Too often Party leaders underestimated this stratum’s ideological danger. Some even denied that such a danger existed. In this respect, the aforementioned Frol Kozlov rang the bell for complacent hypocrisy. At the very time Kozlov was secretly lining his pockets protecting would-be capitalists, he brazenly assured the Twenty-second Congress of the CPSU “that in Soviet society there no longer exists a social basis on which any opportunist trends could thrive in the party.”209
In the society at large, illegal, private moneymaking promoted petty bourgeois values and undermined socialist legitimacy. On the one hand, the underground economy served as a training ground for entrepreneurs, shaped a public consciousness favorable to markets, and “helped create a consensus for market reforms.”210 On the other hand, the underground economy and everything that went with it created what some called a “demoralization crisis.” The prevalence of illegal activities, pilfering, time-stealing, bribery, and corruption, the ubiquitous blat or the “economy of favours,”211 and the growing inequality undermined some people’s faith in the ultimate fairness of the system. The diversion of the highest quality goods into the black market and the shortages aggravated by the black market cast doubts on the system’s efficacy. The second economy thus cut two ways—it slashed at socialism’s worth, while it carved an altar for money. Grossman said, “The prevalence of economic illegalities and corruption casts doubt on the ability of the Soviet system to provide minimal material benefits to its population or to administer its own socialist economy according to its own principles and rules.” Meanwhile, “it elevates the power of money in society” to rival that of the governing Party.212
Some Communists who noticed the development of anti-socialist ideas and values within socialism did not go very far in diagnosing its origin or prescribing a solution. Georgy Shakhnazarov, later a key aide to Gorbachev, wrote a futurological essay in 1978 in which he warned of the growing “philistine, petty bourgeois mentality,” the true source of which was “the scrimmage for riches and the accompanying advantage.” Shakhnazarov noted that inequality and classes still existed and “so long as the problem [of classes] is not radically settled, relapses of petty bourgeois mentality are possible. And relapses mean epidemics, not isolated cases of the malaise, often affecting whole social groups.”213
If Shakhnazarov could point to a petty bourgeois mentality in the 1970s, by the early 1980s this mentality was crystallizing into interest groups with their own agendas. That is to say, the second economy began to serve as the material basis for social structures and ideologies at variance with socialism. One was the world of organized crime. Another was the world of “political dissidents, ethnic and religious activists, refuseniks, opters-out, non-conformist writers and artists, and samizdat publishers.” The second economy and the West furnished these alternative social structures “much material support, especially in the pre-Gorbachev years.” Inscribed on their banners was the petty bourgeois watchword—freedom: freedom to promulgate religion, freedom to emigrate, freedom not to work, freedom to make money, freedom to exploit others, freedom to write and publish anything. Historian S. Frederick Starr said, “Unsanctioned informal groups and networks sprang up in many fields. Tens of thousands of them were in existence by the mid-1980s, some founded only to provide voluntary services but others existing to influence public policy.” These groups did not arise to promote class struggle, sacrifice, civic virtue, or international working class solidarity. Rather, they promoted freedom, individualism and acquisitiveness, and as Starr noted, “All of this ferment began prior to Gorbachev’s rise to power in 1985.”214
A striking example was the organization, In Defense of Economic Freedom, formed in 1981 and led by V. Sokirko. In Defense of Economic Freedom waged an open campaign for the legalization of the second economy. In particular, it conducted agitation for the repeal of Article 153 of the Russian Soviet Penal Code that outlawed private entrepreneurial activity. The group appealed to the USSR Supreme Soviet’s Committee on Legal Affairs to abolish the article. The organization compiled the records of cases brought under this article and published a journal exposing what the editors regarded as unfair convictions. The group also conducted show trials based on actual cases, where the juries generally acquitted those whom the authorities had convicted. According to Valery Rutgaizer of Gosplan, In Defense of Economic Freedom’s campaign “managed to create an atmosphere of public censure of Article 153” even to the point of stopping prosecutions.215
Before Gorbachev came to power, the ideological influence of the second economy made itself apparent within the Communist Party and the Soviet government. Two distinct approaches toward the illegal economy developed in the early 1980s. One approach predominated in two research institutes that Andropov set up to study the second economy—one institute in the USSR Procurator’s Office and the other in the USSR Interior Ministry. For these two institutes, individual labor activity fell into one of two categories, that which was legal and beneficial to the society, and that which was illegal and resulted in unearned, illegitimate income. Both institutes viewed the latter, the “shadow economy,” as incompatible with socialism. Its growth had resulted from “legal shortcomings”—a failure to enforce the law. It needed to be combated by “stepping up control and monitoring of the individual labor activity.”216
The other approach found expression in Gosplan’s Scientific and Research Economic Institute headed by Valery Rutgaizer. This approach, which Gorbachev eventually embraced, viewed most of the shadow economy as legitimate and useful. This institute aimed at “transforming the economic system” so as to legalize much previously illegal, private economic activity. Early on the members of this institute argued for using leasing and cooperative arrangements to legitimate parts of the second economy, a course of action Gorbachev would follow. These arrangements became a way station on the road to privatization and marketization.217
In the early 1980s, as at other times in the past, the Communist Party faced a variety of economic, political and foreign policy problems. As in the past, some saw the way forward as involving some kind of accommodation with capitalism or incorporation of capitalist ideas. By the 1980s, however, this approach had acquired hidden reserves. Those reserves were embodied by the stealthy growth of a petty bourgeois stratum and a corrupt section of the Party and state that likewise favored a move toward capitalism, toward free markets, private property, free enterprise, and other bourgeois “freedoms.” In this sense, Gorbachev’s move to the right in 1987 and the subsequent unraveling of Soviet socialism can best be understood as the product of a conjunction of the historic Bukharin/Khrushchev tradition and the emerging petty bourgeois of the second economy.
However important the second economy was in providing a basis for bourgeois ideas, this stratum did not exist in isolation. It floated on a larger sea of potential discontent. The very success of socialism had created a vast urbanized and educated intelligentsia in the Soviet sense of white-collar, non-manual workers. Some of this intelligentsia felt disadvantaged by the wage equalization that had occurred since the 1950s. For example, doctors, teachers, engineers, and administrators typically earned less than skilled workers did. Moreover, increased travel and communication had made the intelligentsia aware that they enjoyed a lower standard of living than their counterparts in the West. By the 1980s, this intelligentsia, by the way, had a disproportionate influence at the top. At least half the members of the Communist Party, and an even greater proportion of leaders, came from this sector.218