Sale of the Century: Russia's Wild Ride from Communism to Capitalismby Chrystia Freeland, Jon Karp (Editor)
In the 1990s, all eyes turned to the momentous changes in Russia, as the world's largest country was transformed into the world's newest democracy. But the heroic images of Boris Yeltsin atop a tank in front of Moscow's White House soon turned to grim new realities: a currency in freefall and a war in Chechnya; on the street, flashy new money and a vicious Russian mafia contrasted with doctors and teachers not receiving salaries for months at a time. If this was what capitalism brought, many Russians wondered if they weren't better off under the communists.
This new society did not just appear ready-made: it was created by a handful of powerful men who came to be known as the oligarchs and the young reformers. The oligarchs were fast-talking businessmen who laid claim to Russia's vast natural resources. The young reformers were an elite group of egghead economists who got to put their wild theories into action, with results that were sometimes inspiring, sometimes devastating. With unparalleled access and acute insight, Chrystia Freeland takes us behind the scenes and shows us how these two groups misused a historic opportunity to build a new Russia. Their achievements were considerable, but their mistakes will deform Russian society for generations to come.
Along with a gripping account of the incredible events in Russia's corridors of power, Freeland gives us a vivid sense of the buzz and hustle of the new Russia, and inside stories of the businesses that have beaten the odds and become successful and profitable. She also exposes the conflicts and compromises that developed when red directors of old Soviet firms and factories yielded to -- or fought -- the radically new ways of doing business. She delves into the loophole economy, where anyone who knows how to manipulate the new rules can make a fast buck. Sale of the Century is a fascinating fly-on-the-wall economic thriller -- an astonishing and essential account of who really controls Russia's new frontier.
New YOrk Times Book Review
- Crown Publishing Group
- Publication date:
- Edition description:
- 1 ED
- Product dimensions:
- 6.51(w) x 9.52(h) x 1.35(d)
Read an Excerpt
Every revolution has its Bastille Day, the moment when the rebels finally breach the inner sanctum of the old regime. For Russia's capitalist revolutionaries, that moment came in early November 1991 when Yegor Gaidar, the new deputy prime minister and arch market reformer, walked into the offices of Gosplan, the headquarters of the Soviet central planning system.
It was unseasonably cold. Already, there was snow in the pine forests outside the capital and the premature autumnal chill made the hulking grey Gosplan building in central Moscow, designed by Stalin's architects to humble its visitors, feel even more forbidding than usual. This was communism's economic fortress and Gaidar arrived like the interloper he was - with a policeman at his side and the presidential decree appointing him stuffed like a pistol in his pocket.
I'm being insolent, of course, Gaidar admitted to himself, and as he later recalled in his memoirs. It was his first day on the job. His desk was still bare and his telephones had been connected only a few hours earlier. Yet here he was, already penetrating the holiest of holies, the Vatican City of the centrally planned system, and delivering the news that he, Russia's most ardent capitalist revolutionary, was now in charge of the temple.
Short, round-faced and balding, with soft eyes and an impish grin, physically Gaidar may well have been the least intimidating man in Russia. But for the comrades at Gosplan he was as terrifying an apparition as Lenin had been to Russia's aristocrats, and represented a change of the same horrifying proportions. Surveying the faces in the room, Gaidar saw caution, disorientation and naked fear. Some of the apparatchiks, he thought, seemed to want to ask who the hell this young pipsqueak economist was, and how he had suddenly been given the right to take over the huge Soviet central planning machine - with the express intention of dismantling it.
Sometimes, Gaidar asked himself the same question. Just the day before he had been an academic economist, someone who advised rulers but never had to take the hard decisions, or implement them, himself. All that had changed on 5 November, with a telephone call from the Kremlin appointing him Yeltsin's economic supremo. Some men would have felt elation, others a gladiator's pride at having beaten the other contenders. But Gaidar just felt shocked. Intellectually, he had known the call was coming: after weeks of dithering it had become clear that Yeltsin was in a daring mood and would appoint Gaidar and his team - the country's most radical advocates of market reform - to try to rescue Russia's economy.
Even so, when the phone finally rang Gaidar felt as if he had been hit by lightning. Suddenly, he realised, his life had been sundered into a 'before' and 'after', he had been transformed from a thinker to a doer, and the full weight of Russia's future had been thrust on to his sloping professorial shoulders. Gaidar and his colleagues had long dreamed of the moment when they would march into Gosplan and begin tearing it apart. Now it had finally come, and they were terrified. Looking back on it a decade later, they would realise that probably they had not been scared enough.
In one way or another, Gaidar had been preparing for that moment all his life. The man who would one day demolish the communist economy was born in 1956 into a family which was the nearest thing the Soviet Union had to royalty. His paternal grandfather, Arkady Gaidar, was one of the folk heroes of the Bolshevik revolution, a provincial schoolteacher's son who joined the revolutionary Red Army at 14 and went on to write children's stories after the communist victory. A Soviet cross between Paul Revere and Dr Seuss, Arkady left his grandson a surname to conjure with: years later, Yeltsin would admit that the 'magic' of the Gaidar name had influenced his choice of ministers.
Ironically, this privileged red intelligentsia background - at the heart of the communist system, but slightly alienated from it - proved to be the Soviet Union's most salubrious breeding ground for a future capitalist rebel. Thanks to his family's nomenklatura perks and their foreign postings in countries like Cuba and Yugoslavia, the young Yegor had access to books that could get an ordinary Soviet citizen sent to the gulags.
The New Class, by Milovan Djilas - a founder of socialist Yugoslavia whose criticisms of the regime would inspire a whole generation of eastern European dissidents and reformers - helped the teenage Gaidar to understand the failings of the Soviet system. Then, while still in high school, he began a careful study of the capitalist alternative. Gaidar's older brother gave him two volumes of Adam Smith - 'my favourite book for a decade'. Another powerful influence was American economist Paul Samuelson's lucid textbook which became the bible for Russia's young reformers.
Gaidar's subversive economic education continued at Moscow State University, the Soviet Union's most prestigious academy. There, in the 'special access' stacks he read his way through the Western economic classics - Ricardo, Mill, Keynes, Friedman - becoming ever more critical of the centrally planned economy. By the early 1980s, Gaidar, who had gone on to graduate studies in economics, reached the inevitable and radical conclusion: the Soviet economy was in a deep crisis, and only capitalism could save it.
In 1986, he took his first big step towards acting on those convictions. In late August, he and a group of like-minded economists gathered at Zmeynaya Gora, literally Snake Hill - a shabby sanatorium outside the city still known as Leningrad - to hold an economic seminar. During that long weekend in the pine forests, Gaidar and his friends coalesced into a formidable political team: the young reformers.
'It was our first quasi-legal economic seminar, where, for the first time, all the future young reformers met,' Sergei Vasiliev, one of the participants, told me. A slender, neat man with close-cropped grey hair and glasses, Vasiliev had a charming manner, a deep knowledge of economics and a sure judgement which made him one of the young reformers' most effective political operators.
For the participants, the meeting at Zmeynaya Gora was like the Bretton Woods conference and Woodstock rolled into one. They debated serious, clandestine economic theories, but they also drank vodka, lit bonfires and sang songs. They were profoundly, unapologetically geeky: with their hideous bottle-thick glasses, polyester suits and laboured equations, even Bill Gates would have seemed trendy by comparison. But they also had a light-heartedness, an almost childish gaiety perhaps stemming from their sureness of purpose, which Gaidar at least would retain even after the collapse of much of the market economy he had so painstakingly constructed.
Part of the reason their meeting was so electric was the wider spirit of change then sweeping across the USSR. A year earlier, the young reformist Mikhail Gorbachev had become General Secretary and was starting to loosen the Soviet straitjacket. Once banned books were being published, discussion groups were being formed and public demonstrations contemplated.
The young reformers were carried along by this national awakening, but they were not wholly part of it. Most of Russia's intelligentsia was interested in political change; the young reformers focused on economics. Many Russian liberals thought that mass political action - public demonstrations and, later, mobilising a protest vote at the ballot boxes - was the way to transform the country; the young reformers preferred to focus on back-room lobbying. They didn't really care who ruled the country, just what economic policies the rulers adopted.
What distinguished them most of all was their extreme seriousness and self-confidence. In 1986, everyone in Russia was cooking shashliks with his friends around a bonfire and talking about the ways in which the Soviet Union must change. Gaidar and his gang were among the few who had the chutzpah to believe their plans would actually make a difference. They had the rare ability - shared by revolutionary leaders and megalomaniacs alike - to have utter faith in their power to alter the course of history.
The young reformers' absolute belief in the importance of their ideas - and of themselves - was captured by the tragi-comic speech Gaidar delivered at their closing lunch at Zmeynaya Gora. The seminar which had just concluded, he explained, had only two possible outcomes.
One was that the group gathered in the fly-ridden canteen would soon be running the Soviet economy and steering the country from communism to capitalism. Gaidar predicted which post each of the assembled economists would hold, later congratulating himself on his prescience for having foreseen the crucial role which Anatoly Chubais, an energetic red-head from Leningrad, would play as an administrator and organiser.
The other scenario was much bleaker: the Soviet Union would plunge into a new Ice Age of repression and the young reformers would be sent to the gulags for their subversive theorising. Gaidar detailed this outcome with as much precision as the first, specifying the prison term which each participant in the Zmeynaya Gora seminar would serve. His speculation seemed worryingly plausible. Already one of the young reformers, Konstantin Kagalovsky, had been subject to a month-long KGB interrogation because of a technical economic paper he had written to amuse himself while carrying out his military service near the Chinese border.
There was, of course, a third alternative - that the young reformers' theories would remain just that, never having any impact beyond the Zmeynaya Gora seminar room. Gaidar didn't even entertain that possibility, and he proved to be right.
Meet the Author
CHRYSTIA FREELAND was born in 1968 in Peace River, Alberta. She began reporting on Russia as Moscow bureau chief for the Financial Times in January 1995. Before that, she was the Eastern European correspondent for the Financial Times. She has also written for The Economist and The Washington Post. She has a BA from Harvard, and a master's of Slavonic studies from Oxford, where she studied on a Rhodes scholarship. Chrystia Freeland lives in Toronto, where she is deputy editor of The Globe and Mail.
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