Grabitization (Don’t Look)

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 Chubais’s youth?

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 town.

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 elite.

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 Hoffman.

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 show.

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 completely concealed.

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 experience.

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 privatization.”

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.

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