Grabitization (Don’t Look)
Almost everything that is wrong with Washington Post foreign
editor David Hoffman's new book about Russia's transformation into a
capitalist system, The Oligarchs, can be discerned in one small
and apparently meaningless passage on page 91. In it, the erstwhile
Moscow bureau chief of the Post (1995-2001) describes former
Russian Deputy Prime Minister Anatoly Chubais's reaction when, as a
young man, the future and now infamous "father of Russian privatization"
first read the works of Austrian economist Friedrich von Hayek:
Many years later, Chubais recalled the thrill of reading Hayek and
instantly gave his own example of how Hayek's theory worked in practice
in the United States. "One person is selling hamburgers somewhere in New
York," he told me, "while another person is grazing cows somewhere in
Arkansas to produce meat that will be used to make those hamburgers. But
in order for that person in Arkansas to graze cows, there needs to be a
price for meat, which tells him that he should graze cows."
Now, the reaction a sane person is likely to have when reading a passage
like this is, What kind of maniac experiences a "thrill" when reading
about hamburger distribution? A corollary question that occurred to me,
as I imagined this 20-year-old Soviet dreaming guiltily of Arkansas
cattle, was, Were there no girls at all in the Leningrad of Anatoly
It's a given that the answers to questions like these are not to be
found in the seminal analytical work of one of the Moscow journalism
community's most notoriously humorless foreign correspondents, but this
problem is less inconsequential than you might think. For it is
precisely Hoffman's inability to write honestly and perceptively about
ordinary human experience that makes The Oligarchs miss as badly
as it does in its attempt to describe the changes in Russian society
over the past decade or so.
By the time Hoffman took over as the Post's Moscow bureau chief,
I had been living in Russia for about five years. First as a student and
then as a freelance reporter, I'd watched during that time as Russians
became increasingly disillusioned with democracy and capitalism. Kids
I'd studied with who had brains and talent found themselves working twenty-four-hour
shifts in dingy street kiosks or lugging feminine hygiene products door
to door, while the only people from my class who ended up with money
were morons and thugs who took jobs with local "biznesmen" (read:
mobsters) doing God knows what.
That was the reality for the Russians young and old who had the
misfortune to live through the early 1990s, when the inefficient old
planned economy was dismantled and something--I hesitate to call it
capitalism--was installed in its place. Honest, hard-working people were
impoverished overnight, while swindlers and killers quickly rose to the
top. The insult was exacerbated for Russians when they began to hear
that the rest of the world, America and the American press in
particular, was calling this process progress.
What America called a "painful but necessary transition," most Russians
saw as a simple scam in which Communist functionaries and factory
directors reinvented themselves by swearing oaths to the new democratic
religion and cloaking themselves in fancy new words like "financier" and
"entrepreneur." The only difference from the old system appeared to be
that the villas were now in the south of France instead of on the Black
Sea. The ordinary Russian also noticed that his salary had become
largely fictional and that all his benefits had been taken away--corners
had to be cut somewhere in order to pay for all those new Mercedes in
At the national level, this process was symbolized by the rise of the
oligarchs, a small group of rapacious and mostly bald men who were
handed huge fortunes by their friends in government. Eventually, they
were to take the place of the Politburo as the ruling coterie of the new
Men like bankers Mikhail Khodorkovsky, Alexander Smolensky and Vladimir
Potanin, industrialist Boris Berezovsky and media magnate Vladimir
Gusinsky became Croesus-rich seemingly overnight in those early years of
the 1990s. By the middle of the decade, they owned or controlled much of
the media and held increasing influence over Boris Yeltsin, a weak
autocrat who had grown dependent on their wealth and power to fend off
his political enemies.
The Oligarchs purports to tell the story of the rise of these
men. It is an exhaustive book, impressive in scope, that contains
extensive interviews with all of the key figures. But it misses because
Hoffman does not know what it is like to sleep in a street kiosk during
a Leningrad winter, nor does he particularly care to know; he writes
like a man trying to describe the dark side of King George from a
trundle bed in a guest room of Windsor palace.
Not that this is surprising. In his tenure as a reporter in Moscow,
Hoffman was notorious for being an unapologetic ideologue, the hardest
of hard-core cold warriors. The basic structure of a David Hoffman
article was generally to lead with a gloomy flashback to some grim
Soviet-era scene and then go on to describe how, with the help of
American aid, the courageous leadership of the democrat Boris Yeltsin
and the heroic efforts of Western-minded reform economists like Chubais,
things had since changed spectacularly for the better.
In other words, lead off with a picture of a groaning, overweight
housewife at the end of a long line to buy shoes that don't fit, and
close with a shot of an apple-cheeked cashier at Pizza Hut using her
salary to buy Nikes. That was Russia Reporting 101 during the 1990s, and
no one was better at it or more devoted to its practice than David
That said, it is surprising, even shocking, that Hoffman would employ
that technique in this book, given the subject matter. Hoffman begins
his book by focusing on the Soviet-era experiences of a characteristic
"ordinary Russian," a schoolteacher named Irina, and describing her
humiliating search for toilet paper on a summer day in 1985.
Use of these images made a kind of sense in the wake of the collapse of
Communism, but in Hoffman's book, published ten years after the fact,
the decision to spend the entire first chapter (titled "Shadows and
Shortages") describing the hardship of product-deprived Soviets in the
1980s can only mean one thing. Hoffman is setting up his reader to
understand the phenomenon of the oligarchs in terms of their eventual
benefit to society.
That benefit, in Hoffman's view, is clearly a Russia full of available
products and the triumphant building of a "rapacious, unruly
capitalism...on the ashes of Soviet communism."
That the vast majority of Russians could not and cannot afford those
products, or even earn enough to feed and clothe themselves, does not
concern Hoffman. The opening of the book, set in the old USSR, is full
of portraits of ordinary folks grasping for Beatles records and VCRs and
other Western delights (Hoffman even sinks so low as to use the
heavyweight champion of Russia-reporting clichés: the Soviet
citizen sitting despondent at the sight of a full refrigerator in a
Western movie). But those same ordinary people are conspicuously absent
from the middle and later pages, when the cracks in the new system--the
stalled salaries, the collapsed local industries, the crime-- begin to
In one particularly telling section, Hoffman describes Yeltsin's
surprise when he learned in early 1998 that his popularity figures in
poll ratings had dropped below 5 percent. According to the book, media
mogul Gusinsky and some of the other oligarchs discovered that Yeltsin,
kept insulated from the truth by his KGB aides, had no conception of the
depth of his unpopularity:
"Before the meeting, they agreed that someone would try to deliver the
raw truth to Yeltsin that he was no longer popular, a painful
realization that, according to [Yeltsin's chief of staff, Viktor]
Ilyushin, the president had not absorbed."
This passage is ironic because Yeltsin's surprise at this juncture of
the story is nearly identical to that of the uninitiated reader
traveling through Hoffman's book for the first time. Until he informs us
a few sentences later of Yeltsin's meager poll ratings, the pain felt by
the overwhelming majority of Russians during the early reform years is
When Hoffman first showed us the schoolteacher Irina, she was a Soviet
citizen deprived of toilet paper, and this was apparently worthy of
note. But if she remained a teacher through this Yeltsin poll moment in
the middle of the book, in 1996, Irina also saw her health benefits
taken away, her salary slashed to the equivalent of about $50 a month
(and possibly delayed for months in any case) and funding for her school
cut so severely that she would have to buy chalk out of her own pocket.
This is not considered noteworthy, in Hoffman's estimation.
The determination to keep the telling of the oligarchs' story within the
context of their eventual salutary effect on the country leads Hoffman
into some grievous oversights and contradictions. None of these are more
important than his insistence upon painting his oligarch subjects--in
particular, Khodorkovsky, Potanin and Berezovsky--as self-made
entrepreneurs who bucked the state system to make their fortunes. The
fact that he connects the rise of these men to the encouraging fact of a
Russia full of products on its shelves is even more misleading.
The reality is that none of these men produced anything that Russians
could consume, and all benefited directly from tribute handed down from
the state. Bankers like Smolensky, for instance, made fortunes through a
collusive arrangement with state insiders who gave them exclusive
licenses to trade in hard currency during a time when prices were set to
be abruptly freed. When hyperinflation set in (naturally) and the
population frantically scampered to convert their increasingly worthless
rubles into dollars, the currency-trading licenses became virtual
spigots of cash.
Furthermore, the oligarchs really became a ruling class only after the
"loans for shares" auctions in late 1995, a series of privatizations
that underscored the incestuous relationship between the state and the
new tycoons. The state "lent" huge stakes in giant companies (in
particular oil companies) in return for cash. Implemented and organized
by Minister Chubais, the auctions ended up being one of the great shams
of all time, as in many cases the bidders themselves were allowed to
organize the tenders and even to exclude competitors. In some cases, the
state actually managed to lend the bidders the money to make the bids
through a series of backdoor maneuvers.
Hailed at the time as the death knell of the state-controlled economy
and a great advance of the privatization effort, the auctions were
actually a huge quid pro quo in which bankers were handed billion-dollar
companies for a fraction of their market price (a 78 percent stake in
Yukos, the second-largest oil company in Russia, valued at least at $2
billion, was sold for just $309.1 million to Khodorkovsky's Menatep
Bank) in exchange for support of Yeltsin in the upcoming 1996 election.
Many Russians today consider loans for shares one of the biggest thefts
in the history of mankind. Hoffman, incidentally, didn't bother to cover
loans for shares as a reporter, either.
One final note about Hoffman. Many reviewers have lauded The
Oligarchs for its "readability." They must have been reading a
different book. If there is a worse descriptive writer in the journalism
world than Hoffman, I have yet to come across him or her. In those
passages in which he goes after the "breezy" conversational style of
David Remnick's Pulitzer Prize-winning Lenin's Tomb (Hoffman's
Remnick inferiority complex is grossly obvious in this book), he
repeatedly breaks down into crass stupidities that reveal his lack of
knowledge about the country he covered for half a decade.
At one point, for instance, he describes the young Chubais as having had
a penchant for driving his Zaporozhets automobile at "terrifying
speeds." As the owner of two such cars, which feature 38-horsepower
engines and can be lifted off the ground by two grown men (or maybe four
Washington Post correspondents), I can testify that terror is not
and has never been in this machine's design profile.
Hoffman's atrocious Russian, a subject of much snickering in the Moscow
press community, also shines through in this book. He consistently
mistranslates Russian expressions and fails to grasp lingual/cultural references. For instance, when he talks about Chubais's habit
of spending long hours in the Publichka, which he says is what
"young scholars fondly called the [public] library," he appears not to
grasp that the "fond" nickname is a play on the term publichniy
dom, or whorehouse.
This might be because Hoffman is the only American male to have visited
Moscow in the 1990s and escaped without personal knowledge of the term.
Whatever the explanation, it seems clear that Hoffman is not the kind of
person one would normally consider an authority on the nontycoon Russian
That's particularly true given the ironic fact that prostitution was one
of the few real growth industries during the reign of the oligarchs, the
one feasible financial option for the modern-day Irinas of Russia.
That's modern Russia in a nutshell: plenty of toilet paper for the
asking, but no way to afford it except...the hard way.
If The Oligarchs is simply a wrongheaded book, then Building
Capitalism, by Carnegie fellow Anders Aslund, is legitimately
insidious. Aslund throughout the 1990s was a key adviser to reform
politicians like Anatoly Chubais and Yegor Gaidar, and as such his
assessment of the success of the privatization era is obviously
self-interested. He claims in the book that "populations have gained
from fast and comprehensive reforms," and that "economic decline and
social hazards have been greatly exaggerated, since people have
forgotten how awful communism was."
This is typical of Western analysis of Russia over the past ten
years--an academic who grew up in Sweden and lives in Washington,
telling Russians that their complaints about reform are groundless
because, unlike Western experts, they do not accurately remember what
life was like under Communism.
Aslund, who helped to design the privatization programs in the middle of
the past decade, goes on in the book to defend those blitzkrieg
liquidations of state industries on the grounds that such formal
privatizations were more equitable than what he calls "spontaneous
A major aim of formal privatization was to stop spontaneous
privatization, which was inequitable, slow, and inefficient. Reformers
feared it would arouse a popular political backlash against
privatization and reform, as indeed happened all over. Especially in the
[former Soviet Union], the saying "what is not privatized will be
stolen" suggested the urge for great speed.
It's not clear from this passage to whom this "great speed" idea was
suggested. Those "equitable" formal privatizations Aslund helped design
left billion-dollar companies like Yukos and Norilsk Nickel in the hands
of single individuals (Khodorkovsky and Potanin, respectively) for
pennies on the dollar. They were so corrupt and unfair that for most
Russians--the majority of whom were left impoverished by the
changes--the word "privatization" became synonymous with theft. Indeed,
Russians even coined a new term, prikhvatizatsiya (or
"grabitization"), that perfectly expressed their outrage over the
private commandeering of property they considered public and their own.
It should be admitted that the extent to which one finds success in
Russia's capitalist experiment--and the worth of the oligarchs who
administered it--is largely a matter of opinion.
If you believe that capitalism is about destroying a country's industry,
handing over its wealth to a dozen or so people who will be inclined to
move it instantly to places like Switzerland and Nauru Island, and about
humiliating the general population so completely that they are powerless
to do anything but consume foreign products and long for the "good old
days" of totalitarianism (polls still consistently show that 70 percent
of the population preferred life under Brezhnev to that of today's
Russia), then you have to judge the Russian experiment a success.
But if you believe that people are more than just numerical variables in
some dreary equation found in an Adam Smith reader (or perhaps numbers
lumped together with cows in Anatoly Chubais's dogeared Hayek text) then
you'll have a hard time finding any true capitalism at all in today's
Russia. Or in either of these coldhearted books, for that matter.