7.

The Politicization of Private Enterprise

The continual battle for survival against officials determined to curb or eliminate the emerging alternative economy compelled cooperatives to become a political force in Soviet society. This politicization evolved rather rapidly during the first three years of the movement’s existence as it became increasingly obvious that efforts to solve their economic problems at the local level would not be successful without mobilizing politically at the national level. Cooperatives needed a countervailing power to that of the party and state bureaucracies if they were to endure.

POLITICAL RESPONSES

The most effective method that cooperatives used to protect their interests was the formation of associations and unions of various kinds. There were such organizations at the local and regional level, the republic level, and the national level, and their development proceeded in that order. Associations also formed along functional lines.¹ Although cooperatives began to form interest groups almost immediately after the 1987 law,² the first association of cooperatives was created in early 1988 in Naberezhnye Chelny, a city manufacturing motor vehicles in the Tatar Autonomous Republic. The association included 40 of the more than 100 cooperatives operating in the city, with a staff consisting of eight people, mainly lawyers and economists.³

In the late fall of 1988, the Rossiia association of cooperatives was formed and an organizational meeting was held in Moscow at the Institute of Economics. The primary purposes of the association were to provide legal assistance through one of its member cooperatives and to provide credit through the association’s new bank. The meeting elected as its president V. Korchagin, a 48-year-old electrician with a secondary education. At the end of 1986 he had founded the Feniks cooperative dealing in secondary raw materials and selling by-products to Finland and Hungary.⁴ The association ran into political difficulties when it held its congress in Leningrad in February 1989. The local party committee tried to prevent the meeting from taking place on the grounds that the association had not followed the correct procedures for holding such a gathering. Members decided to go ahead with the congress. They maintained there was no legal basis for the party committee either to give or withhold its permission, since legal organizations and coop-eratives did not need permission to hold conferences.⁵

The Moscow Union of Cooperatives was constituted in late 1988.⁶ The December 1988 resolution banning many different kinds of activities gave an impetus to this and other organizations to engage in public action.⁷ The first public political action by the union was a rally held on July 20, 1989, in the Luzhniki Sports Arena. Officials of the cooperative movement addressed the meeting and there were open debates in which the public became involved, over issues affecting the cooperatives and the economy at large, ranging from pending tax legislation to pogroms committed against cooperatives in other cities.⁸ The organization was also a springboard for the founding of a national organization; on January 24, 1989, the Moscow union decided to organize a national congress, the fundamental purpose of which was to be the formation of a national union of cooperatives.

The All-Union Congress of Cooperatives in the Spheres of Production and Services, as it was formally called, opened on June 30, 1989, and was accorded the implicit blessing of the government when it was warmly addressed by A. P. Biriukov, the deputy chairman of the USSR Council of Ministers.⁹The delegates to this congress were a mixed lot, ranging from Academician Vladimir Tikhonov of the Leningrad Academy of Agricultural Sciences and a people’s deputy to a Father Nikodim, the head of a monastic beekeeping cooperative. Overwhelmingly, the delegates saw the most important work of the congress as political organization and action to protect cooperatives. Narrower interests of inter-cooperative organization and self-help took a distinctly second place. This was consistent with the priorities of an earlier interregional conference of cooperators held in January 1989 in Naberezhnye Chelny. Delegates to these two conferences ranked their aims in organizing as follows:¹⁰

to organize political protection for cooperators through the nomination of people’s deputies, 90 percent

to provide for the legal protection of cooperators, 80 percent

to exchange information and to organize joint scientific-technical projects, 53 percent

to establish insurance funds for the economic protection of cooperatives, 46 percent

to study markets and to organize advertising, 44 percent

to establish large joint ventures, 42 percent

to solve problems of space and supplies, 35 percent

to organize marketing activities, 9 percent

Political motives probably dominated because, whereas economic problems could be dealt with mainly at the regional level, it was only at the national level that political representation and protection could be sought. Furthermore, the delegates must have been vividly aware of the new income tax legislation that was being debated in the Supreme Soviet.

On July 1, the congress’s second day, the delegates created the USSR Union of Amalgamated Cooperatives, electing Tikhonov as its first president. In keeping with the dominance of political concerns, the primary action taken by the congress was to adopt an appeal to the USSR Supreme Soviet to suspend the proposed tax legislation. It also discussed questions dealing with state-cooperative relations and the problem of racketeers in the cooperative movement.¹¹ The membership of the union included all of the fifteen republic associations and eleven all-union trade associations (for medical and building cooperatives, for example), each of which paid an annual fee of 15,000 rubles.¹²

The congress ended with a grand and startling expression of the new freedom in the Soviet Union of which the cooperatives were a part. Just as newly elected president Tikhonov formally closed the congress, Father Nikodim mounted the rostrum and blessed all the delegates, who, as he said, “had done something that was pleasing to God.” He then walked to the front of the presidium table and, in the words of the Izvestiia correspondent, “with a sweeping gesture, made the sign of the cross over the Academician president.”¹³

The process of politicizing the cooperative movement was spurred on by the mounting pressures put on cooperatives by local and central authorities and led to the convening of an extraordinary meeting of the Moscow Union of Cooperatives held at the Moscow Youth Palace on January 27, 1990. The December 1989 decision in Moscow to freeze new cooperative registration and to review existing cooperatives was the event which precipitated this meeting. Actually, the Moscow crackdown was a fairly late development compared to what had been happening in the rest of the country, where coopera-tives had already suffered significant damage. For this reason the January gathering was not just for the Moscow Union of Cooperatives; those attending came from all over the country.¹⁴ There were about 250 delegates and an equal number of guests. This was followed on February 17 by an extraordinary congress of the USSR Union of Amalgamated Cooperatives, also held in Moscow, to discuss the same broad issues.

At the meeting of the Moscow union, the Moscow cooperatives formally refused to recognize the Moscow city legislation that had gone into effect on January 1, 1990, banning registration of new cooperatives. They said this was a violation of Soviet law, and appealed to all cooperatives to file suits against the Moscow district soviets implementing the decree.¹⁵ The meeting also demanded that the Presidium of the RSFSR Supreme Soviet repeal the Moscow City Soviet resolution, and that the USSR Supreme Soviet repeal all acts which contradicted the Law on Cooperatives. They further demanded that the All-Union Central Council of Trade Unions protect the interests of workers whose jobs were lost as a result of these illegal rulings, and that the prosecutor-general of the USSR ensure that procurators at all levels enforce the law as it was written. Finally, the meeting called for the resignation of those responsible for drawing up and implementing the allegedly illegal decree.¹⁶

At the meeting of the Moscow Union of Cooperatives and again at the February extraordinary all-union congress, many endorsed radical plans of action such as the suggestion that the cooperative movement become entirely politicized and set up its own political party. Tikhonov, as president of the USSR Union of Amalgamated Cooperatives, proposed civil disobedience in the form of a refusal to file income declarations to the tax authorities. He went on to say that the crackdown was part of a larger process that was starting in the country to throttle glasnost and the beginnings of democracy, and called for the setting up of an organization to actively work with democratic organizations (including the radical Interregional Group of People’s Deputies headed by Boris Yeltsin), and the creation of an independent cooperative press.¹⁷

At the all-union congress in February, a resolution was adopted to convene a committee to prepare the way for creation of a political party. The idea was that this party would be joined not only by cooperative members, but also by individual farmers, people working in leased enterprises, and members of public and informal organizations that supported a speedy transition to a market system.¹⁸ There were also other political forces operating at the congress, including a faction calling itself “For Free Labor” (Za Svobodny Trud).“For Free Labor” issued its own political platform, listing among its goals a guaranteed right for free enterprise activity; a guaranteed right to all kinds of properties; equality of all types of property; abolition of the state monopoly over foreign currency; establishment of a free market; strict adherence to the principle “all that is not prohibited, is permitted”; and the right to sue state bodies for illegal actions. It then declared its allegiance to the Social- Democratic Party, to which it pledged financial support, and called upon the entire cooperative movement to join it in this.¹⁹

A related theme at the congress was the need for the greater involvement by cooperators in the March 1990 election to republic and local soviets. Economist Gavril Popov, soon to become the mayor of Moscow, addressed the conference and urged members to do more to win over sections of the population to the cooperative cause. He pointed out that tens of millions were living below the poverty line and were unable to participate in the newly developing economy; cooperators therefore should be active in making sure that the standard of living of the poor did not suffer. He called for the creation of new jobs together with the development of retraining programs to help the large number of workers in state enterprises who were being dismissed. Popov referred, in addition, to the need to do something for soldiers who were being discharged as a result of reductions in the armed forces, to prevent them from joining the ranks of conservative forces opposed to cooperatives.²⁰ At the end of the emergency meeting, the USSR Union of Amalgamated Cooperatives sent an open letter to President Gorbachev, outlining all of the problems faced by the cooperatives and all of their contributions to his economic recovery program,²¹ thus implicitly urging his protection of the movement.

Cooperatives were also building bridges to other groups which had an interest in establishing market relations in the Soviet economy. An example of such a network was the December 8, 1989, meeting that took place in Moscow involving the Union of Managers of the USSR, the Rossiia association of cooperatives, the Moscow banking union, the association of young enterprise managers of the USSR, and other groups from the alternative economy.²²

Thus, by 1990 cooperatives had made considerable progress toward becoming a political force in Soviet society. The most complete statement of the cooperative movement’s political agenda was the platform issued by the USSR Union of Amalgamated Cooperatives in February 1990, just before the March local elections. The platform went well beyond the immediate concerns of cooperative businessmen to encompass a wide range of social, political, and economic transformations that the union advocated. In the political sphere, the platform called for the development of a “truly free civil society,” with “full empowerment of the population,” “the creation of a labor force free from state exploitation,” “the establishment of entrepreneurship free of bureaucratic interference,” “the emancipation of the peasantry” and the “restoration of their right to own land,” and lastly, freedom of word and actions. The economic agenda called for transformation of state enterprises into cooperative, joint-stock, and collective forms of ownership, and the transfer of the accumulated wealth of the nation to the population, free of charge. It also called for a ceiling on taxes so they could not exceed one-third of profits. The platform culminated in a call for a closer linkage with other social and political forces, including support for the platform of the Interregional Group of People’s Deputies and the establishment of contacts with the new soviets that were soon to be elected.²³

In spite of their numerous difficulties cooperatives had made considerable progress in gaining access to some of the key decision-making bodies in the state apparatus at the republic and national levels. This was one of the purposes of the organization of cooperatives into unions, and the effort began to bear fruit. Cooperatives were particularly successful in the Baltic republics in gaining involvement in decisions affecting the interests of private enterprise. In all three republics, the 1989 draft decrees on taxation of cooperatives were prepared with the direct participation of cooperators themselves.²⁴In Moscow, even at the height of the conflict between the cooperatives and the city soviet at the beginning of 1990, talks took place between the party city committee and representatives of cooperative associations. A research seminar was organized to discuss ways of devising a program for the develop-ment of cooperatives in Moscow and their incorporation into the city economy.²⁵ Some of the linkages were direct and personal, as was the case with Tikhonov who, before he became president of the USSR Union of Amalgamated Cooperatives, had helped to draft the Law on Cooperatives while he was still at the Lenin Academy of Agricultural Sciences. Also, Pavel Bunich was involved in drafting the USSR legislation on leasing prior to his election as president of the leaseholders’ union.

In February 1990, the chairman of the Kazakh cooperative union and the president of an independent trade union were present at an expanded session of the Presidium of the Kazakh SSR Council of Ministers and engaged in a debate with officials. The topic of the meeting was a new draft resolution which effectively banned state enterprises from using the services of cooperatives, a move which was vigorously fought by local cooperatives. The illegal activities of officials regarding cooperative activities were also the subject of heated debate. In its report on the meeting, Izvestiia commented that, “despite the abundance of mutual recriminations, constructive dialogue between the republic’s government and the leaders of the cooperative movement nonetheless took place.”²⁶ More significantly, when the Presidium of the USSR Council of Ministers discussed issues regarding foreign trade on April 3, representatives of cooperatives and their unions were also invited to participate in the discussions side by side with the ministers and heads of economic departments.²⁷

The government showed that it took seriously the complaints aired at the February emergency congress of cooperatives by sending the minister of finance, V. S. Pavlov, to meet with the cooperatives. He invited the congress to set up a working group to examine all of the documents regulating the relationship between cooperatives and the finance system.²⁸ This was in response to the anxious concerns of cooperative entrepreneurs that official opposition to them was growing and becoming more effective. This offer was obviously an attempt to improve the strained relations between the Ministry of Finance and the cooperative movement by setting up a working relationship. Pavlov also proposed that the Union of Amalgamated Cooperatives take the initiative in regulating the cooperative movement. What he had in mind was the distinction between those with serious intentions who were in the movement for the long haul and those who were in it for short-term gains (including presumably speculators, criminals, and others deemed undesirable by the authorities).

The growing links between cooperatives and the political system and members of the political establishment were condemned by anti-cooperative voices such as the newspaper Sovetskaia Rossiia. Charging that there was a lobby in the Supreme Soviet led by Academician Tikhonov and Anatoly Sobchak, later elected mayor of Leningrad, the newspaper claimed that co-operative interests were so well represented in the Supreme Soviet that they were able to hinder the attempts to revise the Law on Cooperatives. The newspaper further accused several groups and individuals, including people’s deputies, of having personal financial interests in cooperatives, and said that this influenced their attitude toward cooperative legislation.²⁹

But cooperatives were willing to make great efforts to disprove such negative presentations in the press and defuse public hostility. This was demon-strated by their involvement in the coal miners’ strike of mid-1989. When the miners in the Donbass attacked cooperatives and called for their elimination, the USSR Union of Amalgamated Cooperatives sent a delegation to the Donets Basin, the Kuznets Basin, and Vorkuta to investigate the miners’ complaints. Because cooperatives felt they were being unfairly blamed for the high prices charged by “profiteers,” their representatives asked the miners if they could distinguish between true cooperatives and these profiteers and whether or not they knew by whom they were being victimized. Apparently, the miners were not able to make this distinction. In Komi and Vorkuta there was evidently no dissatisfaction with cooperatives and no attempt to blame them for shortages. Before leaving, however, the cooperative delegation began discussions with the miners regarding the latter’s problems. The vicepresident of the cooperative association proposed that his association help the workers establish their own trade and supply cooperatives along with their own cooperative bank, and the cooperative union would provide the services of its foreign trade organizations so that miners could sell their coal abroad and use the foreign currency to meet their own needs.³⁰

Yet another cooperative group emerged in mid-1990. This was the Union of Leaseholders and Entrepreneurs and it held its first congress on June 1, 1990. The new organization encompassed 7.5 million leaseholders and about 6,0 enterprises, and 800 people attended the congress. In the absence of the legal right to own productive property, the cooperatives relied heavily on leased equipment and premises to conduct their businesses. The special problems faced by those involved in leasing were addressed at the congress. The purpose of the meeting was to discuss ways in which the leaseholding movement could be expanded, and how best to secure the creation of a market-oriented, non-state economy. The goals of the union were to improve existing laws and work for the adoption of better laws, to provide training in the union’s business center, and to establish a bank which would provide credits and would help with foreign trade.³¹ What the leaseholders were demanding was real independence, by which was meant that they would make their own decisions about workers’ wages and not be held responsible for the debts incurred by the business prior to its being leased out.³² The president of the new union, the economist Pavel Bunich, told the congress that 50-60 million people must be involved in leaseholding in order to bring this about. One of the speakers declared that leaseholding is a way for one to learn to “live like a normal person. . . . [to] move on from forced labor to free labor.”³³ The seriousness with which the central authorities viewed this organization was evidenced by the presence at the congress of E. Stroiev, a secretary of the CPSU Central Committee, who read a message from President Gorbachev. In his message, Gorbachev reiterated his support for the cooperative movement as an important part of his overall economic reform program.³⁴

In creating organizations to protect their economic and political interests, cooperatives formed two main types of association. Associations that were geographically based consisted of cooperatives that were engaged in a variety of businesses, with local organizations seeking economic advantages through mutual aid associations, and republic and national associations pursuing common political agendas. Secondly, what were essentially trade associations brought together cooperatives that worked in the same economic sector, such as those in scientific and technical fields, or the more narrowly organized Moscow union of building cooperatives.³⁵

In addition to organizations and associations of cooperatives, those who were employed by cooperatives also began to form their own protective unions. In the fall of 1989, after the All-Union Central Council of Trade Unions had passed a resolution allowing the cooperatives to create their own trade unions,³⁶ a new Soviet trade union was organized to provide social and legal protection for about 2 million people working in 180,000 cooperative businesses.³⁷ The reason for the establishment of this new union was that there had been complaints that cooperatives were permitting violations of labor legislation. The task of the new trade union was to monitor working condi-tions and to enforce safety regulations in much the same way that this was done at state-owned enterprises. Members of this union were supposed to receive the same benefits as workers in state enterprises, including payment for temporary disability and accommodation at sanatoriums and rest homes. Such unions were to be set up in each of the fifteen republics. The development of the new unions was clearly not the result of a grass roots movement, but rather emerged under the direct influence of the official trade union organization run by the state. The desire of the official union to gain a foothold in the cooperative movement was evidenced by the statement of Vladimir Ivanov, head of the state union’s Organizational Department. He said that the new trade union not only would act to protect workers’ narrow interests, but might one day also be able to influence the course of development of cooperatives.³⁸

While this was clearly the most systematic effort to organize cooperative workers into unions, there were other moves in this direction on a much smaller scale. In the Moscow district of the city of Kazan, people working in cooperatives that were attached to state enterprises organized their own trade union because in their view the official union was not providing any services.³⁹ In September 1989, a meeting was held on the premises of the AllUnion Central Council of Trade Unions to discuss the problems of organizing a trade union for workers in scientific-production and scientific-technical cooperatives.⁴⁰

PUBLIC RELATIONS

A combination of public prejudice and persistent anti-cooperative propaganda sustained an image of cooperatives as selfish and greedy, and as not really interested in the welfare of others. In an attempt to offset such views, cooperatives began early to donate part of their earnings to charities and other public causes, and to make voluntary contributions to local government budgets. These practices became widespread as a visible means of defusing the mount-ing public hostility over high prices and profits. Moreover, tax changes made this practice appealing since cooperatives could deduct the contributions from their taxable income. In 1989, Moscow cooperatives were making donations to charity at the rate of a million rubles a month.⁴¹ A cooperative in Leningrad, Monolit, helped out a local charitable organization called Miloserdie (Charity) by giving it 12,000 rubles toward the 25,000 rubles needed to start up a soup kitchen for the aged poor. Leningrad officials even worked out ways to channel cooperative contributions to charitable causes on a regular basis. The regional social security office in Leningrad contracted with cooperatives to regularize their donations, and with others they made arrangements for direct help to be given to single and poor pensioners. Services provided by the cooperatives included the delivery of hot meals to the homes of senior citizens, making apartment repairs, and setting up a bathhouse for single people.⁴² In Cherkess, in the Stavropol krai, cooperatives donated 800,000 rubles for the construction of a trolley line and also donated 500,000 rubles for the construction of a children’s home and a hospital. In addition to helping local charities, cooperatives routinely made donations to national charities such as the Children’s Fund and the Veterans’ Fund.

Cooperatives were also involved in the growing environmental protection movement. Environmental issues were at the top of the public’s agenda of social concerns, and a large number of unofficial environmental organizations emerged during the late 1980s. The importance of this issue was shown in a poll conducted in May 1990 in which 96 percent of those surveyed were more worried about the protection of nature than they were about rising crime rates, food shortages, AIDS, and growing national conflicts.⁴³ Among the contributions cooperatives made to this popular cause was joint work by the cooperative Nigiar and the state marine transportation organization Torgmortrans to address problems associated with the Caspian Sea.⁴⁴

The need for a more professional approach to public relations was recognized by the chairman of the amalgamation of cooperatives in the city of Frunze, who volunteered to establish a public relations center where cooperatives could hold press conferences to communicate their ideas, problems, and needs to the public via the media.⁴⁵

The increasing attention to public relations and the proliferation of regional and national trade associations and unions were important ways in which those in the cooperative movement pursued their interests. This should not obscure the fact, however, that battles continued at the local level. An interesting microcosm of the national struggle between cooperatives and their enemies was provided by the events in Maikop.

THE MAIKOP AFFAIR

In early 1990, Maikop, a city in the Krasnodar territory, gained attention for the counter-attack launched by local cooperatives to fight back against a major campaign by local officials to eliminate them.⁴⁶ In 1989, local authorities had shut down more than a thousand cooperatives in the oblast, after a period during which private businesses had flourished. Local officials, taking advantage of the decision made in Moscow to give local authorities greater control over cooperatives in their area, went on the offensive. As the chief executive of Krasnodar krai said in an interview with Moscow News in 1989, “My people have the right to know who is robbing them.” The local party boss was even more outspoken in a television interview, declaring, “Cooperatives are a social evil, a malignant tumor. Let us combat this evil in a united front.” Together, these two men were busy shutting down cooperatives at the rate of seven a day at the height of the offensive. Virtually all trading cooperatives were closed, as were most medical cooperatives and many restaurants, on the grounds that supplies were being diverted away from the public. At this time, cooperative restaurants in other parts of the Soviet Union were also being forbidden to buy food in state stores, but the officials in Krasnodar went further and forbade them to buy even in farmers’ markets. Harassment reached such a level that cooperatives in Krasnodar were even being made to pay a road repair tax. Cooperatives were heavily regulated. As the director of a cooperative that cleaned toilets and cesspools complained, “They don’t let us charge more than 30 percent above the state prices, although the state operates at a loss, and does a lousy job at that.”

The turning point came in the fall of 1989 when cooperatives in Maikop successfully began to fight back. The occasion was the announced intention of the city council drastically to reduce the number of cars that cooperatives used for taxi services. The excuse for this was that all of these cars were adding to pollution and increasing the chance of accidents. The taxi drivers went on strike for three days (during which it continually rained) before the officials had a chance to vote on this action. During this period drivers left their cars in the streets, and had their stranded customers sign petitions. As a result, the city did not pass the regulation reducing the size of the taxi fleet. After that, the cooperatives increased their resistance through lawsuits and a protest rally. The cooperatives’ counter-offensive reached its peak in early 1990 when Maikop cooperatives ran four candidates for seats on the city council, and threw their weight behind the national movement for the creation of a Free Labor Party.

Efforts by local bureaucrats and politicians to inflict damage on the cooperative movement forced cooperatives all over the country to become more political. The depth of local feeling was illustrated by the way local officials constantly ignored warnings from the center that they were violating Soviet law. As one Soviet journalist put it in a local youth newspaper: “To our authorities, the cooperative people represent an alien ideology. . . . They are free people.”

Usually, those who joined the cooperative movement did so for reasons of self-interest, because they were interested in finding a creative outlet for their entrepreneurial energies and because they wanted to make more money than they did working for the state. But events overtook them. The state and party controls that were imposed upon the cooperative movement pushed it rapidly into the political arena. This was an absolutely unintended consequence of the legal restrictions and the bureaucratic interference, and was possible only because of the democratization and growth of political pluralism under Gorbachev. As a result, these actions changed the face of the cooperative movement much more quickly than could have been foreseen, and in a direction that was quite unanticipated.

According to an official of the USSR Union of Amalgamated Cooperatives, the political battle had been won by the fall of 1990. The united actions of cooperators in the spring elections (especially in such cities as Moscow, Leningrad, and Sverdlovsk) helped put in office people who were not antagonistic to cooperatives. Following these elections, anti-cooperative legislation was abolished in many areas and leaders of the cooperative movement were predicting that more conservative areas would follow suit in order to survive in an increasingly competitive and difficult economy. Developments in late 1990 generally supported the view that the cooperatives had essentially won the political fight, and the leaders of the USSR Union of Amalgamated Co-operatives began to turn their attention to providing for the economic, social, and organizational needs of its members, and to deemphasize political activities. In their minds, at least, politicization had succeeded—the survival of the cooperative movement was assured.⁴⁷