Veronica Kabalina Alla Nazimova
Institute for Employment Studies, Russian Academy of Sciences,
Ministry of the Russian Federation for Labor and Employment
PRIVATIZATION THROUGH LABOR CONFLICTS: THE CASE OF RUSSIA
Introduction
By the end of 1992, Russia was on the threshold of mass-scale privatization, as envisaged by the State Program of Privatization adopted by the Supreme Soviet of the Russian Federation in June 1992. Four hundred thousand retail trade outlets and public catering and services facilities, from ten to fifteen thousand small industrial plants and tens of thousands of small construction and motor-transport enterprises were considered objects of mandatory "smaller" privatization. Besides, over 4,500 big industrial enterprises were to be made private as well.
By November 1, 1992, nearly 23,000 predominantly small state and municipal enterprises were privatized. Some two million people (three percent of those employed in the Russian economy) worked there. Nearly 12 percent of enterprises changed their organizational set-up and legal status to become joint-stock companies [1].
The more than modest results of economic de-etatization seven years after the beginning of perestroika were due to the fact that the transformation of state property was accompanied by political and social struggles, overt and covert conflicts on macro- and microsocial levels.
The concept of property vacuum suggested by Pavel Campeanu in "The Syncretic Society" [Casals, 1980] is a useful analytical instrument for getting at the roots of privatization-provoked social changes and conflicts. The formula "property vacuum -- ownership-inabeyance" describes well the principal contradiction of property relations under state socialism. Given the absence of a legally codified private ownership institution and of the class of owners, the means of production, declared to belong to the whole people, were actually owned by the party and government nomenklatura. But that stratum lacked legitimacy to become a full-fledged owner of the property of the whole people.
Totalitarian rulecannot be overcome and transition to a
democratic society with a market economy cannot be effected unless this property vacuum is filled -- unless privatization is carried through. Making ownership rights legitimate and creating a stratum of private owners should become its essence and result.
Whom and how should state property be given over to? Defining the content and direction of the reform of the property relations of state socialism has become an object of ideological struggle and political and social conflicts. Political conflicts over influence on the privatization process on the level of society at large are considered by the authors to an extent these conflicts provided a general background and framework of reforms at the enterprise level.
In studying privatization conflicts, this article focuses on the
participation of the enterprise work collective and its management in the formation and redistribution of the rights and duties of the owner, the manager, and the hired worker. The formation of fullfledged subjects of labor relations is impossible if these rights and duties are not defined clearly. Privatization, if understood in a sense broader than a simple legal change of the form of ownership, presupposes profound changes in labor relations, within which
ownership rights are exercised. Privatization in post-state-socialist societies, particularly in Russia, and ensuing labor conflicts have not yet been thoroughly investigated as a process of transforming labor relations on the enterprise level [2].
To investigate the above aspect of privatization, the authors have been conducting, since 1991, in-depth studies, making use of structurized interviews and group discussions at two medium-size enterprises (with the labor force of 1,000 and 2,000, respectively), which took the path of reforms in 1988-1989 [3].
There were also meetings and on-site studies at enterprises
standing on the threshold of privatization:
- at one state-run enterprise reorganized into an association of small businesses employing 1,300 people;
- at two science-and-production associations of the defense complex, employing up to 3,000 people; and
- at a big auto-making plant employing some 25,000 people. Besides, the article makes use of the results of the social
monitoring of open labor conflicts, being made by the authors since 1988 on the basis of press reports.
De-etatization Without Privatization
Social and labor conflicts of the first years of perestroika were conflicts of the disintegrating administrative-command system based on state ownership. They developed in a way ruinous for economy and society [4]. State enterprises were the main battlefield. There were no full-fledged subjects of labor relations, no institutions to represent their interests and no mechanisms for settling conflicts directly at enterprises, so these conflicts were inevitably taken outside and the parties (enterprises) appealed to their "higher-ups." This was in the form of demands to state organs, which involved them in settling numerous local conflicts. In the final analysis, these conflicts were settled at the expense of society at large, rather than through joint effort by the parties involved. The enterprise management thought it better to shift the responsibility for rooting out the causes of the conflict on state organs, rather than seek a solution by itself. All the more so, as in most cases the management was actually unable to dispose of its enterprise resources. This situation resulted in a chain reaction of conflicts, because state organs met the demands of the workers of only one enterprise or one industry.
Apart from the logic of the still existing command system, measures taken by perestroika initiators -- not radical and consistent enough -- were also conducive to labor conflicts.
The perestroika project allowed an improvement of property relations through the decentralization of decision-making, rather than their radical change. During ideologically-tinged discussions on the future of property, a widespread viewpoint was that what was needed was not privatization, i.e., making the property of the whole people private, but rather "decentralization," "de-etatization" of the property of the whole people, allowing private property just to a limited extent. The proponents of this viewpoint believed that reforms of property relations should essentially boil down to "the fullest possible realization of the right of ownership of the means of production by the whole people by way of giving this property over to labor collectives in their full economic possession, rather than rejecting it totally" [5]. "The right of full economic management," while retaining the former status of property as stateowned, would accord state enterprises the rights of possession, utilization and disposal, similar to those enjoyed by classical owners. By this token, the proponents of de-etatization without privatization held, granting state enterprises the "right of full economic management" would result in the formation of "original institutions of ownership, enabling the workers and their unions to become real masters of the means of production" [Alexeyev, 1989].
Laws regulating the status of state enterprises were adopted in
line with the ideology of de-etatization. But the independence of enterprises as economic subjects entitled to dispose of state property, as declared by the USSR Law on State Enterprises (Associations) (1987), remained a mere declaration because the ministries retained power.
Conflicts of De-etatization
The awareness of the inadequacy of the face-lifting measures proposed at the initial stage of perestroika, caused mass-scale social and labor conflicts in 1989-1991, which were the work collectives' response to the attempts to impose de-etatization "from above." Miners were the first to realize the need for a radical economic reform. During their first massive strike action in 1989, they demanded economic independence for their enterprises. Subsequently, this was followed by political demands, because economic reforms were stalled by the absence of political changes. Thus, the miners' first massive strike actions contained elements of politicized vertical conflicts of privatization, which should be more appropriately called conflicts of de-etatization, because at that time the miners were not offered any alternative variant of transforming state property (except for the transfer of mines to the ownership of their work collectives).
This kind of politicized conflicts of de-etatization may include horizontal conflicts between central and republican structures over the problem of jurisdiction over enterprises located on the territory of individual republics but subordinated to Union ministries. The management and work collectives of such enterprises were inadvertently involved in the political struggle between the Center and the republics in 1990-1991. Many took advantage of the situation by using the placement of such enterprises under republican jurisdiction to acquire economic independence.
The USSR Law on Ownership adopted in March 1990 was still based on the idea of de-etatization without privatization. Its recognition of multiple forms of property was limited to the property of Soviet citizens, collective property and state property, and provided that their usage "shall exclude the workers' alienation from the means of production and the exploitation of man by man" [Art. 1].
The Law on Ownership and the new edition of the USSR Law on Enterprises in the USSR (June 1990) allowed work collectives to reorganize state enterprises into joint-stock companies and societies, and also to lease them or form independent divisions within particular enterprises. But this right was made contingent on the agreement of the property owner, i.e., the relevant ministry.
This condition provoked a wave of non-politicized vertical conflicts between enterprises and organizations and ministries. From the very outset, the two conflicting sides found themselves in an unequal position because higher-up organizations had the last say in granting independence to enterprises. For this reason, their conflicts became protracted and in some cases could not be settled.
Thus, de-etatization "from above" carried through by state organs themselves (by ministries unwilling to share power) resulted in vertical (politicized and non-politicized) conflicts between
enterprises and the state. Their one distinctive feature was openness, another -- the coincidence of the interests of the workers and the management, who both considered privatization an instrument for improving their situation. In confronting state organs, managers acted as representatives of their work collectives, or joined their
workers' strike action to demand economic independence for their enterprise.
"Spontaneous" Privatization
In spite of the official policy of de-etatization (and sometimes owing to it or, to be more precise, owing to its contradictions), illegitimate privatization began to develop, which was called "spontaneous" or "nomenklatura" privatization. This became possible
because of the collapse of the administrative-command system, which gave the party and government nomenklatura a chance to convert power into property.
The former ambiguity in the distribution of ownership rights -which was not done away with and only increased during the perestroika period -- created favorable conditions for individual representatives of the nomenklatura to appropriate state property.
Various nomenklatura groups, standing closer to or farther from the production sphere, employed two strategies in effecting their privatization -- spontaneous privatization "from above" and spontaneous privatization "from below." Representatives of the higher nomenklatura stratum, who had settled down in the party apparatus and ministries, attempted to secure the right to dispose of state property and become its actual owners by employing illegitimate methods, such as their informal connections and influence. The results of such attempts are known: the "party money" was used to set up commercial banks and exchanges and the would-be defunct ministries came back to life in the guise of intersectoral associations and concerns. The more scandalous cases of spontaneous privatization "from above" became objects of the closest public scrutiny.
Spontaneous privatization "from below" in the production sphere was less conspicuous and more quiet. Its motive farce was state enterprise managers. When the command system was just beginning to
get softer, the directors' corps stratified. More advanced, marketoriented managers (mostly young and energetic) evaded conflicts with higher-up bodies and took advantage of ever-changing laws, above all their drawbacks and contradictions.
The USSR Law on Ownership (1990) and the RSFSR Law on Enterprises and Entrepreneur Activities (1991) granted state enterprises the right of full economic management. Formally, the state retained all
enterprise ownership rights, but the directors actually became independent and acted like private owners, though they were not materially responsible for any losses incurred by their enterprises [6]. State enterprises could sell raw materials and equipment, rent out buildings and facilities to other enterprises, yet, as the owners, they did not pay anything to the state for the right to dispose of property.
One can agree with S. Johnson and H. Kroll that spontaneous privatization is the result of the managers' purposeful strategy giving them a chance to acquire rights of ownership [Johnson and Kroll, 1991, 282]. They create property rights by establishing control over the utilization of resources as a result of reshaping external and internal relations. The limit of power
within the work collective is also fraught with conflicts, just as
a restructuring of external relations between enterprises and ministries, which, as has already been said, is accompanied by vertical conflicts.
The words "quiet" and "latent" should, however, be added to the traditional name of "spontaneous" non-legitimate privatization. Shifts resulting from the changed form of enterprise ownership increased tensions within the work collective. But, as a rule, the resultant horizontal conflicts between various groups of workers and the management were not massive and open, usually taking on some latent form.
The low conflict potential was frequently ascribed to the
specifics of labor relations at corporate-type enterprises which could include production cooperatives; rented, people's and collective enterprises; societies with limited responsibility; and also closed joint-stock companies set up on the basis of medium-size enterprises. It was these enterprises that turned out to be the pioneers of privatization. They are characterized by less alienated relations between the management and the personnel, by paternalism, which is especially manifest in crisis situations. Faced with the economic crisis and the prospect of bankruptcy and mass lay-offs, the workers are less demanding on their management because they begin to regard it their only protection, especially in the wake of the sharply
diminished role of labor unions and the weakening of state power. Budding conflicts at such enterprises, provoked by changes, did not become open and uncompromising. They were rarely institutionalized and were often settled in an informal way.
In any case, at small and medium enterprises there were no conflicts over possible variants of privatization which could split their work collectives. In the period between 1990 and 1991 (prior to the adoption of the official program of privatization), open conflicts over the choice of the form of ownership broke out at big enterprises having powerful organizations to represent their workers' interests. They managed to put forward alternative variants and find support among part of their work collectives.
A good example was the conflict at the VAZ auto plant -- this country's largest maker of Zhiguli compact cars known as Samara-Lada on the world market (100,000 workers and employees). The conflict erupted between the management and the personnel, headed by the Work Collective Council (WCC), who proposed their own variants of a new form of enterprise ownership. The management suggested a joint-stock company, its co-owners being the state, the work collective, and the suppliers (each was to own 20 percent of the shares). The remaining part (40 percent) was to be sold to foreign companies. The WCC decided that the right to own the enterprise should be transferred to the work collective (51 percent of the shares). It was proposed that the shares should be distributed among VAZ workers and employees free of charge, the value of these shares being dependent on the length of service at the plant. The final decision on the method of privatization was to be made by voting at a work collective conference. But the radical part of the work collective, headed by the WCC, called in question the voting results favoring the management's proposal and continued their struggle [7]. Developments took a similar turn at some other big enterprises (Elektrosila and Kirov plants in St. Petersburg), where the privatization process had begun before relevant rules had been worked out for the whole of Russia.
"Effective," "Just," "Privileged" Privatization
During the period of 18 months since July 1991, two editions of the RF Law on the Privatization of State and Municipal Enterprises in the RSFSR and two State Programs of Privatization were adopted in Russia. They were drafted and adopted against the background of a fierce political struggle centering around various approaches to the methods of transforming state property and participants in that process. These approaches can conventionally be grouped into the following three categories (depending on the answer to the questions: in what way and to what potential owner will state property be given over to?).