On muddy pavement between the Bolshoi Theater and the Metropol Hotel, a few thousand workers gathered under blue banners last week to protest Russian President Boris Yeltsin's economic policy.


But instead of demonstrating the might of labor unions, as organizers hoped, the rally showed the confusion and impotence of Russia's labor movement during the current economic transition. Russia's biggest union federation is wealthy in the property it inherited from its Communist glory days, but it seems at a loss to represent the 60 million workers it claims as members at a time of growing unemployment and upheaval.


The union's weakness has political implications, since many observers have been predicting for the past three years a wave of strikes and unemployment riots. The moderate turnouts at Thursday's rallies in cities across Russia showed that, at least for now, few workers are ready to channel the dissatisfaction they feel into action. That, in turn, may give Yeltsin more time to pursue his policies of privatization and fighting inflation.


The union's uncertainty also reflects difficult questions about social justice and protection of workers' rights at a time of major dislocation. Thanks to the irrationality of the old command economy, and through no fault of their own, millions of Russians work for state-supported mines, farms and factories that are unprofitable and unlikely ever to become profitable.


For the most part, the Federation of Independent Unions of Russia, once a bulwark of the Communist system, has responded to this dilemma by opposing free-market reforms that would pull the lifeline from these money-losing enterprises. But -- in what critics call a crass attempt to hold on to millions of dollars' worth of sanatoriums and other properties -- it also has tried to maintain at least cordial relations with the government.


Mikhail Shmakov, chairman of the federation, said it is trying to steer a moderate course, supporting reforms as long as they include protection for workers. But the union's many critics argued that the anti-government, anti-reform tone of Thursday's rallies proved how little the union has changed from its days as a pillar of the Communist establishment.


Viktor Nekrasov, president of the independent Seafarers' Union of Russia, said workers should be targeting their employers, not the government. But he said local union bosses and factory directors often are on the same side.


"The union shows no interest in factory directors who have parking lots full of Mercedes but don't pay their workers," Nekrasov said in an interview. "Instead, the union comes to the state with its hand out, as it always has."


In the not-so-distant bad old days, the factory director, the party chief and the union boss formed an iron triangle of management at every Soviet enterprise. None was any more concerned with workers' rights than the other, but the union handled issues of worker welfare -- handing out apartments and other perks to favored employees.


Unlike in Poland, where a grass-roots movement led to the creation of the Solidarity trade union, which in turn helped unseat the Communist government, the official union in Russia simply changed its name.


Even though many factories have been privatized, managers and owners can still belong to unions. Many workers still think of the union as a corrupt worker-welfare office. Union officials ran on the same party ticket last December with enterprise directors.


Shmakov, who took charge only a year ago, said that his union is reforming and adapting to the free-enterprise economy. He said, for example, that his headquarters is advising member unions to no longer allow employers and owners to belong to the unions. And he said his union does not oppose restructuring of the economy, if the government provides new jobs and training.


But many outsiders remain skeptical.


"The rhetoric has changed -- they talk about democracy, about reforming to operate in a market environment," one Western diplomat said. "Nevertheless, they've made such little progress, you have to believe it's going to be a long, long time -- or maybe the rhetoric is only a smoke screen."


Nothing shows the division between the two sides more clearly than their approach to the problem of unpaid wages, a central issue of last week's rallies. Many workers in Russia have not been paid for two or three months, and some are owed six months' wages or more.


Independent unions such as the Seafarers blame factory directors in many cases. A recent report in the newspaper Izvestia provided a particularly egregious example of a defense plant that has purchased a villa in the Bahamas instead of paying salaries for the past two months. The directors explained that any factory employee could use the villa. That would be a bad joke at any plant but is particularly ludicrous here: Since the plant does classified work, Izvestia said, only top managers can get passports to travel abroad.


Shmakov said that such cases are exceptions. The government could solve 90 percent of the problem, he said, by paying its own debts to enterprises -- and by decreeing that managers may pay wages before tax and utility bills.


It is not much of a solution to the huge economic problems facing this country. Shmakov himself said that, if unemployment had grown as quickly in the United States as it has here during the past year, "you would already have replaced your president."