Epilogue by Paul Klebnikov

 

A healthy state should not be confused with a powerful state. The U.S.S.R. was powerful but not healthy. Its power was based on fear, arbitrary rule, bureaucracy, corruption, lawlessness, and the absence of independent local governments or civic organizations. The Soviet Union’s terminal illness was the result of its failure, despite massive propaganda, to encourage a sense of duty or civic responsibility among both masses and the elite. It failed to produce citizens. Those who believe that a healthy state means a strong central government forget that the central government is merely the top of the pyramid. The foundation is a network of local governments and independent civic associations competing with the central government in addressing local and national needs. Without a broad foundation of such local and civic organizations, a strong central government is a fragile structure – a tall tower on a shallow base. The Soviet Union was such a structure. Over the course of seven decades, the Communist dictatorship destroyed churches, elected local governments, independent trade unions, professional associations, charitable organizations – all independent institutions, in other words, that could challenge the Communist Party’s monopoly on power. In the end, The U.S.S.R.  collapsed because of the hypertrophy of state power.

A healthy society can be defined by the strength of its system of values – a factor as important as it is difficult to measure. The nation that Boris Yeltsin inherited lacked the values that are the foundation of prosperity and democracy. How can private enterprise flourish when society is suffused with envy? How can the economy grow when the value of honest work is derided? How can democracy flourish when no one wants to take responsibility for the common good? The pervasive nihilism in Russia is the result of the Communist’ regimes destruction of such key building blocks of a healthy society as family, religion, and independent civic association. Boris Yeltsin’s Russia was not a nation of citizens, but a mass of fractured families and isolated individuals. Russians were subjects, not citizens.

The fact that Boris Yeltsin inherited an unhealthy state and an unhealthy society made it difficult for his reforms to succeed. Yet, Yeltsin and his ministers did little to address the problem. The Russian state grew more corrupt, more inefficient, more arbitrary in its exercise of power. Russian society grew even sicker than it had been under the Communists, there was a decline in both family values and the sense of civic responsibility. The disregard for the value of  human beings, already rampant under Communism, deepened under Yeltsin’s watch. Often it seemed that Russia’s perverted value system rewarded any activity that victimized one’s neighbor; this criminal mind-set become so dominant  that adhering to principles of honest, decency, or law-abidance became equivalent to moral dissent.

In the absence of either a healthy state or a healthy society, the application of such Western liberal principles as privatization and free prices  could only precipitate Russia’s destruction. While Chubais and other young reformers naively followed a lopsided version of the American model in macroeconomic policy (neglecting the role of good government and healthy social values in breeding America’s success), Russia’s businessmen were guided by a perverse understanding of American capitalism on the microeconomic level. Whenever I asked Russia’s business magnates about the orgy of crime produced by the market reforms, they invariably excused it by pointing to the robber baron of American capitalism. Russia’s bandit capitalism was no different than American capitalism in the late nineteenth century ,they argued.

Communist propaganda had always maintained that making money in a free market was a purely predatory and criminal activity. Soviet schoolchildren has been taught that the United States, as the paragon of capitalism, was controlled by a ruthless, superrich elite; they were taught that all the great financial and industrial empires powering the American  economy had immoral origins- behind every fortune was a legacy of theft, lies, even murder. The American captains of industry were little more than crooks and criminals. Russia’s new business magnates had all absorbed this image of Western Capitalism in school, when they went into business, they acted accordingly.

 

“Perhaps our criminals are the most powerful people in the country today, but this is just a phase, ’they would say. ‘Just like America. Look at all your great capitalists – Rockefeller, Ford, Carnegie, Morgan: They all started out s criminals as well.’

The old American robber barons may have bent the rules, but they were neither criminals nor looters. On the contrary, the robber barons, whatever their moral flaws, helped turn the United States into the strongest industrial power in the world. They built railroads that opened up the country. Carnegie built the world’s largest steel industry. Rockefeller created the world’s largest oil industry. Ford invented a way to mass-produce automobiles for the American middle-class consumer. Morgan financed America’s industrialization and turned Wall Street into a market where small investors would not be defrauded. No, Berezovsky and is colleagues could in no way be compared to the robber barons of American history.

In its scale and rapaciousness, the looting of the state that took place during the Yeltsin regime was unprecedented – it was, perhaps, the robbery of the century. At the root of the disaster was the Russian penchant for playing the double game, for pursuing an essentially dishonest policy. This tendency to pay the double game was evident in the KGB’s willingness to finance organized-crime groups and the new commercial banks in  the 1980s in hopes of controlling them and prolonging the existence of the Soviet Union. It was also evident in the Yeltsin regime’s sponsorship of a handful of crony capitalists in hopes of using them to create a genuine free-market economy. It was evident in Russia’s long, tangled relationship with Chechnya.

The West, too, betrayed a penchant for the double game. The fact that the Yeltsin regime had turned into a gangster state was often blithely dismissed; Russia’s lawless market was described as ‘raw capitalism’ or ‘frontier capitalism,’ with the implicit analogy to the American nineteenth century. The Clinton Administration, in particular, while trumpeting the principles of democracy and the free market, repeatedly ignored the evidence that the Yeltsin regime was a kleptocracy. In 1998, a top Russia analyst at the CIA told the New York Times that the Clinton Administration routinely discouraged reports about the corruption of the Yeltsin regime. One such report about Prime Minister Chernomyrdin ( said by the CIA  to have amassed a personal fortune of $5 billion by 1996)  was returned by Vice President Al Gore with a ‘barnyard epithet’ scribbled across it. Thus self-delusion on the part of the Clinton Administration was confirmed in a 1999 article by Fritz Ermarth, a veteran CIA Russia hand and former chairman  of the National Intelligence Council. Ermarth spoke of American policy makers’ ‘disdain for analysis about the corruption of Russia politics and their Russian partners ‘ Ermarth attributes this primarily to the ‘warping of intelligence analysis to fit political agendas’ and to ‘a cynical Washington habit of .  .  .  Preserving the image of a foreign policy success.’

The U.S. government’s repeated praise of the Yeltsin regime as ‘democratic’ and ‘reformist’ damaged the liberal principles on which Western societies are based. The issue came to a head during the 1996 Russian presidential elections, when the Clinton Administration was faced with a choice of supporting either Yeltsin of the communist candidate, Gennady Zyuganov, who was said to represent a return to the Cold War past. There was no reason for the United States to support either one. When one is faced with a choice between two evils and not compelled to chose either one, the correct choice is to abstain. But the Clinton Administration abandoned the stated U.S. policy of staying aloof from other countries’ political processes and threw its weight behind Yeltsin, promoting his campaign with both rhetoric and money.

Berezovsky’s career in the 1990s undoubtedly was very exciting: All around him, history was being made – Communism was destroyed, the Soviet Union fell apart, democracy and free markets were proclaimed, huge fortunes were acquired. But what was left at the end of it all? Russia was ravaged and destroyed. Millions of Russians died premature deaths. Most of Berezovsky’s companions of the road ended up as nonentities, despised by their survivors.

Eventually, of course, Russia’s era of self-destruction will draw to a close and the nation will undertake the difficult task of rebuilding. Vladimir Putin may well be the man to accomplish this task. But first he will have to deal with the corruption and crony capitalism epitomized by Boris Berezoky.