The Oligarchs (18 page)

Gaidar recounted how at the end of the day they made campfires, sang, and told jokes. At the final seminar, he presented two satirical skits foreshadowing “the crisis to come.” The first was titled “The Crest of the Wave,” and it portrayed what each of them would do to reform the economy.
¹⁷
The second skit was called “Going Under,” and it showed them all being sent to prison, stipulating the length of each sentence and the size of their food ration packets.

In the months that followed, Gorbachev's era of
glasnost
dawned. Taboos were being broken everywhere, Gaidar recalled, causing even more confusion. “The censors overseeing scholarly economics journals and publishing houses were tearing their hair out,” he said. “They no longer knew what could be said and what couldn't.”

When the progressive economists tried to organize another seminar outside Leningrad in 1987, under the auspices of Sergei Vasiliev's institute, the old guard struck back. Chubais said the agenda was officially approved by the party regional committee, which meant that it was certain to be a dead end. Gaidar, Chubais, and the whole crowd went to the resort but found the meetings so boring and regressive that they walked out of the cold conference hall and gathered in one of the lodges. There, in jeans and sweaters, they began a parallel seminar, talking more openly among themselves, as they had the year before. The group had grown somewhat since the previous year and now included Mikhail Dmitriev, a graduate student in regional economic studies at Vasiliev's institute who was well versed in Western economic theory.
¹⁸
Also invited from Moscow was former Gosplan mathematician Vitaly Naishul, who had written the underground text
Another Life
and was working with Glazkov at the Central Mathematical Institute. By this time,
Another Life
, still in typescript
samizdat,
had been widely circulated among the progressive economists. The reader may recall that in the first part of the text, Naishul had made a revolutionary argument that the property of the Soviet state must be turned into private property, literally distributed to the people.
¹⁹

Standing before a stairwell at the informal seminar, Naishul made a rump presentation of his radical ideas. Spread out before him on the stairs were Gaidar, Chubais, and many of the other most progressive thinkers at the time. Naishul explained to them his concept of mass privatization in which every Soviet citizen would be given a check that could be used to purchase a bit of the enormous holdings of the Soviet state. The check would be worth 5,000 rubles and the result would be a daring leap toward the market.
²⁰

Naishul's remarks were received with sharp criticism. Both Gaidar and Chubais dismissed Naishul as too radical. They were pragmatic and wanted to try something that could actually work, not just get them in trouble with the KGB. Glazkov also thought that Naishul was jumping ahead too fast. “Look, there is a transition problem,” Glazkov recalled saying. “What you are suggesting is too tough. The system will break. If you want to get down from a tall tree, you have to climb. What you are offering us is to jump. We will break our legs and our neck!”

Gaidar's objections, he told me later, were that private property would be “politically impossible” and that it was dangerous to introduce
it when market institutions and property rights were not well developed. It was like trying to divide up the state's property on a roulette table, Gaidar said. The population would feel “cheated.” As an economist, Gaidar was at the cutting edge of change. He was beginning work as economics editor of
Kommunist
, the once orthodox Communist Party theoretical journal. Gaidar used the journal to begin to break Soviet economic taboos, and he wrote about such once forbidden subjects as inflation, unemployment, deficits, and military spending. But Gaidar felt that Naishul had gone too far—it was just unrealistic to begin thinking about private property.

Chubais was also critical of Naishul's privatization plan. He said Naishul had adopted a “trivial” device—property checks for every person—to deal with what Chubais saw as a hugely complex transaction. “What was I criticizing Naishul for?” Chubais told me later. “I was criticizing him because when you try to solve a problem of such gigantic, immeasurable, supernatural complexity—as the problem of privatization was—in such a simple and stupid way as giving out 150 million vouchers to each citizen and then just giving him an opportunity to invest it wherever he wants, this is an extremely primitive technology, extremely primitive. The result would be gigantic disproportions. Millions of people would get something that is useless, while someone would get something fantastically valuable. Millions of people would be extremely dissatisfied, and disappointed, and so on. The disproportion between the complexity of the problem and the simplicity of the way to solve it was just way too big.”

Even the discussion about private property could have brought trouble at the time, Chubais recalled. “Of course there was fear,” he told me. “It was absolutely secret. We couldn't tell anyone from the outside that this discussion had taken place. Obviously, it wasn't part of any official program. If Naishul had given that speech at the official conference, it would have undoubtedly meant that all people who organized the conference would be fired, without a single doubt. That is 100 percent sure. The subject of the presentation was privatization—
private property!
It was far beyond the line of what was allowed at the time.”

Somehow, word got back to the KGB that even the boring official conference had included anti-Soviet statements. An investigation was launched, and Chubais recalled the group being hauled before the KGB. “We were saying that we hadn't said anything of the kind, that we were simply studying the decisions of the party Congress and analyzing how to implement them better.”

Dmitriev had been taking notes in an obscure type of shorthand that was not widely taught in the Soviet Union. He told me that after the conference, the rector at his institute demanded to know what was in his notes. Dmitriev typed up the minutes and in the process completely sanitized them, leaving out anything that was remotely controversial. He gave the rector the sanitized version. Satisfied that there were no anti-Soviet remarks at the conference, the KGB let it drop. They never found out about the far more radical ideas being debated on the stairwell.

 

Chubais lived modestly and seemed indifferent to wealth. His great luxury was listening to music on a cassette player in his Zaporozhets. He lived in a one-room communal apartment, extremely common in Leningrad, with a single large corridor and small rooms off to the side for each family. “He practically studied in the corridors,” Oding remembered. “And there were a lot of neighbors. Everyone used the soap. There were problems about who took someone else's soap in the bath. You can imagine, right? Who took whose food? And he was almost never there—he was always at the library or the institute.” Chubais had been waiting patiently on the “city line” for a municipal apartment, until some friends persuaded him that he would never get a private apartment that way and should go out and buy one, even if he had to borrow from friends. “He had certain limits, what one could do, and what one must not do,” Oding recalled. “And he couldn't imagine that he could step over those limits and cross the boundaries, and allow more for himself. His personal demands were low. You live in a
kommunalka
, so you live there. It never entered into his head that he could take a step forward.”

As Gorbachev's era of
glasnost
and
perestroika
accelerated, Chubais expanded his horizons. In 1988 he spent ten months studying in Hungary, which had carried out the most far-reaching economic reforms in the Soviet bloc. There the market was not an alien concept, and a visitor would have found the stores brimming with products. “It had a huge influence on him,” Oding recalled. “He had made the Hungarian experience his own. He saw that within the framework of socialism, even within the Soviet Union, the Hungarian experience could be used. He even saw the insufficiencies of the Hungarian model.”

After Hungary, Chubais seemed more relaxed and more curious than before. At the urging of friends, he made an attempt to become
director of another institute but was defeated by more orthodox party members. He also visited the United States. “He was this rather correct person, who was maybe just one step ahead of the others, but not a kilometer,” Oding recalled. “And suddenly, he started to work over new information. It seems to me that America had a great influence on him. He never doubted himself after that. He didn't have those socialist inclinations any more. After that, he had no more socialist illusions at all.”

“His velocity changed,” she added. “There are people who, when faced with new information, become paralyzed. But Chubais's mental processor leaped to some fifth generation. He worked it all over and ran more and more quickly.” A hint of how far Chubais had come was a paper that he and Sergei Vasiliev delivered at a conference in Italy in September 1989. They concluded that the Soviet economy was basically doomed without massive change. Reform “turns out to be impossible with the existing structure of the economy,” they declared.
²¹

In the spring and summer of 1990, radical democrats swept into the Leningrad city council, just as they had in Moscow. Chubais self-confidently delivered a speech to them on “shock therapy” economic reform in Poland, and they installed him as chairman of a special committee on economic reform.
²²
Chubais gathered around him many of the friends and allies he had made in the previous decade, and they began thinking about how to make the city a model for reform.

One of those on the team was Dmitri Vasiliev, a diminutive economist with thick glasses who talked in rapid-fire bursts. He had attended the famous Naishul debate on the stairs. Vasiliev, who was deeply interested in the idea of private business and property rights, came from a family that traced its Leningrad roots back six generations. He recalled this as a heady time. The Chubais team was suddenly thinking big and parceling out all the exciting new spheres of possible reform, such as land and currency regulation. The biggest idea of all was to prepare the city—or at least a part of it—to become a “free economic zone,” sort of a demonstration project for radical economic reform inside the Soviet Union.

Vasiliev had been researching the newly emergent cooperatives, and he was given the task of privatizing small shops and businesses, which the others considered less exciting work than currency or land reform. Vasiliyev said that he saw that “the market economy was winning, and it was winning fast. For example, two hairdressers—one
state, and one private—you couldn't even compare them. The private one was doing much better.” Oding recalled that as Chubais and the team were drawing up their plans, out on the street the country was changing even faster—small kiosks and cooperatives were popping up everywhere.

Chubais was a champion of the free economic zone, but it was overtaken by events. The Soviet empire was inexorably disintegrating before their eyes. A free zone inside a collapsing country made less sense with every passing day. Then in 1991 the Leningrad council elected a new mayor, Anatoly Sobchak, a law professor who had been one of the most eloquent democrats of the Gorbachev era. Sobchak did not see the need for the Chubais experiment. He demoted Chubais from head of the economic reform agency to simply an “adviser,” which effectively marked the end of the free economic zone. Characteristically, Chubais kept working on it long after the others had given up. “It lost all its meaning,” Oding recalled, “because all of Russia become a free economic zone.”

Then Gaidar called from Moscow in the summer of 1991. Boris Yeltsin had been elected president of Russia that summer. He was putting together a team for a truly radical attempt at economic reform in Russia, and Gaidar wanted Chubais to join them. Chubais drove his yellow Zaporozhets to Moscow and began working with the Gaidar brain trust. On November 9, 1991, he called Dmitry Vasiliev in St. Petersburg. Could he write a two-page program for mass privatization of all Russia?

And write it fast?

M
IKHAIL KHODORKOVSKY was a child of the last-ditch effort of the Soviet system to save itself. Desperate for a way out of stagnation, the Soviet leadership permitted a modest experiment in capitalism. It worked—and unleashed enormous, unexpected forces of change.

The experiment occurred in the Young Communist League (or Komsomol), the party's youth organization. Khodorkovsky was the deputy chief of Komsomol at his university. When the doors swung open to new opportunities, as they did repeatedly in the years of
perestroika
, Khodorkovsky rushed through, exploiting his connections with tireless determination and a surprisingly sophisticated understanding of loopholes and gaps in Soviet socialism. Was there a hidden force behind this unstoppable young man with the black hair, mustache, and distinctively high, soft voice? The accounts I heard from friends and colleagues suggested that there was not just one Communist Party boss who put his hand on Khodorkovsky's shoulder and said, “You will be our experimental capitalist, son.” Rather, there were many patrons in high places, including the KGB. They anointed him, and Khodorkovsky anointed himself—with hard work and a
gritty fortitude. “All the ventures that were started at this time succeeded only if they were sponsored by or had strong connections with high-ranking people,” Khodorkovsky acknowledged in 1991. “It wasn't the money but the patronage. At the time, you had to have political sponsorship.”
¹
In the end, however, Khodorkovsky far outpaced his early sponsors. He was more ambitious and ruthless than the Communist Party apparatchiks who wanted to dabble in capitalism, and he was more clever than the KGB bosses in a position to help him. They never went as far as he did in the new world.