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Kapitalizm: Russia's Struggle to Free Its Economy

Kapitalizm: Russia's Struggle to Free Its Economy

by Rose Brady

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Rose Brady, Moscow bureau chief for Business Week magazine, here provides a compelling first-hand account of Russia's transition from a socialist state to a market economy. Taking us into the factories, stores, banks, markets, homes, schools, and corridors of power in Russia, she explains how the country's own brand of capitalism has evolved.


Rose Brady, Moscow bureau chief for Business Week magazine, here provides a compelling first-hand account of Russia's transition from a socialist state to a market economy. Taking us into the factories, stores, banks, markets, homes, schools, and corridors of power in Russia, she explains how the country's own brand of capitalism has evolved.

Editorial Reviews

Scott Shane
A compelling, close-up account of the Russian economic struggle by BusinessWeek correspondent Rose Brady.
Baltimore Sun
Finance & Development
Providing a mosaic of views is the author's objective and a chief virtue of the book....For the professional economist, the book highlights the importance of initial conditions for economic reform...
Fen Montaigne
...[A]dmirably chronicles, step by step, how Yeltsin's young reformers fought to...construct a free-market society....Kapitalizm is at its best when Brady takes readers behind the scenes of machinations....one of the most coherent accounts to date of the disassembly of the economy of the Evil Empire.
New York Times Book Review
Publishers Weekly - Publisher's Weekly
Brady's vibrant account of the first six years of Russia's post-Communist economic reform explains how a once closed economy became so precariously dependent on the global markets. As Business Week's Moscow bureau chief from 1989 to 1993, Brady collected interviews from government officials Yegor Gaidar, Anatoly Chubais and Boris Nemtsov. She leaves chronology and statistics for the appendixes (which include charts listing wages, inflation, poverty level, household income) and allows anecdotes, photos and quotes to paint a picture of the socioeconomic metamorphosis of the country. Bankers and tycoons such as Oleg Boiko, Vladimir Gusinsky and Boris Berezovsky, the so-called oligarchs who have asserted their power since Yeltsin's reelection (for which they were arguably responsible), figure prominently, and Brady delicately probes the role of Western financial advisers and their reincarnation into overly bullish investors. Pensioners and the poor, too, speak out: one widowed pensioner laments, "We were just beginning to live when it was Brezhnev's time." The book ends in early 1997, when Russia's future still looked relatively rosy--before the August 1998 financial crisis catapulted the country back into economic chaos. But Brady addresses these recent changes in a postscript. For the most part, she believes that Russia has no choice but to stumble on toward economic liberalization. However, in speculating about Russia's future, Brady offers the cautious "Pozhivyom uvidem. We will live and see." (Feb.)
Kirkus Reviews
Under no five-year plan, Russia's journey to capitalism is a unique occurrence. Brady, Business Week bureau chief in Moscow when the Soviet Union disintegrated, was a witness to the ongoing struggle. The Russian economy has been in severe recession for most of the 1990s (and, according to the Finance Ministry's latest report, will continue to shrink a lot more). Funds for education, health care, and science have evaporated. The path to the free market has been rough, indeed. Vouchers, issued to all Russians, were to be used to buy shares in state-owned businesses at privatization auctions. They could be sold for cash, too. Not worth much, the vouchers were traded, arbitraged, or placed in dubious investment funds. But the idea of private ownership hasn't been generally understood. Many barely subsist, trading on street corners and waiting for the state to help while some "new Russians"-often former apparatchiks or insider nomenklatura-have become instant plutocrats. Indigenous mafias and gangsters have joined the party, seizing power by force or fanciful schemes and scams. The most promising cases are dogged by adversity. Brady describes the Vladimir Tractor Factory and interviews its management as an example. She interviews citizens in the street (literally) who cope with hyperinflation and she talks with the privatization czar. The rough politics of the last presidential election and the current economic policy are parsed impartially. Through much of the time since the fall of the Soviet regime the author seemed to think that it might all come together somehow. Yet the national fisc is still no healthier than Boris Yeltsin. In a postscript, she acknowledges the default in Russian debt,the bare spots on store shelves, and the exhaustion of policy. The aspect is Chekhovian, indeed. The sorrowful story could cause a seismic perturbation in the neighborhood of London's Highgate Cemetery (where Karl Marx lies buried). But in Russia a story is never ended. "Pozhivyom uvidem," says the author. "We will live and see." (30 photos) .

Product Details

Yale University Press
Publication date:
Product dimensions:
5.95(w) x 8.60(h) x 1.11(d)

Read an Excerpt

Chapter One

Images, Voices

    Babushki. Grandmothers. A conga line of babushki stood shoulder to shoulder outside the railway station. Their feet stamped in the slush and mud. Their blank eyes gazed into the distance. Their rough hands held out bottles of vodka, loaves of bread, Ukrainian sausages, Chinese-made handkerchiefs, T-shirts, used boots, old cameras ... all for sale.

    Hundreds of grandmothers stood at a makeshift market at the Kiev Railway Station on the south side of Moscow. Or a few miles away at Belorusski Vokzal. Near metro stations on the outskirts of town. At Luzhniki Stadium. And at train stations and stadiums in St. Petersburg, Yekaterinburg, Vladivostok, Nizhny Novgorod, Perm, and all across Russia.

    Hundreds and thousands of Russian traders were doing what just a few years ago had been against the law — exercising their freedom to buy and sell goods or to sell their old belongings, for a profit. Dengi. Money. They needed money to supplement miserly pensions or salaries. Not to buy sausage or bread, which they could still afford, but to replace eyeglasses that had been lost or to buy medicine or to pay the huge telephone bill (which used to be so low) or to buy a birthday present for a friend ... In other words, to survive Russia's transition to capitalism more or less as human beings.

    Antonina Grigorievna had worked for decades at a lightbulb plant. Nadezhda Petrovna had guarded a factory during the siege of Leningrad. Vera Nikiferovna, orphaned at birth, had raised four children on her own after her husband died of a heart attack.

    "Milaya, moya ... my darling ... what would you like?" Dressed in a big brown wool coat, with a brown wool hat, Vera Nikiferovna was selling lemons, milk, and cottage cheese.

    "We are pensioners. We don't have enough money. We have to work a little bit — what can you do? We buy these goods in the store and sell them for a little bit more — whatever we can get. I come here at about five in the afternoon and leave at nine. During the day I buy, and at night I trade — that's my work."

    Vera's husband had died twenty-two years ago. "I have two daughters and two sons, and I raised them all myself. It was easier then. Everything was much cheaper. I had seven thousand rubles in the bank. At that time I could buy both a dacha and a car with that money. Now you can't buy anything. We planned and planned and then everything was lost. We were lied to."

    They enjoyed life more before, these babushki. Life was hard but more predictable. "We were just beginning to live when it was Brezhnev's time. With him, it was good, very good. We were paid very little, but we ate well," said a woman combing through the garbage bins near my office. She wouldn't give her name. "Before we could buy meat, clothes, boots. Now I can't buy boots. It's impossible. You have to save, save, save. That means don't eat anything, don't drink anything. What to do?"

    She didn't search the garbage bins for food, though. "I look for children's toys, pretty containers, empty wine bottles, sometimes pens. I want to buy something for my grandchildren, maybe some fruit, maybe some bananas.... I come here — it's far away from my own neighborhood — so no one there will see me. Mne stydno, after all. I'm ashamed. Maybe someone will tell my children,...`Your mother is picking in the garbage.' Even sometimes my grandson asks, `Babka, where did you get this?' And I say, `I bought it.'"

    "I worked in a sewing factory for forty-one years," she recalled. "I started when I was fourteen years old. I got married young, lived with my husband, gave birth to children, raised them, and that's it. I don't have beautiful furniture. I don't have a beautiful apartment. I don't have a dacha or a car. I didn't earn anything in life. Now my children tell me I raised them the wrong way. All that honesty and fairness, no one needs it now. If you are honest you are a fool.

    "They say we are going to live better but I don't know."

    Viktor knew. "I live better, much better," he said. He had come to my apartment at the invitation of a friend. A young man in his thirties, tense, he leaned forward in his chair and smoked Camels fiercely. He was big across the chest and in the arms. He spoke in a matter-of-fact voice — without emotion. "We live as we like. I am not dependent on anyone. Everything is perfect. But for every job, I always am prepared for the worst — that I won't come back. That's it. It's pressure, constant tension."

    A robbery conviction had landed Viktor in prison at the age of fourteen. After his release, he had wandered for a while, looking for a job. When Gorbachev's perestroika allowed new private businesses to open, Viktor had joined a Moscow gang.

    "What can I say? People with higher educations are being cut back from work every day. There's nothing to do, nowhere to go. You have to live somehow, so we steal, we kill. There was one businessman in recent days, the director of a firm. He didn't want to pay us. So we took him, tied him up, brought him into the forest, and beat sense into him. After that, everything was fine. As soon as he gave us our money, we arranged for him to be kicked out of his company and we put our own man in. We invested our money into it."

    "There's a street here in Moscow — Tverskaya Ulitsa. Just look at it," Viktor urged. "All those buildings, all that land. All those new stores. It's almost all owned by people who at some time were involved in the raket. My life today is such that I can get for myself anything I want. But one perfect day maybe it won't be like that anymore."

    "I go to church every week. I light a candle. I give the bums there money for something to eat. Everything is fine."

    At a Moscow school, I met Julia. She was an attractive young woman, dressed in a short black skirt, high heels, a vest. She was in her last year, planning to enter the Institute of Foreign Languages. Her best friend had just been killed. "He was a bodyguard for a businessman, and he was shot. He was the only person who had the kind of life I respect. He worked, he brought money home to his family. He lived for something and for someone. I haven't met many people like that."

    Julia spoke with a great deal of irony for one so young. "This is the kind of country that makes you tired," she explained. "It's that kind of life, impossible to predict. You go along and suddenly bonk — a new reform. Yesterday you had ten thousand rubles, and today it's only worth a ruble. And in our country now if you don't have money you will not succeed. Whether you area genius or a fool, you need money. All around, you have to give bribes."

    But she did not want to go back to the way it was before. "I think Russia should be a capitalistic country. We shouldn't have the situation when a stupid, cruel, immoral person should have as much as an intelligent person. It's not moral. If people behave differently, work differently, why should they be paid the same?"

    On the assembly line of the huge tractor plant in the ancient city of Vladimir, Alexander Martisyanov missed the old socialist egalitarianism. A spark plug of a man, short and tough, Martisyanov was hoisting a half-built engine onto a hook. He had worked at the factory for forty-four years. "Look at these hands," he declared, holding them up. The right hand was covered by a thick, grease-stained blue mitten. The left hand was bare except for the grease working its way into his pores. "Before, they gave us two. Now I only get one. I switch it from hand to hand. One hand gets dirty, the other gets a rest. Our conditions have worsened in every way. We produce one-half of what we used to. Our wages are never paid on time. Socially, we are poorly defended. The minimum amount you can live on is seventy thousand. We get paid forty thousand or fifty thousand a month."

    "Look at the assembly line," he gestured. "It's shut down. Today isn't a holiday. It's a normal working day. But we didn't get the right parts so we cannot work."

    "Whose fault is this?" he asked rhetorically. "It doesn't depend on us, the working class. The bosses dictate everything. They say there are no parts, but there always used to be parts. The parts came from all over the union — from everywhere. Now we are all disintegrated. Everything is ruined."

    Poverty, crime, industrial collapse. These were images of Russia's lurch toward capitalism. Yet there were also images and voices of abundance, optimism, hope. In his newly remodeled office in a prerevolutionary mansion in downtown Moscow, Sergei Solodov leaned back in his plush leather chair. As vice chairman of Rossisky Kredit, one of Russia's largest commercial banks, he felt the burden of his responsibilities. "I spend about twelve or thirteen hours a day at work. Saturday I usually work — either meeting with the collective or on business trips. I have almost no personal life. Once a month I rest, and the rest of the time I work. I am the kind of person who decides to live and die at work."

    Solodov was in his early twenties. Not long before, he had received his diploma from the economics faculty of the automotive construction institute. An average student, he had spent one week on the assembly line, the next week in the classroom. Then his life changed. His sister started working for Rossisky Kredit, and he soon applied for a job there. He worked part-time while finishing his diploma, then full-time. In two years, he rose from analyst to vice chairman. "Now is the time for young entrepreneurs," said Solodov. "We are playing. We are playing football. And the more we play, the better. As we go up, the country will go up." He wanted to help his bank grow throughout Russia and the world, and he was not modest in his objectives. "Empire. To create an empire. That is our goal, to become a transnational corporation. Our goal is to develop while there is the possibility in Russia."

    "I very much like the climate that we now have in Russia," Solodov said. "Whether we say it is good or bad, at least it gives you the freedom to work. If a person has energy, initiative, and a strong mind, that person is able to work."

    Solodov predicted, "In Russia today, there are those who are satisfied with their lives and those that are not satisfied. The new formation will be those that are not satisfied. It will be those that will take the initiative to push forward for the nearest fifteen to twenty years at a minimum. Everything depends on the intellectual potential of the young people. I am by nature an optimist, and I believe that in Russia everything will be fine."

What People are Saying About This

Simon Johnson
This is without a doubt the best-informed book by someone who was there but who was not herself a protagonist. Brady takes a detached and balanced view of Russia's economic and political reform since 1991.

Meet the Author

Rose Brady is editor of European and Latin American editions of Business Week magazine. As the magazine’s Moscow bureau chief from 1989 to 1993, Brady covered the collapse of the Soviet Union and the launch of Russia’s radical economic reforms. Since 1994 she has returned for a number of extended visits to cover, among other events, Boris Yeltsin’s reelection and the rise of Russia’s tycoons.

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