Russia’s Soviet period might be characterized a kind of slavery built in the name of emancipation. Under this system we are told that literacy and industrialization were advanced by state-directed terror and hunger campaigns. People were systematically shot, starved and robbed in order that a huge military infrastructure might be created.

Curiously, Russia also created what could only be described as a black market “communist” economy under a regime of criminal policemen. This economy was highly industrialized and backward simultaneously. Nothing better illustrates this apparent contradiction than the fact that Russia put the first man in space and exploded the first deliverable hydrogen bomb. At the same time, Russian consumers enjoyed few benefits.

Today, despite the appalling poverty of the Russian people, the Russian military continues to produce the world’s most advanced tanks, fighter planes, submarines and strategic missiles. Despite the unreliability of official Russia figures and statistics, on Oct. 17 the Russian government admitted an increase in defense spending.

The paradox of Russia’s recent and dramatic economic growth, which follows on the heels of the country’s 1998 “financial collapse” (another paradox), is that Russia’s people continue to live in poverty.

Who is benefiting from the reported growth?

In a consumer society, a boom means an increase in the standard of living. In a state where the main industries are those tasked to prepare for war, a boom means an increase in heavy and military industry.

Professor Alec Nove, author of “An Economic History of the USSR,” once explained that despite its apparent problems the Soviet economy was a success. Nove pointed out that the Soviet economy was not like the Western economies. It was not a consumer economy but a “a war economy.” In order to judge its success we should not look at Russia’s standard of living. That would be applying a Western standard to something altogether alien.

It is true, of course, that Russian consumer spending has dramatically increased over the past year. But a dramatic increase in nothing is still nothing. According to the Oct. 21 Moscow Times, Russian consumers were spending at a rapid clip — the fastest since the 1998 crash. The first eight months of 2000 noted a 30 percent increase in consumer spending in Russia, as compared with the same period in 1999. At the same time, this “rapid” consumer spending indicates a very slight alleviation of misery. The head of the department for living standards at the All-Russia Center for Public Opinion, Marina Krasilnikova, said it best when she noted, “Only a limited segment of the population is buying durable products.”

Most Russians are not involved in Russia’s economic expansion. The boom is limited to a narrow segment of the population. It is a boom in metal and chemical outputs. It appears as an increase in heavy and military industry — hidden by a vast disinformation apparatus. In fact, at the Dec. 20 celebration of the 83rd birthday of the Soviet secret police — which was attended by President Vladimir Putin — the chief of the secret police said that his main task, at present, is to prevent foreign spies from “uncovering the true plans of the new Russian government in what concerns domestic policy.”

Do you suppose they are afraid the West might notice that Russia’s economy is still a war economy?

The real shoppers in Russia are the army, navy, air force, air defense and strategic rocket forces. These are the country’s leading consumers. These are the “big five” customers for everything from food and energy to copper and palladium. It is for their sake that Russia’s production has been increasing.

How much is the increase?

In late October the Russian Academy of Sciences’ Economics Institute reported rapid growth in Russian industry. Preliminary estimates say that Russia’s base economy expanded its overall production by 8.5 percent in the first eight months of 2000, with industrial output increasing by nearly 10 percent. In 1999 industrial output grew even faster.

Of course, the biggest increases did not serve the poor struggling average folk of Russia. The biggest increases came in ferrous and non-ferrous metallurgy, which expanded its production 19 percent and 11.2 percent in the first eight months of last year.

And who is the leading consumer of non-ferrous metallurgy in the country?

The Russian strategists who wrote the classic text “Soviet Military Strategy” long ago explained that “Increased production of armaments and military equipment naturally requires the corresponding provision of industry with power and strategic raw materials.”

You need metals and electricity. You need platinum and copper and steel and aluminum. According to Russia’s military strategists, “New military weapons (missiles, supersonic planes, etc.) require especially stable alloys; many nonferrous and rare metals are required for military production, as well as a fully developed machine and instrument-building industry.”

It is no mystery, therefore, that Russian consumers have experienced electricity shortages in recent months. As the Russian military text noted, the production of 40,000 fighter aircraft requires at least 4 billion kilowatt hours of electricity. Not only this, but 450,000 tons of aluminum as well.

Quite naturally, the average Russian by no means consumes a proportionate share of electricity and aluminum. These items are reserved for Russia’s “big five” consumers. It is the Russian military that passes through the cycles of bust and boom in Russia’s economy. The average Russian citizen merely experiences varying degrees of poverty and inconvenience, which are now blamed on rapacious American capitalists and native tycoons with Jewish names.

Of course, Russia is a rich country. But 90 percent of the people own almost nothing. The government and its front men control the real wealth. Furthermore, this control is not based on property rights. In reality, a tycoon or a government manager in Russia owns nothing. He is a temporary lodger — a creature of hidden forces, subject to shifting political winds. He might end up at some point, like Media-Most tycoon Vladimir Gusinksy,
languishing in a Spanish jail awaiting extradition to Moscow. Or he might avoid arrest, like Boris Berezovksy, by surrendering his claim to millions or billions in companies X, Y or Z.

If you have read that some Russian towns are without heat, or that there are electricity shortages in this or that Russian city, do not assume the electricity doesn’t exist. Assume, instead, that it has been diverted from civilian uses to military-industrial uses. And if you also read that Western aid to Russia has little or no effect on Russia’s standard of living,
there is no mystery. Just as electricity and other resources can be diverted, so can foreign aid.

To verify this point for yourself, take a look at J. Michael Waller’s recent piece in Insight magazine. Under the headline, “U.S. Aid Is Funding Russian Weapons,” Waller explains that the Clinton administration has “suppressed” warnings from its own officials that Moscow diverted “disarmament aid to fund covert biological-weapons programs.”

Claiming to possess hundreds of internal documents, Insight says the Russians are working on a deadly new form of measles “with AIDS-like symptoms.”

When the logic of your economy is tied to the idea of a future war, you are not going to produce many luxury automobiles, personal computers, washers and dryers. A poor population living in one of the world’s richest countries may seem like a contradiction, but it really isn’t. To allow advanced industry and technology to serve the desire for personal comfort would be highly irresponsible from the military point of view. If World War III is
inevitable, as the Kremlin believes, then Russia’s domestic policy must center on one thing. It must center on war preparations. And as the head of Russia’s secret police, Nikolai Petrushev, recently said, his main objective is to prevent the West from “uncovering the true plans of the new Russian government in what concerns domestic policy.”

The great secret of Russia’s contradictory economic situation should not baffle us. Moscow continues to choose guns over butter. Is that so hard to understand?

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