The struggle between the Russian executive and legislature seems unhinged from the world around and dancing to its own tune.footnote Each side accuses the other of betraying democracy and plotting the restoration of totalitarian rule. The population looks on, bored by political brinkmanship as it tries to survive spiralling prices in a shortage economy. When characterized as more than a struggle for power, the stand-off between the President and the Supreme Soviet is presented as a struggle over economic reform, with Yeltsin seeking the rapid advance of a market economy and the legislature cautious or outright hostile. In this Moscow-centric view the state, now as before, appears as a centre of autonomous initiative. However, the state’s autonomy actually reflects its weakness, its remoteness from regional realities and above all its impotence to transform a resilient Soviet economy still dominated by huge powerful conglomerates including, of course, the military-industrial complex.

It is not that the economic reforms failed because the state was divided, but rather the state became divided because the economic reforms failed. They failed because in spring 1992 economic directors threatened to bring the entire economy to a standstill if credits were not issued that would save them from bankruptcy. The credits were issued not once but many times by the Central Bank, creating an economic crisis marked by hyper-inflation, falling standards of living, and tumbling output. At the same time the enterprises somehow survive, irrespective of economic performance, violating the basic principle of Western prescriptions for shock therapy.

Desperate to demonstrate to the World Bank and imf that the reforms were proceeding according to plan and to his erstwhile supporters that there were some benefits to be obtained from such reforms, Yeltsin began issuing privatization decrees, culminating in the August 1992 distribution of privatization vouchers. Designed as a popular move, privatization, where it has taken place, has in practice most usually enriched directors and managers rather than workers, while failing to provide incentives for transforming production.footnote1 As before, the Russian government and its Western advisors assumed that the withering away of the party-state had cleared the ground for a market economy to be built by decree, as though it were a target for a five year plan. Why this was not possible can only be understood by forsaking political spectacle and turning to the more hidden processes of the economy, in particular the operation of conglomerates and their member enterprises.

‘It’s like the French say,’ mused Alexander Sergeyevich, ‘The more things change, the more they stay the same.’ It was our last meeting with the chair of the Association of Northern Cities, head of Vorkuta’s heating and sewerage works and most important for us, chair of the soviet of directors of the huge conglomerate Vorkuta Ugol’ (Vorkuta Coal), comprising the major fifty enterprises in Vorkuta, including twelve of the thirteen mines. With the disappearance of the party apparatus, Vorkuta Ugol’ is the dominant political force in the city. A long-time resident of Vorkuta, Alexander Sergeyevich knows everyone and everyone knows him. Even his enemies respect him. He wields his power with patience and self-confidence. He knows how important he is, he doesn’t have to boast about meetings in the White House, about businesses he runs or the influence he exercises in all walks of city life.

He has been trying to explain how the soviet distributes subsidies among enterprises when one of the mine directors, who had treated us to an unusually brief and uninformative interview, trundles in and leans his huge body over the desk. He asks Alexander Sergeyevich what he should do about the latest Presidential decree on privatization—the decree of 1 July 1992 which declares all state enterprises, with a few exceptions, to be joint stock companies. Every enterprise had to submit a transformation plan to the state property agency by 1 November. The director was visibly embarrassed by our presence since, only two days before, he had said he knew all about the privatization decree. Even then, it was obvious he did not have the vaguest notion. Alexander Sergeyevich tried to console him, ‘Don’t worry about privatization, just relax’. The director continued, saying that another director had rung him up from the Black Sea, asking him what to do and whether he should return immediately. Alexander Sergeyevich replied, ‘Just tell him to enjoy his holiday’.