Privatization in one
International Viewpoint #220 • January 20, 1992 the parties were acting in the name of a single owner, the state. Now, however, we also have private owners. But they have used the same procedure to transfer real estate from the district soviet, a state body, to a private company, UKOSO, as if they didn't understand that this is something totally different.
AMID the collapse of the Soviet Union, both old bureaucrats and new "democrats" have been scrambling to appropriate public property. Yurii Marenich is a Section Director at the
Central Institute of Mathematics and Economics of the
Academy of Sciences of the (former) USSR. He was elected to the October District Soviet (council or parliament) of People's
Deputies in Moscow in March 1990, and is a member of the soviet's presidium and chairman of its Economic
Commission. The following interview with him, in which he gives a graphic insight into the methods used by the
"democrats" in his soviet, was conducted by David Seppo in
Moscow on October 27, 1991.
RAMATIC events occurred
D last weekend in your district soviet; deputies barricaded themselves inside against the police. What exactly happened?
Last July, Moscow's Mayor, and leading liberal, Gavriil Popov, decided to dissolve the executive committees of all the city's district soviets. Without executives, the soviets are of course powerless to carry out decisions. The
August putsch delayed action, but last week Popov ordered the city's takeover of our executive committee's building. It just so happens that the soviet is also housed there, and Popov offered us nothing else. So we physically had to defend the district soviet's property.
• What is behind the general campaign against the elected soviets that is being conducted by the liberals, or the "democrats" as they like to call themselves, including Yeltsin, Popov and Sobchak, mayor of
St. Petersburg? Ilya Zaslavskii, former chairman of your soviet, who is close to Popov, stated not long ago that the slogan "All Power to the
Soviets" was progressive in the spring of 1990 but has since become reactionary.
They needed the Soviets to take power from the Communists. They ran their electoral campaigns under the slogan:
"Having dewon power, we will monopolize property and manage the economy through the market." But once they had got the power to manage the public's property, they found themselves facing a tremendous temptation to grab this property for themselves. This was made easy by the possibility of combining n private firms dealing with the govern ment.
Briefly, those in charge of supervising privatization simply transferred the district's property to companies they themselves head. They now hold tremendous centralized power, no longer as government office-holders, but as private owners of most of the district's real estate. So they don't need the elected soviets. On the contrary they have become downright inconvenient. • Can you explain more concretely what they did?
All the members of the soviet's executive committee set up private companies that they headed. One firm took over the soviet's information services; another its legal services; a third took over all the real estate, its sale and leasing rights on the territory of the district. As such, they leased buildings and land to other companies or used them as contributions to joint enterprises.
In return they generally take 40% of the profits of these enterprises. Since any new company needs premises, they have no choice but to accept the conditions set by this monopolistic firm, called UKOSO, and to pay in 40% of their profits. What you have here, in fact, is the old command-administrative system, but with the difference that now the monopoly is private, not a state monopoly. • Are you saying that UKOSO transferred to itself, free of charge, this huge chunk of real estate in the very centre of Moscow? I find that difficult even to conceive.
It's quite simple. Since the 1930s, we've had a system of transferring property without payment. But it was all state property and the transfer was from one state agency or enterprise to another. All
• But that's outright theft.
The strange thing is that, strictly speaking, you can't call it theft, since no criminal act occurred. In practise, we have no law forbidding such conflict of interest
Here's just one documented example. A three-storey building in Moscow's centre with 1150 sq. metres of space, whose formal value is set at 53,000 roubles (though a new economy car sells on the black market at 150,000 roubles) is "written off" as if it were of no value or use to the district, and transferred to UKOSO for free. On the very same day, UKOSO sells it for 6.7 million roubles plus 311,000 "hard currency" roubles (about 80 times the value • So the district received no income at all from the privatization of its property.
Yes, that's why the conflict arose. Not only is the people's property being given away free of charge, it is being appropriated by the very people entrusted to manage their property. I cannot say there aren't any exceptions to this pattern; I am talking about what I have personally seen and what is documented • How much has already been privatized in this manner?
The executive committee's order transferred all the property that the district managed to UKOSO. A part of the buildings and land in the district are under the jurisdiction of state enterprises and other state agencies. These too have been transferring some of their buildings to UKOSO, but at least they seem to demand guarantees for their tenants; if the building is torn down, the tenants have to be offered other apartments. • As I recall, Zaslavskii promised in his electoral campaign back in early 1990 that he would not allow such conflicts of interest.
The promise was even published in a local paper. But once elected he radically changed his attitude. Then, when he had finished "privatizing" the district's property, he gave an interview on the radio in which he warned that the economic basis of a new dictatorship is being created, not of the classic Communist type, but no less totalitarian. • And he didn't feel any need to explain why he himself had condoned and participated in what he was now condemning?
A person generally behaves in accor-
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RUSSIA district
January 20, 1992 • #220 International Viewpoint dance with interests that arise from his concrete situation. Thanks to the confucreated by the "war [between the now defunct Soviet centre and the republics] - he found himself in a position to become owner of someone else's property. • What did you, as an elected depu-
I fought from the moment I learnt of the possibility of combining posts in the executive and in the private sector. That was in May 1990. We still didn't know the people in the executive, but they all openly declared that they would be on the board of directors of UKOSO, and we know that in virtually all civilized countries such conflict of interest is outlawed. You realize the tremendous wealth involved and the temptation.
So before anything even happened, we opposed the very principle of combining posts. And the answer was edifying: "How can you even suspect that such upright people would violate the people's trust? What happened to the presumption of innocence?" Zaslavskii said he personally would monitor the process, and he requested that the soviet mandate him to preside over the executive committee between sessions, even though this is not allowed by our constitution.
The deputies refused, and his slate of candidates for the executive failed to win the required votes. So he called a meeting of the Democratic Russia caucus (the main liberal coalition that supports Yeltsin) which had 76 of the soviet's 148 deputies — you certainly can't attribute any of this to some design of the "evil Communists". The caucus decided to ask the soviet for a vote of confidence in the chairman, Zaslavskii. The rules state that if such a vote is won, then the whole executive slate is automatically confirmed. They won the vote. • What are some concrete examples of conflict of interest?
The chairman of the executive committee, Gusev, heads the board of directors of the Urban Construction Centre, a private firm doing business with the district. Its board of directors also includes the vice chairman of the executive committee, Vseyakov, who also heads UKOSO. • You said that Zaslavskii, when he presented proposals for the executive committee, didn't hide his intention of allowing these people to combine their posts with positions in private companies dealing with the district government. What exactly was said?
On May 17, 1990, Shota Katel'bauze and Yuri Agel'son, two candidates for the executive, told the soviet that they were setting up their own company and that they would demand that the executive allot them funds from the soviet's budget and give them office space. They magnanimously offered to forego their salaries as members of the executive. • It seems incredible that they would be so open about this.
People here are used to the idea of combining political and economic management posts. Under the old system it was common for a minister, the head of a huge economic complex, to be a member of the party's central committee. The CC apparatus was charged with monitoring the activities of the ministries, keeping them honest and making sure the state plan was respected. Of course, this greatly undermined the party's real ability to supervise the functioning of the economic administration, but at least this occurred in a regime where everything was state property, and it was impossible to directly appropriate real estate and factories on a
If you tell an ordinary citizen that Zaslavskii or Vasil'ev or someone else allotted an elegant four-room state apartment for their own use, they would be enraged at such an abuse of office. But tell them that one of these has received as his private property a whole building or the whole district, and they simply won't believe you, because such a thing could never occur over the course of the last 70 years. People see all this as public property, and when you tell them that it has already been privatized, it doesn't sink in. Only when they receive orders to vacate forces come to evict them, will they finally grasp how they have been plundered.
Actually with the acceleration of developments after the putsch, people are beginning to understand more. But we, the soviet deputies, who are now being told "we are hindering the work of government", we understood from the start. And so, we were dangerous, and they decided to get rid of the soviets. They have become owners, and as owners, they say "How dare you interfere. This is private property." • Did a majority of the soviet
At first we were a minority. But we soon became a majority when the active transfer of real estate to UKOSO and the Urban Construction Company began. At the time, the constitution required two thirds for a quorum — in our case 99 people; but we could only muster 98. Zaslavskii has created round himself a small, loyal group, linked to these companies, and they simply boycotted the sessions. Finally the law was changed to make a 50% quorum, and we immediately removed Zaslavskii from his post as chairman of the soviet. But he refused to leave his post and transfer the soviet's affairs to the new chairman. The deputies had to declare a six day hunger strike to dislodge him from his office.
RUSSIA • And what did the city's mayor, Popov, do during all this?
He came out in support of Zaslavskii, claiming that it was a struggle of conservatives against democrats. • But Zaslavskii was violating the
In our country today the concept of "revolutionary necessity" dominates. Al the very start, in June 1990, just after the Russian Supreme Soviet and Boris Yeltsin, its chairman, had been elected, the combination of posts in government and private business was declared impermissible. But it turned out that that was meant only for functionaries of the old apparatus and not for the new "democratic" office holders. So the rules apply selectively, that is, it is a lawless state, as before.
This is a conscious policy, in my view. For example, after we published a report on the goings-on in our district in Moscow News, Shakhrai, the Supreme Soviet's representative, declared that combining posts is immoral and that a law prohibiting it was being prepared. This declaraZaslavskii. And I can say categorically, I can show you documents, that prove that these practices are rampant, not only at the district level, but at the city level and higher. The chair of the city's executive committee, Luzhkov, is also the head of a private firm that deals directly city. Indeed, Zaslavskii and his colleagues justified themselves by citing the city gov-
"Why should we not have the same rights?" • Are you saying that this is going
I don't have documents from other districts. But I am positive that since the interest and the possibility of acting on it exist, this is happening everywhere. This is a key factor in the current disintegration of the country into feudal-type princedoms. Those who hold power in a district, city, region or republic hold power over its property and want to fence this power off from outside interference. The power holders at higher levels, of course, oppose this, since they lose a part of the property they could appropriate.
It sometimes reaches the absurd point where individual villages declare their sovereignty. But this is quite understandable. The chairman of the village soviet stands to become the owner of all the property on its territory. Why should he share it with those in the district government? He tries to defend his property, sets up boundary markers, posts guards. In order to gain popular support for what is really a struggle for property among office holders, they try to give it a national, religious or other colouring. • What happened to Zaslavskii after you district so em as chairman of 27 your district soviet?
International Viewpoint #220 • January 20, 1992
ON JANUARY 2, 1992, the
Russlan government of
Borls Yeltsin freed prices on most products, forcing other governments in the
Commonwealth of of prices must be seen in the context of a bureaucratic monopoly of the economy. There is no sign that it will pull society out of the economic crisis. The Institute of Forecasting of the Academy of Sciences predicts that the steep decline in productivity and in overall production will continue throughout the winter and spring.
ndependent States (SNG) to follow sult, no matter what helr Intentions regarding pursuit of their own Independent conomic pollcles
The Russlan plan represents a full-scale attack on the living standards of working people: The monthly minimum wage has risen to 342 roubles, while a kilo of smoked sausage may cost 100-150 roubles and a kilo of beef 90 roubles. This acheme, drawn up by vice-premler Yegor Galdar and supported by Western economists such as the notorious
Jeffrey Sechs of Harvard University, creates a potentially new polltical situation at least in Russla, since It is the first major antl-working class reform carried out by the victorious "democrats"
On January 8, 1992, Poul Funder Larsen talked about the
Initlal reactions to the reform with Alexander Buzgalln, a