About book The Oligarchs: Wealth And Power In The New Russia (2003)
Watching Vladimir Putin preside over the opening of the Sochi Olympics, a glorious spectacle that pointedly included the hammer-and-sickle era, it was difficult to recall just what kind of chaos had descended on Russia during the nineties, a bare decade-and-a half before. David E. Hoffman's "The Oligarchs" is a pertinent reminder of just what it took for Russia to emerge from the collapse of the Soviet empire. He focuses here on the emergence, seemingly overnight, of immense fortunes in banking, mining (especially oil), and media. Many of these fortunes were created through the privatization of state resources through rigged auctions in which the bidder actually borrowed much of the capital he was pledging. The holders of these fortunes in turn gathered with members of the press and of the Yeltsin to save his Presidency from the man himself. At the moment they organized, he was polling in single digits and the resurgent Communist Party looked like the next regime. If the financial sleight-of-hand that Hoffman details can at times challenge the reader, the account of the campaign to save Yeltsin's presidency is gripping. Yeltsin, with the help of his oligarchs, won the election, and they thought they had won the future. The late Boris Berezovsky crowed that the oligarchs would run the country as a board of directors, a sort of new Politburo, one assumes. And then it all came apart, first when one of the auctions, the privatization of a telephone and communications company, was unexpectedly awarded to the highest bidder rather than the oligarch who felt it was his turn (Vladimir Gusinsky, in alliance with Berezovsky). The young reformers who were trying to transform Russia's economy into a modern ones, Anatoly Chubais and his deputy, Boris Nemstov, were dismissed. Yeltsin overlooked all the regular candidates and elevated a members of the security service, Putin, to Prime Minister. We all know how that turned out. All these years later, those oligarchs who made nice with the new regime or at least kept quiet, were allowed to stay and sometimes prosper. Berezovsky died in exile; it was his security man who was famously poisoned with plutonium. Gusinsky also went into exile. Chubais has been low-key although there was a recent article indicating increasing official interest in his business activity; Nemtsov turned to protest and was assassinated this year. Of the other politicians and businessman treated in detail by Hoffman, Yuri Luzhkov, once thought the successor to Yeltsin, was allowed to remain as Mayor of Moscow for many years after he joined the winning side. Alexander Smolensky's bank folded and his billions melted into mere millions. Mikhail Khodorkovsky, the former oil magnate, began to move toward organizing an opposition and found himself in jail for a number of years on tax charges while his company was disassembled. He is free now, living in Switzerland. Hoffman's account of the assembling of Kohodrokovsky's company makes clear that among the key components were inventive accounting and sheer gall. From time to time I run into people who went from the West to Russia in the nineties to help it navigate toward capitalism. I do not think that those people thought they would be helping to create a capitalism like the robber baron era of the post-Civil War United States. Or that the result would include things that I think would even have caused Gould and Frick to pause.
This is a fascinating book, but a chore to read. Hoffman packs it with details about the oligarchs, but the narrative is hard to follow, because it is bogged down with so many facts. The first few chapters are the best, as they tell the initial rags to riches stories of the various men. The rest of it is like a laundry list of transactions, one after another, with mind-boggling amounts of money changing hands in bewildering ways. OK. OK. I get it: so this super rich guy one-upped his super rich rivals yet again, and got even richer than before, while his rivals got richer to lesser degrees. Repeat. It made me sick to my stomach to learn just how much these greedy men controlled the media and influenced Yeltsin's government. The story Hoffman doesn't tell is what the ordinary Russians lives were like in comparison: suffering in a weak economy while a handful of filthy rich guys monopolized the wealth. I skipped ahead to the end to find that I was actually sympathetic with Putin when he stuck it to these guys. (Berezovksy? Who's that! --That made me laugh.) Of course, Putin has his own generation of the filthy rich, so it isn't as if he has improved the situation; though it is hard to say which regime is worse. Who would you rather have control the media and the economy--a thug like Putin, or a group of robber barons ultra-capitalists? The sad thing is that the oligarchs have given ammunition to the socialists who decry the evils of capitalism. Capitalism run amok is also an evil.
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Should be required reading in every economics class in America. Fascinating account of the breakup of the soviet socialist system and the intelligentsia who engineered and managed both the collapse and subsequent capitalist reforms and rebuilding of the Russian economy. Especially relevant today with some historical perspective of the individual fates from Khodorkovsky's imprisonment to Berezovski's exile in England and the intrigue surrounding his attachment to the Litvinenko case.America's recent bailouts and socialization of some of its most sacred capitalist Ideals and Institutions should give students of political science and economic policy makers pause as to the path that we choose and the potential ramifications for our country.A Highly recommended retrospective and cautionary tale !!!
—Eric Logan
To understand the Putin machine is to understand how Russia went from the Soviet collapse to the present. This very well researched and lively account of the Yeltsin years shows how ambitious upstarts made their way to the top and how Moscow's influence was bought and traded. No reformer, entrepreneur and idealist made it out with their soul intact. My questions: Why did Goldman, Merril and Morgan continue to pump billions into Russia after the 1998 ruble/GKO devaluation? Were they that desperate after the 1997 Asian financial crisis? And the "financier" George Soros keeps turning up like a bad penny. After Chubais's experience with shock therapy and the encounters with those who came in to fill the power vacuum (organized crime, speculators, state security agents), no wonder Beijing doesn't want to walk the same road. The complete loss of confidence in both the Soviet system and the Wild-West privatization certificates has left Russians with no where to put their money except Western banks. The book also has excellent first-hand interviews and plenty of catchy Russian phrases.
—Shawn
Hoffman details the rise of six Russian oligarchs from the decline of the Soviet Union until the emergence of Putin. It is truly a shocking and incredible story. Gorbachev began to liberalize the Soviet economy by allowing the formation of cooperatives that could engage in capitalist business enterprises. A few of the successful cooperative managers didn't have any place to put their money and started banks. The banks benefitted from easy money policies and found ways to exploit the Soviet command economy (e.g. by purchasing artificially low gas to export in exchange for hard currency). By the time the Russian government was ready to privatize state industry, these men were poised to make a killing, snatching up existing enterprises for pennies on the dollar or ruble. It was dirty and corrupt and even well-intentioned. But it made billionaires out of a select few who had been in the right place at the right time, and who began to think that they ran the country. And they did, until Putin showed up. The book closes in 2001, which allowed Hoffman to detail how Putin put two television stations back under state control--a mere hint of what was to come. Hoffman did incredible work putting this story together from a myriad of shady and self-interested sources.
—Matt
