The Oligarchs (7 page)

Naishul concluded that, surprisingly, the system had been infected by characteristics of the one great idea Marx and Lenin had sought to bury: capitalism. Gosplan resembled not so much the cathedral of Marx's hopes for a utopian workers' paradise, but rather a crude commodity exchange. The currency of this exchange could be many things, including the very stuff of the state machine—such as bureaucratic “approvals” or permissions. Anything of value in the hierarchy of Soviet life was traded: status, power, laws and the right to violate laws. Naishul discovered that even the official command economy operated on the principles of the shadow economy—the official world was rife with
blat
and
svyazi.
To Naishul it looked far more like a market than anyone wanted to admit. Naishul concluded that Soviet socialism was degenerating, slowly and agonizingly, because the great imperatives of the Stalin years, revolution and war, had long since vanished from the system.
⁹

What's more, Naishul saw that there was no accountability. Factory managers took production goals seriously, but if they were producing something shoddy or unnecessary, the system imposed no penalty on them and they did not go out of business. As long as their product was in the plan, the state would provide them with new subsidies the next year. Naishul concluded that the vaunted totalitarian state was actually quite weak.

This weakness was evident in the statistical cover-ups that so angered Naishul. Virtually all statistical yearbooks, articles, and other material provided for open publication by the authorities had been scrubbed clean and altered to eliminate any negative information.
¹⁰
In
most of Western Europe, life expectancy had continued to grow, but in the Soviet Union, during the years of stagnation, it leveled out, yet another sign that the system was in trouble. What did the bosses do? They made the statistics on life expectancy top secret. Demographers were told to work on “theoretical models” and were denied access to real data about the population.
¹¹

Perhaps the most audacious stretch of all was a series of mathematical calculations about supply and demand in the Soviet economy—the “balances.” In a classic market system, supply and demand are balanced out by free prices: an excess of supply drives the price down, and an excess of demand drives it up. But the Soviet planners tried to break these basic laws and dictate supply, demand, and price. They decided that ten thousand automobiles would be manufactured, they decided how much iron, steel, and rubber had to be set aside to make them, and they set a final price for each car. The price was absurdly low, subsidized by the state without regard to the real costs of building the car. The result was that supply never could satisfy demand. Moreover, since individual initiative had been destroyed, laborers had no incentive to do a good job; the cars were shoddy and often missing parts the minute they came off the assembly line. The parts were stolen. The result was shortage—“deficit”—and a ten-year wait to buy a new car. The balances had become imbalances, and they were causing the whole system to wobble like a top.

Like massive tectonic plates under the Earth, out-of-control forces were grinding deep inside the Soviet economic system in the 1980s. The imbalances were surreal. Energy was cheap and was squandered; a ton of oil cost the same as a single pack of sought-after Marlboro cigarettes. The irony was that in Gosplan, the system lumbered on. Naishul saw, with alarm, that the great national “balances,” which previously had been calculated once a year, were being recalculated more and more frequently—and frantically.

Naishul concluded that the Soviet system was in a deadly crisis. But he could not go out on the street and shout it, not in the early 1980s. Instead, he retreated to his private space, the kitchen, with two friends from Gosplan. In 1981, usually once a week, they gathered in his kitchen to talk—very privately—about what was wrong. Naishul discreetly began to write down his ideas. His friends told him to be careful—he could go to jail. But Naishul didn't stop. His ideas, which were remarkable for the time, spilled into the pages of the
samizdat
book.

“If nothing changes,” he wrote to his readers in
Another Life
, “you and your children will continue to scurry around in shops, wear faded clothes and torn shoes, wait in a line for an apartment for ten years, curse the broken television or refrigerator, live and work in a decaying disorder.” Naishul then went on to argue for change so profound that he still didn't dare utter it in public: he wanted to create a market economy with private property. He wanted to reward self-interest and competition. He offered his readers a farsighted description of how the vast property of the Soviet Union could be distributed to millions of people—private property—but those two words were officially unmentionable when Naishul dared to write them down. He promised a bit of a paradise would come out of privatization of the Soviet Union's vast property. “What enterprise would you like to own?” he asked in the text. “What shop? Food? Books? Clothes? Radio goods? Supermarket?” Wages would double, he promised; new shops and cafes would brighten their lives and they would enjoy a life without lines. Not only that, but the “window to Europe” that Peter the Great envisioned would reopen and they could travel the world and meet foreigners.

Then Naishul shifted his tone. Perhaps, he suggested, the reader would like to take a break from his description of “life in paradise” and go shopping. “You enter a food store to discover that there is still no milk, there has been no meat for a long time now, there is never any buckwheat. There is bread, but it is running out.”

“You wished to buy a summer dress for your wife. There are no pretty ones for sale,” he wrote. “Why?”

His answer vividly described how the Soviet system had become a tangled, unworkable mess. To fix the sundress shortage, he wrote, “the director of the clothes shop is worried by the absence of beautiful sundresses and turns to the garment factory. The director of the garment factory is horrified. ‘I left our women without sundresses?' An order is issued immediately to sew sundresses of a new design made of bright fabric. There is no fabric to be found, so the director phones the textile plant. The plant, on learning that women are short of fancy sundresses, instantly orders better-quality cotton [be cultivated] in the vast spaces of Central Asia, and an improved dye made at the vast USSR chemical industry. When the director of a chemical factory learns that our dear women are naked, he starts producing new dyes, and for this he asks for different oil products and equipment.”

Naishul noted that to fix one shortage, others were created. “To begin with, the garment factory, by decorating a sundress with several extra stitches, is now making less of other types of products . . . of parachutes, for example, which led to interruption in the supply to the air assault troops. At another factory, for textiles, the care for women led to underproduction of some textile filters, as a result, some small branch of industry got clogged up. The chemical plant, carried away with the production of red dye for sundresses . . . did not send enough of the red paint to the plastic industry, so a small plant making red alarm buttons began to produce them in green instead. . . .”

Naishul's secret manuscript was a glimpse into the tangled, atrophying Soviet economic system. By the time he finished writing
Another Life
in 1985, the troubles of the system were even greater than he had suspected. Economic growth had stalled; alcoholism, theft, and worker indifference were rampant; factories and enterprises stumbled from loss to loss; prices were set arbitrarily and remained hopelessly out of whack with reality.

Naishul did not know it then, but soon there
would
be another life, and it was not a life in Soviet socialism. The utopian experiment was coming to an end. As we shall see in the next six chapters, it was the economy of shortage and shadows, the chaos of central planning, and the driving force of self-interest that gave birth to the new capitalism—and the oligarchs of Russia.

I
N THE ECONOMY of chronic shortage that gripped the Soviet Union in the early 1980s, good books were a precious commodity, and books prohibited by the authorities were even more valuable. Although some books were banned as subversive, the Bible continued to exist in the officially atheist state. It could be found on private shelves, bought in shadow markets, obtained from foreign travelers, traded from hand to hand, and exchanged for something. As was true of everything else in short supply, the scarcity of Bibles gave them added value. On the black market, a Bible cost fifty rubles—nearly half a month's average salary.

The authorities had gone to great lengths to prohibit and inhibit the copying of printed matter, especially material considered a threat to official ideology. Even retyping forbidden manuscripts such as Mikhail Bulgakov's novel
Master and Margarita
could bring trouble from the KGB. A popular song lyric of the time referred to the East German–manufactured typewriter known as the Erika, and how it was used to make carbon copies of
samizdat
texts. “Erika can type four copies,” went the song, “this is all, but this is enough.”
¹

Using a copy machine in any office or institute required special
permission, and most copiers were kept under lock and key. Alexander Smolensky had neither lock, key, nor special permission, but he had what in socialist lingo was known as the “means of production”—a printing press, ink, and paper. He worked in a state printing shop, and when the day was done, he took over the press and printed Bibles. He was a rebellious young man, with thin hair the color of wheat and a blond mustache, who had a certain intense street smarts, the product of life at the absolute bottom of Soviet society. For Smolensky, the end of socialism began with printing Bibles.

 

Smolensky had no higher education and few prospects for success in the years of stagnation. He was an outcast. His maternal grandfather had belonged to the Austrian Bund, a Jew who was a member of the Communist Party and fled from the Nazis to the Soviet Union before World War II. His mother grew up in Moscow, but the war brought suffering and misfortune to the family because of their Austrian origins. Pavel Smolensky, his father, was sent off to the Pacific Fleet when the war began, and his mother was resettled to a state farm in Siberia with a young daughter. They returned to Moscow after the war, where another daughter was born, followed by Alexander on July 6, 1954. His parents divorced when he was small.

Smolensky's youth was a painful one of “bread and water,” he recalled. Hardship was common in the years after World War II, but it was aggravated for Smolensky because his mother, as an Austrian Jew, was barred from many jobs and was not admitted to an institute. She could not work, and they were poor. His father played absolutely no role in his life, he said, and he had no memory of him. Smolensky studied Hindi language for eight years, in hopes of finding a better life, but “I discovered that nobody needed it.” He grew up in Moscow with his older sisters and his mother. A turning point came when it was time for Smolensky, then sixteen, to apply for his first internal Soviet passport, the key identification document for all citizens. Brimming with resentment, Smolensky came to the place on the form for nationality. He could enter either the nationality of his mother, who was born in Austria, or his father, who was Russian. Smolensky wrote “Austrian,” and the entry only deepened his woes. As a Jew, Smolensky's career path was already limited; because he added Austrian, he was further stigmatized by the state as an outsider, excluded by the
system from almost any upward path in life. “After that, I received everything that was due to me,” Smolensky told me with a bittersweet half smile. “The state loves jokes like that.”
²

It was no joke. When Smolensky was drafted into the army, his documents included a long list of military districts in which he was prohibited from serving, including the most sought-after cities, Moscow and Leningrad. Smolensky was sent to faraway Tbilisi, the balmy capital of Soviet Georgia, an oriental city distant from Moscow in temperament and style. There Smolensky caught the attention of Eduard Krasnyansky, a twenty-six-year-old journalist who was serving out a deferred stint in the military. Krasnyansky recalled that when he first met Smolensky, the young man had eyes that sometimes were cheery and at other times burned like a laser. Smolensky was a
frondyor
, or rebel against the system. In the harsh world of Soviet army life, he could tolerate no slight, no insult, and was very much a loner. “A cat that walked by himself,” Krasnyansky recalled, paraphrasing a Kipling poem. “Any kind of injustice, and we had many of them in our army, provoked him. He would never allow himself to be humiliated. He wouldn't allow the people around him to be humiliated. In the army, the older soldiers could get what they wanted. Some did it by humiliating the younger and weaker. Alexander Pavlovich wouldn't allow it.” It was a common practice for the older soldiers to call the younger men by the more familiar address
Ty
, or you, as if they were children. But Smolensky wouldn't allow this small slight and insisted they address him with the more formal
Vy
.
³

Krasnyansky knew the ways of Georgia, where he had grown up. He took Smolensky under his wing. They were quite different, Smolensky the angry kid who was so skinny his trousers were always sliding around his waist, and Krasnyansky the more knowledgeable and worldly older friend. When they needed cash, they came up with an idea. At the army newspaper, they had ink, paper, and a press. They started printing cheap business cards, teaching themselves how to set type. They sold one hundred cards for three rubles, undercutting the going rate of ten rubles. They sold most of them to Krasnyansky's friends and family contacts in Tbilisi. “We were cheaper, better, faster!” Krasnyansky recalled years later with a wide grin. They were soldier-businessmen, hustlers on the side. “We did all the typography,” Krasnyansky told me. “A soldier had to live somehow.”