The Oligarchs (19 page)

 

At a very young age, Khodorkovsky became one of the first titans of the new entrepreneurial age, a pioneering financier. But he could not have succeeded were it not for larger events. The first and most important was the disenchantment of youth with the painful shortcomings of Soviet socialism. This led to a profound shift in which the Communist Party decided to let some young people dabble in capitalism. Khodorkovsky seized the moment.

The disillusionment of the younger generation was brilliantly captured by Time Machine
,
a legendary rock band. A popular song, which often met huge applause in concerts, told of a ship piloted by an experienced captain who gets lost at sea in a storm. The song transparently hinted that this ship was the Soviet Union. In the end, after a shipwreck, the captain is lost but the passengers make it to a new land. The song ends with, “Those of us who have survived for different reasons, have forgotten the captain of that ship.”

The lyrics were a powerful metaphor for the profound cynicism, disdain, and ambivalence that characterized the younger generation's attitude toward the Soviet leadership, the Communist Party, and all the official structures and boring propaganda that dominated their lives. They yearned to make it to some new land. They longed for the consumer goods, such as jeans, which the Soviet system could not give them, and rebelled by listening to rock music, which the Soviet system refused to give them. Many young people made their own tapes and crude records, which became treasured possessions.

The youth rebellion was a slow-moving but powerful tide for change, often expressed in later years with satire and rock lyrics that fell just short of confrontation with the system. Alexei Yurchak, manager of the Leningrad band Avia in the early 1980s who later became a
professor of anthropology at the University of California–Berkeley, has chronicled the “last Soviet generation,” young people born in the 1960s and 1970s, and how they cynically adapted to the demands of public life in the Soviet era—the empty promises—while privately rejecting them. They worshiped rock bands like Time Machine
,
which became popular in the early 1970s with romantic and lyrical music, and Avia
,
a late-Soviet band that was sharply cynical and funny. Yurchak told me that his band's lyrics were often a wild composite of different party slogans, which sounded hilarious to young listeners. In one case, Avia mimicked a famous Stalinist era song, “Wake Up and Sing,” but with such a jumble of Soviet slogans that it sounded like, “Stop thinking about anything, just wake up and sing!” Avia's performances were themselves a massive theatrical satire on the Soviet system with a large troupe of performers. The girls were dressed in black stockings, black skirts, and white shirts, saluting and marching and forming human pyramids very much in the fashion of the Soviet 1920s—except they threw in a crazy, unexpected sexual twist, such as one of the girls bending over in front of the pyramid with her bottom to the audience. Off to the right side of the stage, there was always a huge podium covered with red velvet. Between songs, a man climbed atop it and shouted slogans that sounded Soviet but were really made up, and nonsensical. “Forward is not backward!” he shouted, “Hurray!”
²

The younger audiences got the point and loved it. The humor was understated enough that Avia would not be banned by the system that it mocked. But there was always the feeling that someone was watching. Another rock band in Leningrad, Televizor, sang in the mid-1980s:

The reference to the man with cement in his eyes was unmistakable—the party and its agents were watching and were in control. Ever since the Bolshevik revolution, the Communist Party leadership strove to keep the natural restiveness of youth in check. The primary mechanism was the Komsomol, an organization ubiquitous throughout the seven decades of Soviet history. “Whenever a group of teens or
young adults gathered,” wrote Steven L. Solnick, a professor at Columbia University who documented the demise of the Komsomol, “on factory floors and on battlefields, in barracks and in dormitories, during wartime and during harvests, at construction sites and on street corners—a Komsomol organizer loomed.”
³
In a society in which the state tolerated no other voices but those of the party, there was little room for youth to find themselves in private associations. The Komsomol attempted to monopolize the lives of youth between the ages of fourteen and twenty-eight, although the leaders were often older.

For millions of youth, the main reason to join Komsomol was a cynical pragmatism: without it, a young person might fail to get into a university or get a good job. But by the late Brezhnev period, Komsomol had come to symbolize the same bleak, tired slogans as those of the party. The Komsomol leaders were widely viewed as ladder-climbing careerists, as apparatchiks with a certain obsequious character.

Gorbachev, who had once been a Komsomol activist, opened the floodgates to other organizations and other voices. He unleashed a surge in what became known as
neformalny
, or the informals: nonofficial associations, clubs, rock bands, and other groups that took shape outside the party and without official permission or regulation. During Gorbachev's era, an entire youth underground blossomed.
⁴
The youth movement was an open rebellion against the cultural orthodoxy of the past, and much of it was centered around a passion for rock music. In the 1960s and 1970s, Soviet authorities had tried to suppress rock, shutting it off radio and television. But the music spread anyway—on tapes recorded from Western broadcasts, on thin homemade plastic records, and through performances of thousands of unofficial bands that played in hidden cellars or, defying the authorities, in student and factory clubs. Black market trade thrived in record albums. The regime finally gave in and stopped attempts to suppress rock in the 1980s.

As the doors for freethinking opened up elsewhere, the Komsomol began to wither and suffered a drastic decline in membership. In Gorbachev's first three years, Komsomol membership fell by 4 million to 38 million in 1988. In earlier years, the problem of sustaining Komsomol membership had been so acute that figures were falsified. But even that could not mask the real crisis of the Komsomol in the mid-1980s. Membership dues—the lifeblood of the organization—were drying up. Viktor Mironenko, elected first secretary of the Komsomol
in 1986, later acknowledged that he could not convince his oldest son to join.
⁵

The Komsomol had to find a way to survive. Its leaders turned to the capitalist ferment on the street. By 1987, the cooperative movement was gathering steam, forming the first small businesses. The Komsomol chiefs, along with their elders in the Communist Party, decided to grab a piece of the action. They opened a door—and young Khodorkovsky breezed right through.

In the years before Gorbachev, one of the most popular ways to try and remedy the ills of the Soviet economy was “self-financing,” or
khozraschyot
, the idea that a factory could retain its own earnings. When Luzhkov had proposed it in 1980, he was rebuffed, but later in the decade the concept took hold, especially as factory directors got more control over their own affairs. The Komsomol too began to apply self-financing to its myriad of local organizations, allowing them, for example, to decide for themselves how to use income from dues, as well as proceeds earned from the Komsomol's many tourism agencies and publishing houses. Given more fiscal autonomy, many local Komsomol groups simply went into business for themselves. The Komsomol became a Communist Party business school. Cafes, discos, bars, travel bureaus, printing houses, and other small enterprises sprang up, often with loans or subsidies from Komsomol budgets. These new enterprises were allowed to keep their own profits. Entrepreneurial zeal flourished. The Komsomol plunge into business marked an abrupt change of ideology, from decaying socialism to crude capitalism. But it also was a defining moment which suggested that the Communist Party, at the very highest levels, had sensed danger and roused itself for a controlled experiment in making profits. Olga Kryshtanovskaya, a sociologist who became one of Russia's most perceptive analysts of the new business elite, told me years later that the party hierarchy initially had doubts whether the youth experiment would work. It was, she said, “just a test.” But then the test succeeded—beyond their wildest imagination.
⁶

The experiment began with a bear of a young man, Konstantin Zatulin. In 1986 Zatulin, a postgraduate student at Moscow State University, was appointed an aide to Mironenko, the first secretary of the Komsomol. Zatulin was a specialist in industrial management and had studied earlier failed attempts to reform Soviet socialism, such as the Kosygin reforms of the 1960s. His first job was to draft a letter to
the Politburo, suggesting new business directions for the Komsomol. The two-page letter took Zatulin six months to write because of enormous resistance, debate, and confusion inside the Komsomol apparatus. So many business concepts were alien to the old guard that it was extraordinarily difficult to put them on paper in a way that would win approval. Zatulin recalled that he fought with one high-level bureaucrat for weeks over the idea of establishing a company with shareholders who would be paid dividends. The bureaucrat could not grasp the concept of someone being paid who was not actually working on the factory floor. Zatulin persisted.
⁷

He realized the importance of his assignment. Nothing less than the survival of the Komsomol was at stake. Among the ideas in Zatulin's letter was that the Komsomol take over the Soviet toy industry and that it finally abandon the decades-long practice of sending Komsomol youth out on grueling construction “work brigades.” Both ideas were eventually approved. But perhaps the most far-reaching idea that Zatulin proposed was in science. In the 1960s, a youth organization called Fakel (Torch) had taken root in Novosibirsk, a center of Soviet scientific research in Siberia. The young people had found a way to earn money by helping technology-starved Soviet industry solve practical research problems, for additional pay. They were so effective that the party leadership became alarmed—and abruptly abolished Fakel. Zatulin proposed reviving the model. He suggested creating a series of “Centers for Scientific-Technical Creativity of Youth,” which, in theory, would use young scientists to help Soviet industry solve technical problems. The idea was approved, ironically, by the lion of the Soviet old guard, Yegor Ligachev, who had often expressed strong views about banning rock music.

Ligachev had no idea that he had just approved a springboard to capitalism.

 

Khodorkovsky watched Komsomol membership rolls decline firsthand. He was deputy chief of the Komsomol at the Mendeleev Institute of Chemical Technology, one of Russia's oldest industrial schools, situated at Miusskaya Square in Moscow. Khodorkovsky graduated in June 1986, a year after Gorbachev took power. He had a chemistry degree and had also served on the institute's economics debating team.

The technical sciences were a breeding ground for many new capitalists
because their studies included only a minimal amount of ideology and focused on practical questions of what worked and what did not. Alexander Khachaturov, who later became dean of economics at the Mendeleev Institute, told me that the chemists and scientists learned to sharpen their analytical skills and did not spend much time on Marx and Engels. “They entered the new life with ease,” he recalled of the
perestroika
years. “They knew what
khozraschyot
was, what profits and profitability were.” They also had an acute understanding of the country's political and economic failings. “Many felt that the country could not continue endlessly wasting its resources,” he told me. “They sensed that the regime could not continue for a long time . . . with a leadership who could not put two words together.”
⁸

In the Komsomol, Khodorkovsky collected dues, a thankless task at a time when members were fleeing. “We often had to contribute our own money into it,” Khodorkovsky told me.
⁹
“If someone didn't pay the Komsomol dues, then the deputy was reprimanded.” He took a few fingers and rapped the back of his neck in a gesture of reprimand. Khodorkovsky recalled that he disliked the dues-collecting work and took the first chance that came along to do something else. He opened a youth café—one of the budding Komsomol businesses. “It didn't work out that well,” he recalled. The café was in the wrong place. It was located inside the institute, but students fled each day for their dormitories—leaving the café empty. “That was my first experience, not quite happy,” Khodorkovsky recalled. But the Komsomol beckoned with other, more lucrative possibilities.

One of these ideas was to prove crucial to Khodorkovsky's success. It was Zatulin's proposal for young scientists to make money by providing advice to factories and industry on technical issues. Factory managers had some discretionary funds to use as they liked. They often spent their money on contracts with institutes like Mendeleev for research and technical projects. To snare some of the money from such projects, Khodorkovsky started what he called the Foundation of Youth Initiative, a “youth club” that was in reality a nascent business under the protective umbrella of the Komsomol.

Khodorkovsky and his new venture soon reached a crossroads. It was the summer of 1987, just a year after graduation. Unexpectedly, he was forced to make a choice. His superiors told him either he could climb the ladder in the Komsomol, a decent career, or he would have to leave the institute to go off and continue what they called his “self-financing
tricks.” The term was a bit derogatory, since the more seasoned apparatchiks figured the capitalist experiments were just temporary. They demanded to know what Khodorkovsky would decide: stick with them and remain a dedicated Komsomol functionary, or go off on his “self-financing tricks”?