Russia Watch / Wake-Up Calls

...Industrial production fell 26 percent the first half of this year over the same period in 1993...

...He was being heckled by an old lady, who turned to me and asked, pointing at a poster of Zhirinovsky: "What do you think: is that a Russian face...

...The burly ex-vegetable magnate never misses an opportunity to drum up more foreign investment for his city...

...Russia recently sold APCs and missile systems to Kuwait—a $500 million contract—as well as eighteen MiG-29s to Malaysia...

...Quite simply, Zhirinovsky is gaining a reputation as a windbag...

...The painting "Wake Up, Russia," for instance, features a bare-chested Aryan-looking Russian youth, his arms outstretched, Christ-like...

...One might have expected a disquisition on the need to stimulate long-term savings or something of that sort...

...So he's the head of one of the largest Duma factions...

...Moscow is without a doubt the place to be during this period of "primary accumulation...

...But where does the average Muscovite—not even to mention the Siberian miner or Magnitogorsk factory worker who hasn't received a paycheck in months—fit into this game...

...Upon completion of part one, Anatoly Chubais, Yeltsin's privatization czar and the only remaining member of the original Gaidar reform team, noted with pride that Russia now boasts 40 million share-holders, The hope is that a second phase of privatization will transform industrial dinosaurs into productive enterprises...

...But it had all become a bit neprilichny (indecent...

...There are now 300 bars and nightclubs, some with cover charges way beyond the means of an ordinary Westerner...

...The parliament's lower house, which Grigory Yavlinsky, leader of the reformist Yabloko faction, aptly characterized as "a small child in diapers, replete with all that diapers contain," passed a grand total of ten pieces of insignificant legislation during its inaugural session...

...In a recent press conference, Rutskoi stressed that his new political party (called, by the way, Derzhava—"Great Power") is one based "not inside the Garden Ring"—Moscow's Beltway—"but one which comes from the provinces...

...They are the only law which makes the functioning of small, medium, and large business possible...

...Big ticket items—state funds and credits, privatization, export licenses and quotas—are controlled by the social layer described in the Izvestia study, which behaves much like the Brezhnev-era Communist Party nomenidatura...

...In fact, much of the LDP platform from last fall's campaign has become—albeit in a moderated form—Russian policy...

...have long felt that Russia's Choice, the electoral bloc headed by Yegor Gaidar, turned in such a weak performance in last December's vote not simply because it was perceived as "a party of the rich," as many commentators said, but because it was seen as representing the interests of Russia's "appointed millionaires...

...Ex–finance minister Boris Fedorev—a former director of the World Bank, as urbane and cosmopolitan as they come—was recently asked in a press interview to name the first thing he would do if he became president...

...While there is still plain old criminal activity (weapons, drugs, prostitution, auto theft, etc...

...The MMM pyramid began to collapse in late July, when a belated government effort to look into the scam sparked a panic among its stockholders...

...Ultras like Zhirinovsky and Alexander Rutskoi—the former vice president, coup-meister, and jail-bird, who has been busy in the provinces this summer organizing a new political party—want to restore the Russian empire...

...The recently returned Aleksandr Solzhenitsyn continues to insist that Russia, Belarus, and the Russified parts of Ukraine and Kazakhstan constitute an organic whole...

...It may be, too, that a change has taken place in the Russian psyche...

...y et since their strong showing in last December's vote, Yeltsin's hard-line foes have been unable to further cash in on the growing nationalism and nostalgia...

...There is no way of determining the accuracy of these rather startling claims...

...Nevertheless, capitalism a la russe has left millions of people skeptical or dazed, and the government still must steer the economy through the narrow channel between high inflation and mass unemployment...

...During his journey across Russia this summer, Solzhenitsyn made it a point to take swipes at "pampered" and "privileged" Moscow...

...Russian nationalism is definitely coming into vogue...

...In June, Yeltsin issued an anti-organized crime decree including a variety of tough—if not unconstitutional—measures, including the detention of suspects up to thirty days...

...Some today actually argue that the racketeers fulfill a necessary regulatory/enforcement function...

...Support for the program has been lukewarm, at best...

...In Russia, where courts practically do not sustain or defend economic activities, criminals are the only guarantee of honoring business contracts," economist Mikhail Delyaginwrote in Nezavisimaya Gazeta last March...

...It has entailed the most extensive denationalization in history...

...There has been an explosion of commerce and construction...

...More dangerous, perhaps, is the even greater gap that has opened up between Moscow and the rest of the country...

...Legally and psychologically, the distinction between crime and business remains murky to this day...

...Up to 70 percent of property put up for auction winds up in the hands of people picked in advance," Izvestia claimed...

...that claimed Russia's bureaucrats, businessmen (both "legal" and "shady") and the "criminal world" were gradually merging into a single, distinct social group devoted to grabbing the country's wealth...

...The restructuring of Russia's moribund state industrial sector, Livshits argues, must be carried out gradually—even at the cost of higher inflation—in order to prevent an explosion of unemployment and social unrest...

...The government has actually made no move to close down the company: at this writing, in fact, fresh MMM ads occupy full pages in the major newspapers and proliferate on state TV...

...Less then a month later, Yeltsin's spokesman Vyacheslav Kostikov rang in the new year by announcing that Russia's foreign policy in 1994 would be based on the "pan-national" idea...

...Moscow today resembles Bogota: an extremely violent boomtown where, despite Yeltsin's anti-mafia decree, contract killings continue unabated...

...A French sociological study of young "New Russian" entrepreneurs done earlier this year found that many of them belong to an old-boy network of former Komsomol leaders...

...Why did Yeltsin choose to visit an exhibition of overtly fascistic art and consort With its creator, whose views are indistinguishable from Zhirinovsky's...

...And MMM is by no means the only scam in town: local media of late have been drowning in commercials by Telemarket, another suspected pyramid scheme...

...As the article notes, the old apparatchiks are very much part of the new game...

...Indeed, he had the Western community in stitches earlier this summer when, at aluncheon for foreign businessmen, he denied that city officials demand bribes...

...A New York/Washington dichotomy is unthinkable here...

...Walking near the former Lenin Museum (a favorite hang-out for extremists) earlier this summer, I happened on a lone LDP supporter selling party paraphernalia and publications...

...as fronting for a spoils system closed to the average Russian...

...Nope...

...Economic reform in Russia has done little to foster the building of better mouse(continued on page 80) 66 The American Spectator October 1994 RUSSIA WATCH (continued from page 66) traps...

...The study said that 80 percent of voting shares in privatized enterprises "pass into the possession of criminal structures," that mafia clans control more than 40,000 businesses in Russia, and that $20 billion made from criminal activity has been laundered in the West...

...Zhirinovsky railed against the mistreatment of the 25 million Russians in the "near abroad"—the former Soviet republics...

...As the weekly Delovoy Mir (Business World) put it in an editorial on the MMM scandal, "a majority of people in this country still think that under market economy conditions they can earn a lot of money without exerting any effort for it...

...Another reason for today's political calm is that the government has managed to co-opt the new nationalism by moving to the right on issues like crime and the ethnic Russians in the "near-abroad," while maintaining a tough monetarist economic policy...

...If there were any protest rallies following the acquittal in early August of Valentin Varennikov, one of the 1991 coup plotters, I must have missed them...

...Solzhenitsyn has expressed a similar view more than once since his return...

...First of all, the weak and squabbling new parliament has not become a rival center of power, like its predecessor the Supreme Soviet, which was shelled into oblivion after the Rutskoi putsch a year ago...

...And a cursory look at the ads pasted in metro cars promising ungodly interest rates suggests there are many, many others...

...The article merely confirms a widely held view: three different polls taken since late last December found a plurality believing that the mafia now controls the country...

...Thousands of current and potential investors, it seems, are eager to build the pyramid all over again...

...when people refer to "the mafia," they mean precisely this system of dividing spoils...

...The Armageddon scenario didn't materialize: even Gaidar, in an interview I did with him in July, gave qualified support to Chernomyrdin...

...The real Russian business law is being shaped not in the arbitration tribunals, which sit on their cases for half a year and then neglect to implement their decisions...

...his summer, Izvestia ran a series T entitled "Who holds power in Russia...

...Cold Warriors could pick up where they left off, while those of a more liberal bent now had guaranteed great copy without any troubling ideological impediments...

...And, given that the lion's share of foreign investment in Russia stays within the capital's borders, it is not surprising that its caudillo mayor is a major player with national political ambitions...

...It could even give Mad Vlad a new lease on life...

...Zhirinovsky is less the bad boy of Russian politics than its class clown: an embarrassment, a durak, a fool...

...confiscatory taxes which strangle businessmen or turn them into tax cheats, making them easy pickings for criminals...

...It has been characterized, on the one hand, by the worst of statism: arbitrary, bureaucratic control over the key levers of the economy, leading inevitably to massive corruption...

...On his belt buckle is written "God is with us...

...The Chinese would like to buy $5 billion in top-line Russian weapons and technology, much to the dis64 The American Spectator October 1994 pleasure of the U.S., Japan, and Taiwan...

...Any sudden lurch could put the ultras back in business...

...At the beginning of the year, when Prime Minister Viktor Chernomyrdin announced that the days of "market romanticism" were over and that he would fight inflation with "non-monetary means," Yegor Gaidar, the architect of Russia's economic reform, left the government, closely followed by Boris Fedorev...

...Early on, Zhirinovsky got into a slap fight in the Duma cafeteria after he tried to cut in line, but that was the extent of the revolution...

...Jonas Bernstein, a contributor to The American Spectator, is a writer living in Moscow...

...On the other hand, it has featured the worst of laissez-faire—for example, law enforcement's absolute unwillingness or inability to protect honest businessmen from predators...

...Where is his piece of the pie...

...Eyes began glazing over after his umpteenth threat to put this or that reformer into a labor camp, and he even began openly squabbling with fellow Liberal Democratic Party members...

...And the young nouveaux riches everywhere, dressed in their trademark lime-green or cherry-red double-breasted jackets and turtlenecks...

...One survey carried out in February and March showed 43 percent in favor of it, 35 percent opposed...

...Big deal...

...This totalitarian, after all, didn't have a "progressive" bone in his body...

...The group's goal, one of its leaders told a press conference, is to resist the government's "incipient attack on the market and freedom...

...Moscow is the place where the key decisions are made—about foreign goods and investment coming in, about raw materials going out, and about taxes governing both...

...Not to mention casinos (fast becoming favorite vehicles for money-laundering, given their huge cash turnover), European luxury cars (many of them stolen), Western-style supermarkets, audio-electronic outlets, and even plush mini-malls straight out of Western Europe or the U.S...

...In fact, a recent poll showed that a majority of MMM shareholders blame either the company or themselves, not the government...

...Meanwhile, Yeltsin in July made a well-publicized visit to the Central Exhibition Hall on Manezh Square, to see the works of Ilya Glazunov, an artist whose style can best be described as "national-socialist realism...

...This is frightening, but criminals are the only really functioning justice...

...Liberal newspapers like Sevodniya and Izvestia gave the thumbs up—adding, in so many words, that if the Americans don't like it, they can stuff it...

...The Soviet Union is less and less remembered as a hated Communist empire...

...Its chief suddenly donned the uniform of freedom-fighter: he threatened to turn MMM's millions of investors into an opposition movement...

...And now, eight months later, the Kremlin has promulgated a sort of "Yeltsin doctrine" that links Moscow's relations with the former republics to their treatment of Russian minorities...

...It is both the focus of the country's commercial life and the command center of a highly centralized national politics that is the sole means into that commercial life...

...The authors based this assessment on information received from sources in the parliament, the Ministry of the Interior, and "entrepreneurial circles...

...And some within the government would like to capitalize on the current apathy by canceling the parliamentary and presidential elections, planned for1995 and 1996, respectively...

...Many commentators feared that the MMM fiasco would spawn an anti-government, anti-market backlash...

...Or the government's failure to regulate—or at least inform the public about—scams like MMM...

...Vlad may be the West's worst nightmare, but polls here suggest that a growing number of those who went LDP in December would not do so again...

...Zhirinovsky is already old news in Russia...

...This mind-set is in part a legacy of the past...

...It appears Russians are more interested in investing their money in pyramid schemes or real estate than in former weapons plants now manufacturing toasters...

...The prime minister has in fact turned out to be such a monetarist tightwad—inflation was under 5 percent in June—that Yeltsin's chief economic adviser Aleksandr Livshits has been urging the government to cool its inflation-fighting ardor...

...A poll taken by the Russian Academy of Sciences in early May, found that a majority of respondents viewed privatization as "legalized theft . . . undertaken for the benefit of the nomenklatura and criminals...

...A few months later, Yeltsin, in his state-of-thenation address, cited organized crime as the greatest challenge facing Russia...

...it is important to note, however, they were made not in Pravda or the fascist Zavtra, but in one of the most pro-reform and proThe American Spectator October 1994 65 Yeltsin newspapers in the country...

...There is political capital to be made off this growing geographical disparity: there's a lot of anger out there, one often hears...

...The study said that this new social layer includes former Communist apparatchiks, as well as "the 'new people,' who soared to the ruling heights at the end of the 1980s and the beginning of the 1990s on the wave of the anti-Communist movement...

...A s for Zhirinovsky's message—that's a different story...

...Add to that the ultimate faux pas for a Russian ultra-nationalist: the new Hitler's father was indeed Jewish...

...When Chernomyrdin stacked his new team with "red directors" from the state industrial and agricultural sectors, both Gaidar and Fedorev publicly and repeatedly warned that the result would be hyperinflation and collapse...

...T he latest major crack-up on Russia's road to capitalism was this summer's collapse of MMM, Russia's largest "investment fund"—a pyramid scheme that amassed a fortune for its president, the amateur butterfly collector Sergei Mavrodi...

...On the local level, this new pattern is discernible in both "red" oblasts and those governed by democrats...

...In one hand he holds the New Testament...

...Zhirinovsky vowed to put an end to defense conversion, rev up the military-industrial complex, and start selling $30 billion a year worth of weapons to whomever...

...The first phase of privatization—shares in state enterprises in exchange for vouchers distributed to every Russianin 1992—was completed this summer...

...Liberals, of course, generally have in mind repairing severed economic ties, with the result being something like the European Union...

...True, he has managed to get himself expelled and/or banned from just about every country in Western Europe, but such shenanigans have rarely made the front page here...

...in the other, a Kalashnikov...

...It may be that given the massive economic, social and psychological distortions engendered by Communism, the transition to the market in Russia could not have been anything other than an ugly, unfair, Hobbesian process...

...Certain economic activities—e.g., retail trade and agricultural transport—are controlled by racketeers, low-level bureaucrats, and corrupt cops...

...Secondly, Russians are simply sick of politics: local elections earlier this year brought out only 30-or-so percent of the electorate...

...When Mad Vlad and his Liberal Democratic Party (LDP) stormed the stage in last December's elections, it was the answer to a deep psychic need on the part of Western journalists and other Russia-watchers...

...Some of them heeded his call: in early August, while Mavrodi sat in jail, an MMM Shareholders Union claiming 20,000 members in Moscow alone, was busy organizing...

...Yuri Luzhkov has managed to wrest control over the city's privatization from Chubais...

...A stable system involving the backstage conducting of deals has developed...

...In Russia, as former trade minister Pyotr Aven said recently, "you are appointed a millionaire...

...I thought that maybe the newspaper kiosk at the Intourist Hotel near Red Square was selling back issues...

...During the Brezhnev days and even into the perestroika period, when the state continued to view private business activity as criminal, the Soviet Union's pioneer capitalists were targets of KGB harassment and thus forced into a clandestine, "shady" modus operandi...

...While Russia's living standard has been rising since 1993, its income gap has reached Third World proportions...

...He found time to drop by the North Korean embassy in Moscow and pay his respects to the deceased Great Leader...

...It is being created by those informal relations and traditions which are now being born with the help of the criminal's machine-gun...

...Undaunted, Zhirinovsky, on a visit to Nizhny Novgorod this summer, threw a temper tantrum when local authorities refused to have a limo waiting for him at the airport...

...Add to this the growing consensus across the political spectrum that the Soviet Union should be reconstituted in some form...

...He and several LDP goons took over and trashed the empty office of Boris Nemtsov, the reformist regional governor...

...He said the mafia has the country "by the throat," and described the population as being at the mercy of an "army" of corrupt bureaucrats...

...Since his arrival last January for the opening session of the Duma, the new Russian parliam'ent's lower house, the Gorbachev Effect has set in: he's getting much more press abroad than on the home front...

...Zhirinovsky called for a war on organized crime, vowing to summarily execute the leaders of the estimated 5,000 gangs operating across Russia...

...This suggests that more and more Russians accept the idea that under capitalism responsibility rests with the individual...

...Fedorev said he would first "solve the problem" of the "rebellion" in Chechnya, the breakaway Muslim region in Russia's North Caucasus, hinting atsteps which even Boris Yeltsin has thus far been loath to take...

...W ealth is unquestionably being accumulated: the face of Moscow has changed, beyond recognition since I arrived in September 1992...

...0 80 The American Spectator October 1994...

...The answer is simple: presidential campaigning has begun, and the exhibition was the best attended in the hall's history...

...In addition, the New Russians and their political leaders have had an ambivalent attitude toward organized crime: many seem to view the mafiosi as capitalists in a hurry...