Russia (Hansard, 2 April 1993)

§ Mr. Ken Livingstone (Brent, East)

It is surprising that time has not been found in the parliamentary agenda over the past two or three weeks to discuss the momentous events that have been taking place in Russia. Unless I missed something, there has been merely one question to the Prime Minister from a Conservative Back Bencher in the past week or so. That seems strange because, according to the press, the Government have been quite active in making their views known in private to the Government of President Yeltsin and in briefing the press about them. There seems to be some conflict between what the Government said at the start of the crisis and the recent statement by the Foreign Secretary in Germany.

I will examine the origins of the crisis. It is easy for it to be portrayed as a crisis involving men grasping for power, between the Speaker of the Russian Parliament, Mr. Khasbulatov, and President Yeltsin. As is usually the case in politics, serious economic disagreements are the basis of the political rows now shaking the Russian constitution. The west has much to answer for, because of the economic advice that it gives to Russia. Harvard economists such as Jeoffrey Sachs, brilliant academics who have never run anything in their lives—not a company or even a local authority—have popped up in Russia at President Yeltsin's right hand and pontificated about how easily and rapidly the old Soviet command economy could be turned into a model of western democracy and free markets. Perhaps it would have been better if President Yeltsin had sought advice from people who had experience of running industry or a free market rather than turning to those who have broadly taken an academic approach.

None of the economies of the western capitalist societies that we consider to be successful came into being by following the classic academic approach that what one might call the neo-liberal economists have been pushing on the Russian leadership. All the present successful capitalist societies grew up behind trade barriers with degrees of Government intervention and with massive, and in some cases amazing, levels of inward investment. None of them came into being by following a textbook example. Britain built its economy behind trade barriers and the benefits that come from holding an empire. To suggest that somehow we can transform the Soviet command economy into a replica of western democracy in two or three years, or in 500 days, as one Russian economist advised ex-President Gorbachev, is nonsense.

The best record of growth in the world economy over the past 15 years has been in the People's Republic of China. In that country there have been moves towards liberalisation and, after the best part of a decade and a half, 15 per cent. of Chinese GDP could be considered to be in the free market and independent of the centralised state economy.

China has been successful because while it allowed private enterprises to grow up, it also preserved its state industries. If those industries are closed down, where will the people who are thrown out of work find the money to buy the goods that people in the emerging private enterprises are trying to sell them? The contrast between the relative success of the Chinese economic reforms and the problems in Russia is striking. If the privatisation programme is proceeded with as western academics and 782 some western Governments urge, unemployment of 20 or 30 per cent. in Russia is likely, perhaps for the rest of the century. That will not be conducive to the green shoots of recovery emerging in Russia.

We know the debilitating effects of our small recession on our economy and unemployment; we know about people's caution and failure to spend because of fear. So the west should have given Russia and her leadership a range of advice and options, instead of which those who no longer have influence in the White House and in 10 Downing street. The people who advised Presidents Reagan and Bush and Mrs. Thatcher, and who have come close to bankrupting the British and American economies—and who have been booted out of those residences, are finding willing ears in the Kremlin, where they will doubtless successfully bankrupt the Russian economy.

Those in Russia who are paying close attention to the advice of the discredited western economists must be clearly told that those people are no longer listened to in the west: we are moving away from their lunatic free market approach. Even the British Government are moving away from it—and so are the Americans, following the defeat of President Bush and the election of President Clinton.

These are the issues around which the conflict really centres, although much of the British and western media have characterised that conflict as a simple power struggle in Russia. Boris Yeltsin is-pursuing what we in the west now consider a rather discredited economic philosophy, while the Russian Parliament is taking a line that we would consider close to Keynesian. Yet the western media denounce everyone in the Russian Parliament as either Stalinists or fascists, claiming that the whole problem is due to their attempt to win power by undermining President Yeltsin.

In fact, a major economic issue is at stake and we need to tell the Russian Government that they must make up their own mind. It is not up to the west to intervene or decide the outcome of events in Russia; the Russian people themselves must resolve their crisis, which is taking place on a huge scale.

The crisis is so vast that there is not the slightest chance of Britain, western Europe or even Japan being able to come up with the amount of foreign capital investment that would be required for the west to step in and save the Russian economy. The Russians will have to do that themselves and the aid coming from the west will have but a marginal impact on their decisions.

The coverage of the crisis by the western media has done the British people a grave disservice. There were some remarkable comments in the Financial Times on Wednesday 17 March, when a leading editorial headed "The Choice over Russia" offered this jolly advice to the Russian people: The west may have to choose between an anarchy created by totalitarians and an autocracy run by democrats. This choice has to be made in favour of those committed to reforming Russia … Democracies must back even authoritarian rulers if the alternatives are worse. That was the logic which led to the west supporting Franco decade after decade. How would we feel if we were on the receiving end of that sort of jolly advice? "Sorry, good people of Britain, the Government are not doing too well—a Labour Government might even be elected one day; the time has come to suspend Parliament and have a period of authoritarian rule."

783 We would call it dictatorship, and it is outrageous that well-off Financial Times editorial writers from the comfort of their Surrey mansions should pontificate in this way on the grim measures that the Russian people need to face. Those are the very sort of people who have done so well in recent years. Moreover, the popular press's depiction of events was even worse.

A remarkable amount of nonsense also appeared in much of the American press. Time said that Speaker Khasbulatov was very similar to Stalin because they both smoked pipes and came from the south. That is what passes for serious political analysis in Time, but it creates an impression and smears individuals. On Tuesday 16 March, The International Herald Tribune, in similar vein, said: Contrary to conventional wisdom, the economy has not caused the present crisis: While it is far from satisfactory"—— you can say that again, with the levels of unemployment— We are witnessing an attempt by the old Communist nomenklatura, or ruling class, to recapture power and the privileges that went with it, while using the parlous state of the economy as a pretext. Led by an ambitious adventurer, Ruslan Khasbulatov, the chairman of the unrepresentative body called the Congress of People's Deputies, it is trying to gain by parliamentary manoeuvring what it failed to acquire by military power in August 1991. That is the most damaging smear. Boris Yeltsin was not the only person who stood on the tanks and faced down the attempted coup in 1991. Khasbulatov stood there with him and Members of the Russian Parliament overwhelmingly opposed that attempted coup. It is nonsense so to depict events.

The reality is that elements in the west see rich pickings in the Russian privatisation programme. The International Monetary Fund's proposals for the Russian economy are devastating. That huge document, produced two years ago, proposes that Russia should be a supplier of cheap energy—coal, gas and oil—to the world markets, which would benefit our own economic prospects quite dramatically, and writes off Russian industry rather than trying to modernise or save it.

The truth is that however backward much of Russian industry might be, the choice is between reforming and modernising it, keeping people in work and building on the economy or, as the IMF wants, letting it collapse and creating a massive pool of unemployment. The report's impact on the peoples not only of Russia but of western Europe and others who wish to trade with it is potentially disastrous. That is the key: whether we are here simply to encourage a massive privatisation in Russia which offers a few rich pickings to western financial interests or whether we are seriously trying to assist the Russian people in their choices about how to modernise their economy and develop decent standards of living.

The reality was quite clearly revealed in the initial response to Yeltsin's conflict with the Parliament. The Parliament is reflecting popular concern about the economy. It is saying that the privatisation programme is going too far too fast. How can we object? We in the west are telling the Russians that they should privatise their entire economy in the next two or three years. Between 1979 and today, the British Government managed, at best, to shift 10 per cent. of our GDP from the public to private sector. What would have happened if they had done that in one go? The market could not have sustained it. There has been a slow—not as slow as many of us would have 784 liked—shift in the economy, and even that has been difficult in many areas and has led to considerable complaints and objections. What we are proposing for the Russian people is something that we did not seek to do for ourselves when we had a Government quite capable of doing it.

The advice that has been given is disastrous for Russia. It has exacerbated the economic crisis that the Russian people face and reactionary elements in the west are advising President Yeltsin to be firm and to demolish the powers of the Russian Parliament and to go for rule by decree.

I gave notice yesterday of a specific question to which I should like an answer today. Precisely what was the advice of the British Government? Let us examine what appeared in the press. A very interesting article appeared in the Financial Times on 10 March which reported: In particular Mr. Kohl has passed a query from Mr. Yeltsin asking for confirmation of western political support if he is forced to introduce emergency measures in Russia. On 12 March, Martin Walker wrote in The Guardian: In a message to the G7 leaders sent to Germany's Helmut Kohl, Boris Yeltsin has asked the west for a blank cheque, for a promise of continued political and economic support even if he has to bring back a Russian dictatorship, suspending parliament and ruling by decree. That was followed by the kind of comments that I quoted earlier from the Financial Times.

I hope that the Minister will tell us what advice, formal or informal, was given by the British Government to President Yeltsin's Government and whether that reflects the more public comments from the Foreign Secretary in Germany on 29 March after Boris Yeltsin had been forced to back down by the opposition of the Russian Parliament and the Russian people. According to The Daily Telegraph of 30 March, the Foreign Secretary said: 'We are interested in helping Yeltsin the reformer,' Mr. Hurd said in a clear warning to the Russian President that Britain's support was not for the man but for his policies. 'As Yeltsin contemplates the possibilities of rule by Presidential decree, he might comfort himself with the thought that the end justified the means. But that was the mistake made 70 years ago by the Communists,' Mr. Hurd said in reference to the early years of the Russian revolution. That is the correct position, but it is a variance from what appeared in the press based on the usual off-the-record briefings. I am glad that we have had this debate so that the Government can, in more than just off-the-record briefings, state precisely what their position is.

I believe that the Russian Parliament is an embryonic democracy which is strengthening itself. When I went to Russia just before Christmas, I was impressed by the number of parliamentarians who were determined to make it a proper democratic Parliament. If we are to offer President Yeltsin any advice, it should be that if he is unhappy with some elements in the Parliament who were elected before the democratisation process had gone as far as it has today, he should call fresh elections.

I believe that there should be a new mandate in Russia before dramatic measures are taken. That should be the advice. President Yeltsin should build on the Parliament, strengthen it and allow the Russian people to judge the record of the parliamentarians and the president. Let them have the choice of the ballot box and say whether they support the privatisation programme and Yeltsin's economic policies or the more Keynesian line emerging inside the Russian Parliament.

785 The way forward is to trust the Russian people, not for western Governments to conspire behind the scenes and call for the firm rule in Russia which would look suspiciously like the kind of policies that we saw in Chile under the Pinochet regime in respect of which the west played such a pitiful role, first in helping Pinochet to power and then in doing nothing to curtail his excesses.

We have a chance to help create a genuine and successful democracy in Russia. That can be achieved only if they build on the electoral system and renew the Parliament. It will not be achieved by setting the Parliament aside and having strong-man rule of the kind that we have seen across so much of the world to such disastrous effect in recent decades.

§ The Minister of State, Foreign and Commonwealth Office (Mr. Douglas Hogg)

I am glad that the hon. Member for Brent, East (Mr. Livingstone) has secured this debate. It is a useful opportunity for the House to reflect on the policies that we should adopt towards Russia and events within Russia as we now see them. However, I do not share the hon. Gentleman's surprise that neither the Government nor the Labour party have chosen Russia as a subject for prime-time debate. There are probably two reasons for that. First, in truth, events in Russia are very unpredictable and vary all the time. It is, therefore, very difficult to form a clear view of where Russia is going. Secondly—I share this thought with the hon. Gentleman—there is a limited amount that we can do either by assistance or by political pressure to influence the direction of the changes going on in Russia. I think that the hon. Gentleman would agree that those changes are essentially a matter for the Russian people and that all the decisions of substance must be taken in Russia by Russians. Although a debate would be interesting and significant, it is true that neither we nor our friends, by our policies, will make a profound difference to what will happen in Russia.

Our support for Yeltsin is support for someone whom we believe to be a reformer. We judge him to be committed to a number of important democratic and market-oriented principles. We believe that he seeks to make Russia a democratic market economy. We believe that he wants to establish an effective and accountable system of government. We believe that he wants to provide systems that safeguard human rights and civil liberties in Russia and we believe that he wants to curb inflation, to bring the budget under proper control, to implement land reform and to privatise large and small businesses. We believe that those policies are in the interests of Russia. That is why we support President Yeltsin. We also believe that those policies are in our own interests, in that if they are implemented Russia will be a very much more comfortable neighbour than it will be if contrary policies are implemented.

None the less, we watch with concern what is happening in Russia and especially in Moscow. We are reassured by the fact that President Yeltsin has not circumscribed anybody's civil liberties. We are reassured by the fact that President Yeltsin has not introduced presidential rule, as the text of his decree makes plain. He has consistently called for the Russian people to be given a chance to decide how they are to be governed.

786 The hon. Gentleman referred several times to the Congress in Moscow. I believe that he was unduly kind to the Congress. It is not right to equate the Congress in Moscow with a western-style parliament. The Congress is a hangover from the Communist regime established when President Gorbachev was in power and the members of the Congress were elected under that system. It is not in the least surprising that many of them retain many of the attitudes that were then the current political philosophy. The hon. Gentleman was unduly indulgent to the members of the Congress when he referred to the economic dispute between President Yeltsin and the Congress. I think that the hon. Gentleman would agree that Mr. Yeltsin's democratic credentials are more persuasive than those of his opponents in Congress. The President was popularly elected in June 1991 with 57 per cent. of the votes in a 74 per cent. turnout, a point which we should keep in mind. However, I agree with the hon. Gentleman that the questions are for the Russians themselves to answer.

The hon. Gentleman asked what our attitude would be if President Yeltsin gathered more and more power to himself and took on the characteristics of an autocrat. The proper response must be that we support President Yeltsin because he has supported policies of economic and political reform. We should be deeply troubled by any departure from that approach. It is not possible to speculate about what we should say if he adopted policies which, at present, must be wholly hypothetical. One can honestly say that the further that Mr. Yeltsin moved away from the principles of economic and political reform, the less we would support him. One cannot go further than that because the question is wholly speculative. Our support for Yeltsin is in his capacity as a reformer and it follows that if he ceases to be a reformer our support will fall away. The extent of the withdrawal of that support depends on the nature of his policies—all else is speculation.

One must also deal with what the west can do to assist Russia and Yeltsin in the process of reform. There are two strands of thought. The first is political support for Yeltsin and the process of reform and the second is economic support.

On political support, it is important that we continue to emphasise that Russia is a welcome partner in the western community. By that, I mean that we wish to work with Russia for a co-ordination of policy and co-operation across a broad spectrum of issues. We are, therefore, seeking to establish institutional and personal links through visits and constant dialogue. It is not coincidence that my right hon. Friend the Secretary of State will be meeting the Russian Foreign Minister tonight. I had the opportunity, as part of the European Community troika, to go to Moscow last weekend. It is a process of trying to bind Russia into genuine discussion for the co-ordination of policy.

We welcome the positive way in which the Russian Government have worked with us and others within the United Nations Security Council. We want to thicken up those bilateral and multilateral contacts so that there is genuine harmony in policy making between Russia and her erstwhile opponents.

The hon. Member for Brent, East concentrated to a great extent on economic assistance. To some extent, I share his caution. I recognise that a profound change is being asked of Russia and it might be a degree of change that it cannot make, for the reasons that he outlined. There 787 is, however, a weakness in his argument and I ask him to reflect on the fact that the problem is not merely that Russian industry is in the public sector and is state owned—that is not fundamental—but that it is wholly uncompetitive. The Russians are producing stuff which cannot readily be sold in western markets. That is the essential problem and Russian efforts and, to some extent, our own, must focus on that.

It is difficult to see how that problem can be tackled unless there is a fundamental change in the structure of Russian industry, which is the argument underpinning the case for privatisation and inward investment. I am sure that the hon. Gentleman will appreciate the close link that must exist between the two because inward investment—bringing in new technologies, management styles and means to identify markets—will not take place if those selfsame industries are retained within the state sector by Russia. Therefore, if Russian industry is to be capable of trading in world markets, huge inward investment will be required, and that will not take place if it remains in the public sector.

On the question of aid, I state my own belief that although aid has a part to play, it is not so important as trade. What Russia requires are markets. We must recognise that and make adjustments to the policies that we have been pursuing. The United Kingdom has always been on the liberal wing of the argument—both in terms of free trade generally and in terms of enhanced market penetration.

There are also difficulties of which we must take account. The hon. Gentleman will know perfectly well the anxiety felt in this country and in France about the imports of Russian fish. Leaving aside the merits of that argument——