The Oligarchs, page 4
One day Irina’s sister-in-law called, shouted into the telephone, “Get dressed fast, Ira! Near the Sokol metro station, they have thrown out children’s fur coats! Hurry!” She had used the verb “to throw out” but she meant put on sale. Irina’s sister-in-law was 875th in line, and she put Irina down for 876. They rushed to the spot every day, for days, as the line dwindled. Three, four hours a day they stood in line, every day, no time left for anything else. It took all their energy. When their turn came, Irina bought several small fur coats and sewed two of them together to make one coat for herself.
When jeans arrived in the 1970s, Irina remembered how her generation went crazy. Clothes were important because as poor as they were, it was the only thing that differentiated them from each other. People would deny themselves food to buy something flashy or extravagant. They knew they could never afford to move to another apartment, but they could buy something to stand out in a crowd. Irina’s monthly salary as a schoolteacher was 110 rubles, but she spent 100 rubles for a pair of winter boots. It was not enough—she still had no winter coat. When the boots wore out, she bought a coat but had no boots. When she had a brown skirt, she had no blouse to match it; when she finally had enough for a blouse, the skirt was worn out. People had one pair of shoes for all occasions.
Within the Soviet Union, consumers had developed tastes. They were hungry for goods, influenced by what they could learn and hear about the West. But the Soviet Union did not produce contemporary consumer goods to satisfy them, and jeans were the symbol of all they lacked. The Soviet planners had not, at first, made allowances for jeans and only later supplied cheaply made imitations of the Western ones. But real jeans could be had, from travelers or scalpers, or in the special shops where the Soviet elite spent their special hard-currency certificates. The younger generation—Irina and her friends—wore jeans to the theater, to the office, anywhere, for months at a time.
The years of marazm turned them all into a vast, informal human network of connections and friends that spread from family to family, from apartment landings to workplaces, from Moscow to the distant provinces, a chain of svyazi, or connections, that helped them survive when the system could not provide. This network was part of the vast second economy, a shadow system that existed alongside the official world of five-year plans. The shadow economy thrived in industry, in retail trade, in black markets and everywhere that people were struggling to make up for the failures of Soviet socialism. Irina knew a relative who was on the admissions committee for an institute, a much sought-after school. People fought to get in, and her relative took favors from the applicants. “Where would I get meat or sausage or medicine?” she had asked Irina once. “How would I manage without my svyazi? I would be a helpless nobody.” If you needed to see a doctor, you went there with a gift in your coat pocket, perhaps wrapped nicely in a treasured, brightly colored plastic bag. It wasn’t bribery, but an accepted way of survival. To get Irina into a good hospital when her daughter was born, her sister-in-law had come up with several crystal vases and a couple of necklaces made of semiprecious stones for the head doctor.
The shadow economy nestled in the bosom of the official system. In the drive to shape a “new man,” liberated somehow from greed and envy, the Soviet authorities had devoted enormous effort to wiping out the spirit of entrepreneurship. The system sought to eliminate all private property and quash private economic activity beyond control of the state. The official orthodoxy was strict and severe: people went to jail for economic “crimes,” such as daring to buy and sell scarce goods or set up a small underground factory. The whole atmosphere, reinforced by decades of propaganda and penalties, created a cult of hatred toward those who made their own money. They were labeled speculators and criminals. Even so, the basic human instinct for entrepreneurship survived in this hostile climate. The desire to survive, to make the best of life, literally drove the shadow economy. The writer Andrei Sinyavsky, who served seven years in a prison camp for publishing his fiction abroad, recalled that in Soviet society all sorts of operations ran “on the left,” or beyond the realm of the state, for personal gain. Theft at a factory or a collective farm became a way of life; underground “production” thrived despite the risks. Sinyavsky told a remarkable story about workers at a Moscow tram depot who, at their own risk and peril, revived an old tram, already consigned to the scrap heap, and put it back on track as their own private enterprise. “Outwardly, it looked like any other state tram,” he recalled, “but inside, the driver and conductor were working not for the state, and the passengers’ kopeks were not going to the state treasury. This was a private enterprise inside socialist city transport. Long after the crime was uncovered and the criminals imprisoned, people were still gleefully recalling the story of Moscow’s private tram.”1
Years later, Lev Timofeyev, an economist who frequently wrote about everyday life, recalled how the shadow economy spread through the official one. “A shadow beef filet is sold at a state-owned shop by a meat salesman, whom we know personally,” he said. “Shadow wood grows in a state-owned forest. A physician renders shadow service to shadow patients in a state-owned hospital. Shadow goods are produced in the sphere of legal production. Shadow trades happen in the offices of official enterprises—both sellers and buyers of the shadow market occupy certain positions in the official administration. Even two soccer matches—a legal and a shadow one—take place simultaneously at the very same soccer field.” This was a reference to an official match that, in the shadow world, was “fixed” beforehand for a bribe.2
No one ever thought they could get along without their own private networks, and decades before, a word had appeared in Russian, blat, which captured the basic dynamic of the shadow economy. It was once a faintly notorious word having distant connections to thieves, but the expression had evolved to refer simply to using friends and connections to get something. In the world of blat and svyazi, those who controlled the scarcity, those at the choke point of the shortage, like the butcher, held real power in people’s lives. Although officially the Soviet authorities did not approve, the truth was that blat grew up because the Soviet system had failed—had created so many shortages and wants that people had found another way to satisfy them.3
Irina and her generation wanted more—much more—than the system could provide. The Soviet Union felt like a prison cell sometimes, the walls unyielding. The authorities strictly controlled travel abroad, monitored mail from outside, and put overseas publications under lock and key. They even saw evil in copy machines, which were locked up. Igor Primakov, a computer scientist, recalled how he would often cradle his shortwave radio on his lap and settle into his favorite easy chair, which could swivel in a 360-degree circle. At night during the 1970s, when Western radio broadcasts were jammed, he slowly, methodically, rotated the chair, exactly one degree right, two degrees left, three degrees right, until he could pick up the BBC or Radio Liberty. He learned English from the radio. Another force that broke down the walls of the Soviet Union was the Beatles. Against Soviet state ideology and mythology, the Beatles left an indelible mark on the youth of Irina’s generation, who painstakingly copied down the stanzas of their songs, learning the English word by word.
By the early 1980s, the system had begun to weaken, and the way of life outside—including the often lavish capitalist lifestyles portrayed in American pop culture—increasingly seeped through. The most dramatic break was a technological invention: the videocassette recorder. When VCRs began to be smuggled in to the Soviet Union during the early 1980s, there was no stopping the flood tide of movies, and with the movies came a spellbinding glimpse of Western prosperity. The movies were easily circulated from hand to hand, and night after night, young people would stay up watching Western films, sometimes three in a row until dawn. They observed the other life closely: the clothes, the manners, the talk, and the meaning of money and wealth. They were awed when a Hollywood film character casually opened the refrigerator in his apartment: it was always full!
Primakov and his wife, Masha Volkenstein, a sociologist, recalled for me years later how they and their friends loved to play Monopoly, which someone had smuggled in from Spain. For a year, they stayed up late into the night in pursuit of Boardwalk and Park Place. It wasn’t so much the money as the feeling of a Western casino, of freedom—it was Monte Carlo they were dreaming about.4
The day-to-day reality was a sullen struggle to survive, any way they could. The seemingly monolithic face of the Soviet centrally planned economy was in fact full of cracks, and they spent their lives squeezing between these cracks. When Irina’s train stopped at Kupavna, she and her daughter rushed off, walking down the platform and across the tracks, down a path and toward the dacha. Kupavna was a poor village, and the local store offered only meager goods: fat in a huge bowl covered with flies, brown soap, cotton fabric in rolls, and vodka—an endless supply of vodka. Irina did not even bother to look inside. After leaving her things at the dacha, she walked through a small stand of birches to a forbidding wall, a barrier of prefabricated concrete slabs so high you couldn’t see over it. And you were not supposed to go through it. The wall was the monolithic face of the system.
Beyond the wall lay a base for navy personnel, a military outpost. They called it the gorodok, little town. Irina had no idea what they did there and didn’t care. She looked for a gap in the wall. The holes were patched over almost as quickly as people could find them. There—yes!—the slabs had separated. Irina slipped inside and made a beeline for a squat building near the main gate, Military Store 28. Officially, it was just for naval officers and their families, but no one noticed as Irina took a place in the line waiting for stuffed cabbages, sausage, and cheese. She had just found another crevice in the crazy world of the shortage economy.
Once again, for one more day, she had found a way to survive.5
From the time he was a boy, Vitaly Naishul knew that numbers could speak the truth. His father had been a mathematician who calculated orbits for Soviet space satellites. His mother also was a mathematician, and so was his sister. Naishul graduated from the mathematics faculty of Moscow State University. They were a family of the intelligentsia. His father held a sensitive, top-secret post, the details of which he was careful never to discuss at home, yet he also listened to the BBC and Voice of America on the radio. Naishul wanted to work as a mathematician too and kept his faith in numbers. He felt that they spoke logically, even powerfully—one thing you couldn’t bend was the answer. There was truth in mathematics, and in the Soviet system of the 1970s it had not been ruined by ideology. Two plus two equaled four, and not even the system could change that. Or so it seemed.
Naishul was assigned a researcher’s job in the Economic Research Institute of the State Planning Committee, or Gosplan, a citadel of the Soviet system. Naishul did not see himself as a builder of Communism. He wanted to be a mathematician, and took the job gladly.
Naishul sat in the very heart of a great beast, one that ruled the economic life of an empire, allocating the resources for everything from the titanium hulls of the world’s largest nuclear submarine, the Typhoon, which were being built in the Northern Fleet shipyards, to the simple manufacture of a sundress from cotton and dyes in the provincial textile town of Ivanovo.
The empire was fabulously rich in resources, brimming with natural gas, oil, and vast quantities of timber, coal, and precious metals. It was also impossibly large, covering one-sixth of the Earth’s landmass, stretching eleven time zones from east to west and straddling two continents, Europe and Asia. The monopoly on power over this gigantic country was held by the Communist Party in a top-down hierarchy, starting with the Politburo, then the general secretary, the Central Committee, and hundreds of thousands of party functionaries in republics, regions, cities, factories, theaters, offices, schools, and institutes. The party had a special personnel system, the nomenklatura, by which it kept track of this network of appointees, from the elite in Moscow to a distant factory director or infantry unit. All roads led back to Moscow and the central authorities. Not only did they command a globe-spanning military force, not only did they seek to control literature, art, theater, and culture, not only did they dominate the sciences and seek to rule a far-flung empire of satellite nations, but also from the center, from the corridors and balance sheets of Gosplan, they tried to control every important economic decision.
From his seat at Gosplan, Vitaly Naishul gradually began to see that something was wrong. Naishul’s soft smile and black, wiry hair concealed a bit of revolutionary spirit. He did not openly display his suspicions and emotions, for that might have been risky. Instead, he began to secretly write about what he saw, and the result was a remarkable book in samizdat (or self-published) in dog-eared, carbon-paper copies. The book was titled Another Life, and it was a visionary tract.
To understand why Naishul’s work—written at his kitchen table in the early 1980s—was so important, it is necessary to reach back in time to a momentous battle of ideas. Let’s take a brief tour of this conflict, which was at the center of the Soviet economy and its collapse, before returning to Naishul.
In the Industrial Revolution of the mid-eighteenth century in Britain, automation and factories transformed rural, agricultural economies into urban, industrial ones. A new, more important economic actor was created, the industrialist, who pushed aside the early dominance of landholders, merchants, and traders. Adam Smith, the Scottish economist and philosopher, was the prophet of this new age. In his great work, The Wealth of Nations, Smith explained coherently how the central underlying motive in economic life is self-interest. In his most famous passage, he wrote: “It is not from the benevolence of the butcher, the brewer, or the baker, that we expect our dinner, but from their regard to their own interest. We address ourselves, not to their humanity, but to their self-love, and never talk to them of our own necessities but of their advantages.” Smith said the individual “is in this, as in many other cases, led by an invisible hand to promote an end which was no part of his intention.”
This observation marked a huge step forward in economic thinking. Smith made self-interest respectable. Central to Smith’s argument was the concept of free trade and competition. His ideas were later refined by other European philosophers, who peered into the inner workings of early industrial capitalism and laid down a set of rules about the way the world worked. They believed that the basic relationship between employer and worker, or between land, capital, and labor, never changes. They stand in a state of “equilibrium.” There could be changes in the supply of labor and capital, for example, but that only would only bring a new “equilibrium” that was profoundly stable.6
A relentless German revolutionary who lived a quiet, isolated life in London, Karl Marx mounted a mighty challenge to classical economics and the theory of stability. His long-time colleague, Friedrich Engels, said Marx was “before all else a revolutionist,” because he saw the world not at rest in equilibrium but constantly changing. Marx believed that just as the new industrialists, the capitalists of his age, were displacing the landed, ruling classes, the capitalists would also pass. The system described by the classical economists would come to a spectacular end with a revolt of the working class. Marx saw capitalism as just a passing phase—although a necessary one—and believed that it would have to “ripen” fully before it would eventually consume itself.7
Marx and Engels gave full voice to their theory in The Communist Manifesto, published in 1848, in which they describe the world as splitting into “two great hostile camps,” the capitalists or bourgeoisie on one side and the working class, or proletariat, on the other. Marx and Engels quite accurately observed that capitalism had unleashed enormous productive powers in the hundred years since the beginning of the Industrial Revolution. But they declared that capitalists had reduced everything in human relations to “naked self-interest.” They saw the small shops and merchants of an earlier age turned into the “great factory of the industrial capitalist,” where workers are “daily and hourly enslaved by the machine” and by the capitalist himself. They demanded the abolition of private property and predicted the demise of the bourgeoisie in a revolt by the working class.
Marx’s ideology was enthroned in 1917, when Vladimir Lenin and the Bolsheviks seized power in Russia. But Lenin and his revolutionary cohorts did not seize a country with a ripe, developed capitalism of the kind that Marx had foreseen. Nor were they propelled to power by an abused working class. Instead, Lenin both sparked and led a revolt in a country where industry and capitalism were unevenly developed, the economy was predominately agricultural, and the people were disinclined to rise up against their economic masters. Lenin’s accomplishment was to organize a coup d’état while giving the appearance of a workers’ and peasants’ revolt. Lenin shrewdly played on the peasants’ hunger for land, but the Bolshevik revolution later proved a disastrous turn for the peasants. Lenin could not wait for capitalism to “ripen” as Marx had predicted and believed that the Russian revolution would touch off a worldwide socialist revolt. It did not, but in the years after the revolution, the Bolsheviks put into practice their ideas of what Marx intended, erratically and violently. It was the beginning of a seventy-four-year experiment to defy the laws of capitalism and suppress the basic instincts of human nature. It was an experiment that, however grim and ultimately disastrous, touched all of those described in this book, who attempted to lead Russia on a different path.
The experiment took twists and turns. The civil war was marked by chaos, anarchy, and a period of stringent economic measures known as War Communism. A relative easing began in 1921 under Lenin’s New Economic Policy, which tolerated some market mechanisms in agriculture and trade. This short interlude was crushed by Joseph Stalin at the end of the 1920s. Stalin began to impose a massive command economy on the nation. He repeatedly tried to force prices downward, especially on grain and agricultural goods, with devastating results. Those who set their own prices, the private entrepreneurs, were accused of criminal “speculation.” Stalin turned viciously against the stubbornly independent peasants, forcing them onto collective farms. In 1929 he attempted a forced “revolution from above,” brutally collectivizing agriculture and creating a vast legacy of human misery—famine, death, and shortages.
