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By Root 1486 0

takeover firms riding shotgun for Russian companies that buy raw materials for rubles and resell them at exorbitant dollar prices abroad. Western observers celebrate unfriendly takeovers as if they were crucial blows in the struggle for democratization. Joseph Blasi, a Rutgers University economist, happily retells the story of the Vladimir Tractor factory near Moscow where “a Russian businessman with a Harvard M.B.A. unseated the plant’s chief executive with the help of a New York investment group that owned one-sixth of the stock.”14 What is greed in New York counts as economic modernization in Moscow where perhaps greed really is good. Many indigenous Russian investment firms trade in the vouchers given early on in the privatization process to every Russian as a marker for their piece of the old Soviet collectivist rock, taking advantage of the fact that most Russians, desperate for cash to pay rent and subsistence, cannot afford to hold on to their vouchers and are willing to sell them cheaply to speculators. Like their American counterparts, these companies manufacture nothing except unearned profits. Other firms like the notorious MMM that went into a dizzying tail-spin in 1994 are little more than pyramid schemes through which gullible grandmothers are hustled out of their life savings, the proceeds of which are used to lure others into buying a stake in an outfit that neither owns nor produces anything other than the misplaced hope of its duped investors.15 For those rich enough to want to gamble directly, there are a dozen new casinos in Moscow, while for the less well-heeled, Harrah’s ruble slot machines are available in almost every neighborhood workingman’s grocery store.16

Wild capitalism has made business and crime kissing cousins and no one is quite sure where one ends and the other begins. Street crime and mafia-style executions are only the tip of an infrastructural iceberg that lurks below the water of business and government. Often the same people who once ran state-owned enterprises are now their “private” owners, while other former Communist managers help liquidate the businesses they were supposed to privatize, leaking goods abroad on the black market and smuggling oil and nickel and scandium out of the country for profits from which neither Russia nor Russian voucher holders profit.17 Amateur speculators lurk in the Moscow subway with signs saying I BUY VOUCHERS while enthusiastic professionals, unhindered by a centralized securities exchange, an FTC, or SEC, or regulations of any kind, exclaim: “We are making money out of air!”18

Money is not made out of air, however, but snatched from the pockets of Russians whose incomes do not permit them the luxury of speculation. What Robert Reich condemned as the “secession of the rich” from America’s public sector is a growing issue in Russia as well: two societies are emerging, one rich, private, and insulated, the other, poor, public, and exposed to the trials of the Russian nation (that is, the Russian market) at large. As the first society succeeds, with the collusion of investors from abroad—individual and institutional—the second (including the 40 percent who are technically “impoverished”) is abandoned to a bankrupt public sector incapable of offering social security, employment, or a decent wage. Even advocates of privatization now acknowledge that wage subsidies might have protected workers from what they rather charmingly call the “labor-shedding” practices of privatizers wishing to make state firms look more attractive to investors who might not have the political gumption to fire half the staff of newly acquired companies.19 In practice, however, a large percentage of the new class that makes up the second sector of the poor, the indigent, and the unemployed are flotsam and jetsam on the tides of privatization: workers who have been sloughed off by a system that is more profitable to its new private owners without them. The real story of democratization in Russia and elsewhere in Eastern Europe will likely unfold as a product of the tensions between