament were at logger heads over how to manage the transition—so Yeltsin the “democrat” sent in tanks, laid siege to the parliament building and shot it to pieces. Afterwards Yeltsin brought in a new constitution—known as the “Sobchak constitution”—which concentrated power in the hands of the presidency.
This is an important example of the continuities between Yeltsin and Putin. The second important continuity is in their imperialist foreign policies, as seen in Ukraine and Belarus most recently in 2014 and 2020. From the 1990s, Russia sought to maintain control over its “near abroad”, the other republics that had been part of the Soviet empire. It fermented ethnic divisions and civil wars in Georgia, Ingushetia and between Armenia and Azerbaijan, costing 170,000 lives and creating 1.5 million refugees throughout the 1990s. But the key sticking obstacle was Chechnya, which had declared independence in the 1990s. Far from an easy victory, Russian tanks became bogged down in a brutal war of conquest. And opposition to free market measures at home combined with opposition to the war from ordinary Russians. After 18 months, Russia was forced to “negotiate peace” in yet another humiliation for the once mighty second super power.
Yeltsin faced defeat against the Stalinist challenger in the presidential election in 1996. There was a circling of the wagons from oligarchs and the West to defend his presidency. The International Monetary Fund (IMF) gave a £10 billion loan and some workers’ wages were paid for the first time. Chubais summed up the position of the Russian ruling class, saying, “Russian democracy is irrevocable, private ownership in Russia is irrevocable, market reforms in the Russian state are irrevocable.”
During the mid-1990s, Putin found himself out of a job when Sobchak failed to win re-election mayor St Petersburg. But he soon gained a job in the presidential administration, the key political power structure within the new set up, through the political patronage of Alexei Kudrin who would go on to be his finance minister. Putin climbed to the position of prime minister in 1999 through a slavish loyalty to the Yeltsin presidency. And, soon enough, the stage was set for a further rise. Despite his victory in the 1996 presidential election, Yeltsin’s vodka-fuelled behaviour was making him into a liability in the eyes of his allies and the oligarchs. Yeltsin suddenly resigned on 31 October 1999 and appointed Putin as acting president, whose first act was to give his predecessor and his family legal immunity from corruption charges.
Putin has always been committed to the Russian model of capital accumulation built in the 1990s. Some on the left see Putin as “standing above” capitalists or having subordinated them to an all-powerful state. But this ignores the real relationship between state and capital, and how key sections of oligarchs were instrumental in Putin’s rise. By the late 1990s, powerful sections of oligarchs could see the need to bring some order to the “wild west capitalism” of the past decade. A stronger, more centralised state could keep in check the rivalry of different republics within the country’s federal structure. It had reached the point of anarchy, with oil-rich regions threatening to withhold taxes or break away. They also saw the need to stop the scale of asset stripping strategic parts of Russian capitalism, namely oil, gas and the military industrial complex. By doing so, it would also allow the state to rebuild the army and assert its imperialist interests in its “near abroad”. These oligarchs weren’t motivated by any concern about corruption or the social crisis facing working class people. They were interested in ensuring a stable basis of future capital accumulation.
Putin did subordinate—or get rid of—oligarchs who disagreed with the new presidency. For Western politicians and pundits, this is symbolised by Putin moving against Yukos oil boss Mikhail Khodorkovsky in 2003. He was imprisoned on fraud charges and the state seized Yukos, which had emerged from the “loan for shares” privatisation scheme. But at the same time as the state was nationalising Yukos, it privatised other parts of the industry and built partnerships with US oil companies to modernise ageing Soviet infrastructure. And Putin has been very good for the super-rich, with Moscow being one of the billionaire capitals of the world. While they were kept in check more, they profited.
During his first term between 2000 and 2004, Putin pushed through more free market reforms to increase the importance of private firms. They included staples from the “neoliberal” playbook, such as a highly regressive “flat tax” of 13 percent on incomes, tax breaks for big business and weakening workplace rights. Alongside state control over oil, gas and arms industries, Putin copied US and European politicians’ zeal for increased privatisation and outsourcing in public services. Thanks to his policies, private capital penetrated into schools, hospitals, council housing and the welfare state. Putin’s statism and neoliberalism don’t contradict one another. They are two sides of the same coin, aimed at making the Russian state and capitalism more “efficient” at exploiting working class people.
The stability and popularity of the Putin regime was underpinned by two key events—a victory in Chechnya and the boom in oil prices during the 2000s.
In 1999 Putin, having learned the lessons of the previous defeat in Chechnya, won a decisive and bloody military victory and installed Chechen politicians loyal to Moscow. It sent a powerful signal to Russia’s neighbours that its imperialist power was back—and boosted patriotic and chauvinist feeling at home.
The war on Chechnya also showed signs of how Putin would use, and build on, the repressive powers of the presidency. The state effectively banned journalists from reporting from the battlefields unless they embedded themselves with the Russian Army. It made sure to marginalise reporters, such as liberal Anna Politkovskaya, who sought to tell the truth about the conflict. In 2006 she was murdered in her flat, and was at the time at least the 12th contract-style killing of a journalist since Putin came to power.
Meanwhile, from the 2000s there was a doubling of oil prices and a quadrupling of oil production in Russia. It meant Putin could pour money into the military-industrial complex, rebuilding the state’s military might. It also helped build up a more prosperous middle class, alongside the superrich oligarchs who continued to keep huge profits, which has supported Putin. And the growing revenues meant many workers’ wages were paid for the first time in years.
Putin has ruled through a combination of force and fraud. He has relied on Vladislav Surkov, who was his right hand man until being sacked a year ago. He helped set up Putin’s right wing United Russia party—but is also rumoured to have funded parties to its left and right. One of them is For A Just Russia, a supposedly social democratic party. Other parties appeal further to the nationalist right. One the one hand it seems to show how Machiavellian and all-powerful Putin is. But why set up fake opposition parties unless one is worried about the possibility of real opposition parties springing up?
During his first presidential term, there was very little opposition whether from disgruntled oligarchs, middle class intellectuals or working class people.
The liberal free market parties were side-lined into opposition after parliamentary elections in 2003. The liberal Yablko (Apple) party and Union of Right Wing Forces lost 40 seats, leaving them with just seven MPs between them. By the time of the next parliamentary election in 2007, they were reduced to none. This was down to a combination of Putin raising the threshold to 7 percent of votes and their association with the profound social crisis of the 1990s. While Putin continued the free market policies of the Yeltsin years, he was careful not to come out ideologically in favour of the market.
In March 2004 Putin won a second term with a whopping 71 percent. But that winter there were small signs of discontent after Putin tried to push through a nasty reform to the benefits system. Ordinary people, led by pensioners, took to the streets in a dozen cities and forced the government to slow down the speed of the implementation. The following year anger over the privatisation of social housing saw people set up local campaigns in a number of cities. Once again, the reforms were slowed down. And in 2006 there were the beginnings of workers’ struggle, mainly in new industries where the old Stalinist era’s fake unions weren’t dominant. But through the 2000s the growth of Russian capitalism and the state’s revenues, alongside real repression, meant the opposition didn’t burst onto the national stage.
Putin has clung to a faux democratic legitimacy. Instead of unilaterally changing the constitution to stand again in 2008, he stepped down as president in favour of his man Dimitri Medvedev. But he stayed on as prime minister—and returned in 2012. During Medvedev’s time in office, the stability of the 2000s weakened because of the global financial crash. In particular, the rapid fall in the oil price—from $130 dollars a barre in July 2008 to $40 a barrel in December—gave the state less room to manoeuvre. Like the US and British governments, the Russian state bailed out some key enterprises, but still let many others go to the wall leading to embittered feelings among ordinary people. When Putin returned to the presidency in 2012, he faced the biggest protests the country had seen since the collapse of the Soviet Union.
Today the Putin regime faces a bigger challenge than after the global crash. The end of the “commodities super cycle”—with prices peaking in 2011 and falling from 2015— means no going back to the long-term stability of the 2000s. As Thane Gustafson writes in Wheel of Fortune: The Battle for Oil and Power in Russia, “This is not simply unlikely to happen—it is impossible.”
Even if oil prices go up there will never be a return to the high “oil rents”—the difference between the price of crude oil and production costs—of the 2000s. There are all sorts of things the state can do in the meantime, such as depleting currency reserves, but those are only temporary measures. This could cause further clashes. Gustafson warns, “Major spending programmes will have to be cut back, including socially sensitive ones such as pensions and subsidies. The state’s rainy day funds will be depleted. Inflation will eat away at the populations’ savings. The myth of endless prosperity, which has sustained the popularity and legitimacy of the present regime for so long, will erode.”
Some of those trends are already on show and helped fuel the recent protests in Russia. There is also disquiet from some oligarchs. While they support Russia asserting itself in the world, the deteriorating relations and sanctions have hit some of their ability to rake in profits from foreign markets. Some oligarchs are looking to a greater “normalisation” of relations with the West—but without Russia subordinating itself to the US or Nato. Sections of the middle class see corruption as a barrier to efficiency of the state and capital. One consequence of the end of oil boom is that some in the middle classes, for example military officers, are finding it harder to get by and progress within the system. And there’s a broad working class resentment at elites enriching themselves. This dire state of affairs means anger does explode from below, but there’s no clear working class alternative for it to cohere around.
A feeling of discontent means the regime is more brutal—increasing state repression—but also more brittle. But, as of yet, there don’t appear to be cracks in the state apparatus. And while we talk about the Putin regime, it’s not a one-man show. Even without Putin, that model of capital accumulation will not simply disappear with him—whether he’s replaced by an ally or liberal rival.