A Sanctuary For State Capitalists

Belarus transitioned to capitalism much differently than other post-Soviet countries. But while some describe Belarus as the last “sanctuary of socialism,” privatization has been underway for more than twenty-five years.

Like other nations, it began with the formation of a national elite, pulled from the Soviet nomenklatura, directors of cooperatives, and leaders of state-run enterprises — which, incidentally, began capitalizing their budgets in the 1980s. This newly established class rapidly took control of all the core industries, but it did not rush to divide state assets among competing oligarchic groups.

Instead, it took the opposite path. The state apparatus, itself dominated by Alexander Lukashenko and the small circle around him, took over all the key industries. Only a few enterprises were privatized, leaving little opening for foreign capitalists.

Even after 2008, the situation hardly changed. The government finally began selling off assets to attract foreign capital, but it would only put unprofitable enterprises up for sale. Unsurprisingly, very few international companies invested.

These new policies kept the model created in the 1990s in place. The state controls the largest and most profitable enterprises, which form the core of the economy. These will not be privatized without the elite’s permission. Below them, weak companies are given over to the free market, simply because the ruling class isn’t interested in them.

Observers often explain the many social problems this model has created by pointing to Belarus’s lack of market institutions, but this mischaracterizes the country’s place in the international economy. Though the state capitalists do not face any serious competition at the national level, they remain highly dependent on international trade.

Belarus exports half of the goods it produces, with more than half of those going to Russia. Oil products and secondary raw materials represent its main exports to the European Union, an arrangement that keeps the country closely connected to Russia because the raw material (oil) comes from there. Any changes in the global market or the Russian and European Union economies have major impacts in Belarus.

More than trade flows tie Belarus to neighboring imperialists. Lukashenko, who has ruled the country for more than twenty years, has taken out multiple International Monetary Fund (IMF) loans. He managed to pay back the first loan by 2005, but he took a second in the wake of the global financial crisis, which precipitated the new wave of privatizations. Today, he’s discussing a third loan.

As in other post-Soviet countries, the IMF pushes the government to increase prices for state-run utilities and amp up state-run companies’ productivity. These demands get in the way of state capitalists’ plans, so it’s no wonder that Lukashenko also took numerous loans from Russia. Institutions like the Eurasian Development Bank served as a stable lending partner for the Belarusian oligarchy until last fall, when the payments suddenly stopped coming.

This history has allowed Russia to substantially spread its influence over the nation. Unlike the IMF, Belarus’s eastern partners only require the country to create favorable conditions for oil transit and trade. Lukashenko may not be able to balance the competing national and international interests for much longer, but Belarus’s dependence on its international partners remains essential.

Because elites control both the core industries and the state, they are extremely worried about any alternative powers, both inside and outside the country. Undoubtedly, a change in leadership would change who controls the economy. To secure their position, Lukashenko and his cronies have enacted authoritarian policies on labor rights as well as freedom of speech and the media.

In 1999, a new labor code took numerous rights away from workers and introduced a system of temporary contracts that made employees highly dependent on their bosses. Mass protests, like those following the 2010 presidential elections, meet violent oppression.

Numerous human rights organizations as well as the Western media have expressed concerns about the totalitarian regime in Belarus, but they rarely mention that these authoritarian politics help the national elite retain its power over the country’s economy.

Reviving a Soviet Policy

In the 1970s, the Soviet Union realized it needed to move a certain portion of the labor force to specific industries that, in large part, citizens found unappealing. Rather than improve working conditions to make these jobs attractive, the government enacted oppressive methods to fulfill its economic plan. Fighting so-called parasites was one strategy.

Many people have compared Lukashenko’s unemployment tax to the Soviet Union’s “war on parasites,” but what’s happening in Belarus today more closely resembles European austerity measures.

The Soviet Union in the seventies and Belarus today have radically different economics. Soviet workers in that period weren’t losing their jobs because of deindustrialization or economic restructuring. The problem wasn’t the absence of workplaces, but rather the presence of unattractive workplaces.

Further, the Soviet government offered much more robust social support than what’s available in Belarus, which offers decent health care but neglects education and housing. And while Soviet law did not recognize domestic workers as unemployed, Lukashenko’s new decree does. This change especially targets women.

That said, the comparison of this old Soviet policy to Belarus’s unemployment tax offers one insight. Thanks to weakening trade with its post-Soviet partners and the inability to offer anything to the Western market, the Belarusian elite has had to invent new ways of keeping the economy running, especially at the level controlled by state capitalists.

First, the unemployment fee helps fill the state’s coffers, which in turn funds core companies. Further, the tax motivates the labor force to take jobs with these state-run companies. Many workers are exploring alternative employment options, either joining the private, informal sector or migrating to Russia, Poland, or Lithuania. Rather than attracting employees by improving labor conditions or raising wages, the elite retrofitted the old Soviet policy of campaigning against parasites. Ultimately, the unemployment tax forces people to either stay in the informal economy and pay the fine or work in the formal sector for a lower wage. Either way, the state apparatus wins.

Though it uses old Soviet rhetoric, Lukashenko’s “war on parasites” doesn’t look much different from Western privatization strategies. For instance, citizens of neighboring Lithuania pay a fee to reimburse the state’s health-care expenses. Formal employers typically cover this, but more and more Lithuanians work in the informal sector or leave the country. Regardless, they must still pay for the insurance — if they do not, they face fines and must refund the state for expenses incurred during the period of formal unemployment.

Lithuania is no exception — governments all over the world have been turning their country’s social welfare system into businesses for decades to make up for budget gaps. Considering that Belarus’s unemployment tax emerges from the contradictions of capitalism that the Belarus elites have been facing for the last decade, it aligns more closely with Western neoliberalization than with Soviet decline. Now, this Belarusian austerity is bringing people to the streets.

Whose Streets?

Unlike the 2010 protests, when the nationalistic and pro-European opposition questioned the presidential elections’ legitimacy (with good reason), today’s demonstrations are characterized by socioeconomic demands and support for the most marginalized groups, such as the rural population.

But the possibility of the Right taking over the movement remains. Though trade unions, which combine their economic agenda with anti-authoritarian demands, played a significant role in organizing the protests, the nationalistic opposition parties are trying to introduce their rhetoric into the marches. This has been effective at least in Minsk, where demonstrators come from middle-class backgrounds and student circles.

That said, the movement isn’t likely to develop along the same lines as the 2014 Maidan protests in neighboring Ukraine, where violent, far-right groups hijacked the agenda. In Belarus, the nationalistic agenda is detached from the popular demands: the people in the streets call for negotiations with the government to cancel the new policy while the right-wing forces are promising to overthrow Lukashenko.

Unfortunately, thanks to the Left’s weakness — a typical situation among post-Soviet countries — there are no forces to help lead the demonstrators in their demands for economic justice.

The ruling class regularly deploys the rhetoric of social equality and labor rights; it even goes so far as to call for an end to privatization and deregulation. As a result, the independent movements actually fighting for these values are increasingly marginalized.

From a historic perspective, this situation is rooted in the failure of “actually existing socialism.” The Soviet Union’s collapse took away all the hopes for a just society and gave liberals and nationalists the opportunity to present private-led development as the only possible path forward.

Meanwhile, a government that has abandoned socialism still uses its past to secure power. It’s not just that the government’s appropriation of the left tradition stops an independent movement from emerging. The division of social movements into two camps — one with a pro-Western, human rights–only agenda and the other with an often pro-Russian, traditionalist agenda — also contributes to the Left’s weakness.

Nevertheless, in some cities progressive forces are playing an important role in the movement. For example, in Gomel, a coalition of left-wing groups successfully fought to include social demands in the demonstrators’ platform. Such small victories, if there are enough of them, might change the political climate and create space for a new left in Belarus.

The Belarusians with shrinking employment options and falling wages are not the nation’s parasites. That role is reserved for the ruling elites and for the nationalist opposition, which hopes to overthrow today’s parasites in order to become them.

But neither of these forces has the broad support of Belarusians. Unfortunately, the small and marginal left cannot take over the movement and reorient the nation’s politics. This impasse will continue until either the Left or the Right breaks through.