The Soviet collapse and ihe Russian collapse.

Stealing the StateBY STEPHEN KOTKIN

et's face it," saidGeorge Soios, ^\natolyC-hubais is "tainted."(.hubais is first deputy

prime minister of Russia and the formerchief of Rtissia's privatization. Soros hasbeen the great champion of Russia'stransition, one of the few itidividuals tomatch rhetorical support with financialsupport, first with philanthropy, nowalso with investment and with bridgeloans to the Russian government. Soroswas speaking about ('hubais at a sympo-sitim at Harvard University on invest-ment in Russia; btit to point out, in 1998,that Chubais's reform machinations aretainted is akin to ascending a soapboxand declaiming, with an air of intellec-tual courage, tbat most French intellec-tuals in the 1950s were ... Communists!

The Neil' York Times, another unvvaver-itig enthusiast for tbe Russian transition,has gone further, admonishing Chubaisin an editorial to step down. This cameafter the sore losers in Russia's firstapparently competitive bidding auction(for a 25 percent stake in Swazinvest,a state telecomnuinications conglomer-ate) used their private media outletsto divtilge that Chubais had accepted an"advance" for a coauthored book on pri-vatization with dim sales prospects. Apublisher's miscalctilation, one mightconclude—except that the company wassubsequently acquired by the hank thatwon the Svyazinvest auction (with a ten-der of $1.87 billion). The amount of thebook advance was s90,000.

For years, as part of Rtissia's dash tothe market, untold billions of dollars'worth of properties have changed handsunder (^Ihubais's direction, with Westerncheerleading, consultants, and cash. Butall of a sudden we are shocked, shuckedhy "robber-baron capitalism," and some-one must be beld accotmtable. The up-roar over Chubais s petty greed reflects acertain disappointment over the eotuseof events in Russia. But that disappoint-ment derives from an insufficient graspof what has transpired.

Amid lamentations over "reforms"stymied by Communist troglodytes, the

STEPHEN KOTKIN is director of RussianStudies at Princeton Universitv.

repudiation of socialism and the dissolu-tion of the Soviet Union seetned to comeout of tbe bitie. An instittitional loss ofconfidence turned into a self-fulfillingspiral. "Soviet institutions," explains Ste-ven L. Solnick. "were victimized by theorganizational eqtiivalent of a colossal'bank run.'" Soviet officials sensed theImpending doom, and they "rushed toclaim ... assets befote the buteaucraticdoors shut for good." Of course, "unlike[in] a bank run, tbe defecting officialswere not depositors claiming their right-ftil assets, but employees of the state

Stealing the State:Control and Collapse in Soviet Institutions

by Sicvcii L. Solnick(Hiirvard University Press, 337 pp., $49.95)

'/'/;(' Political History of EconomicReform in Russia,'1985^1994

byMadimir Mau{Centre for Research into Communist

Economies, 132 pp.. £9.95)

Privatizing Russiaby Maxim Boycko. Andrei Shleifer,

and Robert Vishny(MITPress, 165 pp., S12..50)

Kremlin Capitalism:Privatizing the Russian Economyby Joseph R. Blasi. Maya Krt)uniova,

mid Douglas Kru.se(Cornell University Press, 249 pp., $16.95)

Boris EVtsin: ot rassveta do zakata[Boris Yeltsin: From Dawn to Dusk]

by Aleksandr Kor/hiikov(Inicrbiik. 479 pp.)

appropriating state assets." And theygrabbed everything that was "ftmgible."(From the wreckage Solnick himselfplucked a valuable book.)

It looked like the end of history, butit was a bank rtin. Solnick's study of the"stealing" of the state proceeds throughthree case studies: the Communist youthleague (Komsomol); the system of man-datory job assignments for universitygraduates; aud universal military con-scription. Examining archival materials,he f̂ ound that Soviet youth displayed a

pattern, not of acrmuulating ferment,btit of deepening passivity. A survey in1961 of 17,000 yotnig people reportedtbat only one-quarter of them listedbuilding a Communist society as a goal oftheir lives. The rest singled out music,social activities, and the need to avoidblue-collar occupations. Youth leagueofficials, at a gathering in 1968 devotedin part to a discussion of apathy amongthe rank and file, occupied themselveswith trying to come to grips with EasyRider, the American film that had beenofficially banned. Some stalwarts scoldedthe others for enjoying tbe film, btu. asSolnick writes, "even the indoctrinators... seem to have been inadequately in-doctrinated."

There was cynicism over a long timeamong yotuh and older youth officials,Solnick argues, and it indicates thatneither generational conflict tior ideo-logical decay can explain the regime'sabrupt loss of contr<}l over instittitionssuch as the Komsomol in the 1980s. TheKotusotnol deserted into opporttmisin,btu tintil the "bank rtm" it functioned.The qtiestion, therefore, is why "Gorba-chev's reforms apparently catised mid-level and lower-level Soviet bureaticratsto abandon decades-long patterns ofsubordination and to defy the autboritv'of their instittitional bosses." Solnickcontends that "discretionary behavior"amotig "enterprising" officials was un-intentionally let loose. The reformssought to achieve state aims by enablinggreater local initiative. btU a divergenceof interests between state officeholdersatid top rtilers pushed decentralizationmuch fnrther than intended.

T be Komsomol vanishedalong with its bank de-posits. So did the systemof mandatory job assign-

ments for university gradtiates. ButSolnick's third case, the Soviet draft,survived the events of 1991, notwith-standing [he known prevalence of drunk-enness, violent hazing, and noncombatdeaths in the army. Observing that"assets" such as draft boards cotild not beeasily expropriated, he overlooks thegarage sales of Kalashnikovs, commtmi-cations equipment, and tanks. He alsoneglects lo mention that the Komsomolwas linked to the Commtinist Partv' andso went down with it. and that tbe systemof job assignments formed part of tbeplanned economy and could not stirvivethe latter's demise; but the army was astate institution, not a party institution. Itcould exist, whatever the nature of eco-nomic organization, provided it receivedallocations from the state budget anddrew on a sense of statehood.

The state survived the party andsocialism. Indeed, the Communist Party

26 THE NEW REPUBLIC APRIL I 3, I 998

had nt-vt'i di.splated Ilie siaie. Alter therevolution in 1917, tsarist officers andbureaucrats were incorporated into thenew order for their much-needed ex-pertise. But they were not trusted, andso tlie revolutionarv autlioritics pairedthe experts with polilital commissars.Thf ncxr generation of officers andbureaiicraLs were graduates of Sovietschools, but the party-state parallelismwas already inslittitionalized. Thus, theSoviet Union acquired two separatebureaucracies, one of the party and oneoC the state, mirroring eatli other infunction and in office fiom tlie lowestlevels to the liii^hest.

By itself the Soviet state was ininienst',encompassing ihe whole system of Sovi-ets, or legislatures, and the executive, orthe various ministries, the planningagencies, the KCiB, the aiiny. To conductbusiness, the staff of each state institu-tion usually held two meetings, once aspai t\ niembi IS and f)nce as state iunc-tionaiies. Since almost all state officialswere party members, ihe two meetingstrequently seemed identical. At the sametime, the garganttian party hiireauctacyheld its own meetings alongside thoseof the stale bodies. Thus, a decision onS(IK)O1 textbooks meant a resolutionfrom botli the parly s Ontral Cotmnit-lee aiKf the government's Council of

Ministers, to be followed by in.structiotisfrom the (Genual (̂ ^ommittee depart-ments in charge of ideology and educa-tion and the Ministry of Edtication. andso on, right down to the eity and districtpart) committees and the local branchesof tlie state edtication btireaticracy.

Why not, then, remove the party asredundant, anti get on only with thestate? That is what CJorbachev half-wittingly set out to do. But he had an im-pleasant surprise. The problem that Gor-bachev enctJtmtered—the bank run—took place becatise the party under-girded tlie I'nion. (k)ntrai y to commonunderstanding, the Soviet state reallywas a union comprising Ifi republics.Each republic had fixed borders, a quasi-parliament, a government, an academyof science, and a national langtiage, allestah!ishe(f mostly as a result of (lelil>eiate policies undertaken hy the Sov-iet regime. I'he constitution gave thereptiblits the right to secede. But self-rtile was hioekecl, hec ause ihe party wasnot fedetal. The ("ommunist Party of,say, Georgia did not have even the nomi-nal autonomy of a republic: it was sub-ordinated to Moscow like the party com-mittee from any Russian province. Aslong as the centralized party apparatusheld sway, the federal institutions of thestate could be overridden. Bnt remove

the party and you got a voluntary tmionof states, any one of which could chooseto withdraw.

Gorbachev had trouble grasping hiscountry's structure. He also feared partyconservatives, (ilasnost was introdticedto force "reform" on the recalcitrant, butit had the opposite effect, ft heightenedconservative opposition, hi late 19H8,to avoid a repeat of Octoher 1964, whena conspiracy of the apparat oustedKlirushchev by accepting his "request"to resign, (iorhachev abolished theUnion-wide supervisory tun( tions of theparty. By sabotaging the appaiat, and insuch a masterly way that the con-servatives scarcely noticed, the wily geti-eral secretary secured his own posi-tion—but he also inadvertently placedthe republics beyond Moscow's control.The Supreme Soviets of the sovereignrepuhlics, freed from party domination,hegan to pass laws stipeiseding tho.se oftlie I'SSR. Hectoring and the inconclusiveuse of force could not alter the newpolitical balance.

How could the Soviet Union have"survived decades of inescapably realchallenges like war, famine, and crashintkistriali/ation," yet perish as a resultof "the altogether less ominous chal-lenge of internal lefotin"? Solnick hasan answer. This hajjpened because ihe

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party was redundant to the state, butwithout the partv the federal state nolonger operated like a centralized state.Dumbfounded, the Soviet elite dividedbetween those who clung to the unsal-vageable Union and futilely demandedmartial law. and those, such as Yeltsin,who I ushed to join "nationalists" repre-scntinj:; the republics, thereby saving oreven elevating themselves. The putschin August 1991 (it was conducted by thegovernment of the Soviet Union, so as topreserve itself) undermined the Union'sla.st operating institution: the Sovietpresidency (llmt is, Gorbachev). RtissianRepublic bodies—some recently formedon paper (the army, the KGB), others oflong standing (the Finance Ministry)—took over the remains of their disinte-grating Union counterparts. Solnick isunconcerned with this larger frame, buthe pinpoints the dynamic: "preciselythose agents who successfully defectedfrom weakening Soviet structures" havebecome "the leading political and economic actors in post-Soviet states." Rare-ly has disloyalty been so extensive and sorewarding.

F or a few month.s latein 1991, an incoinpreiieiid-ing idealism reigned. Butno sooner had Egor Gaidar,

a 35-year-old economics teacher, .set inmotion a leap to the market in |anii:iry1992 than he came under savage pres-sure. The pressure did not come fromstreet uprisings. It came from interestgroups. The bosses of the tens of thou-sands of large enterprises bnilt in theSoviet period, explains \1adimir Man."possessing material, labor, and financialresources, and being bettei" orgaTii/edthan anyone else," emerged as a politicalforce. Besieged. Gaidar sought an unsta-ble alliance with the barons of manufac-turing and the energ)' sector, who forcedhim to retreat from hardline mone-tarism but allowed him lo survive. Themacroeconomic results were disastrous.After an initial euphoria, when price lib-eralizaiion wiped out shortages. Russiaexperienced hyperinflation and a catas-trophic dro[>otf in output.

There was plenty of shock, but therewas not much therapy. Foreign advisors,such asJcifrey Sachs, blamed insufficientWestern aid. Others blamed Communistsurvivals, or Russian culture, or Gaidar.Few blamed ihemselves or the theory.Some argued that shock therapy had nottruly been tried; but one must wonderabout an economic program whose pro-ponents concede, that it works only inptire form, even as they anticipate real-world obstacles to its implementation.Theorists ihemselves warned of strikes,and called for the introduction of asocial safety net. But this was not done.

and there were few strikes. So homefree? Hardly As Mail emphasizes, consis-tent anti-infiationary policies provedimpossible in Russia, owing to the sociallegacy of Stalin's industrialization. Gai-dar vanquished the planning bureati-cracy, but agents of the more itmdanien-tal sector of the planned economy, theindustrial enterprises, vanquished him—after he had litjerated them from theplanners.

G aidar was replaced byViktor Ghernomyrdin. thenatural-gas tsar of theSoviet era. Stoking dooms-

day prophecies in the West, Gherno-myrdin pnblicly castigated his predeces-sor and bemoaned the steep decline ofRussian industry. In practice, however.the new prime minister began to follow amore vigorous anti-inflationary coursetlian Gaidar, using patriotic rhetoric todeflate the opposition. For all his analyti-cal acnnien, Mau does not explain thisostensible policy siujjrise. other than tohint that a stidden plunge in the rtible-dollar exchange rate in October 1994scared the Ghernomyrdin government.(In fact, the government was spectilatingsuccessfully in (follars.) Western financialinstitutions, for tlieir part, have placedthe prime minister's epiphany on theirbalance sheets, but they fail to explainwhy their suggestions and iheir ihreatshad only minimal effect between 1992and 1994.

The answer to the Ghernomyrdin"mystery" lurks in the reallocaiion ofproperty. Grafted by another YoimgTurk economics instrtictor. Analoly C'.hu-bais. the privatization program did notpass the Russian parliament tmtiljtme1992. after shock therapy's infeasibilityhad become manifest. In a market econ-omy, privatization is usually conductedby inviting an outside accotmting firmlo inspect a firm's books, assign a valtieto each building and piece of equip-ment, suggest possible restructnring.and maybe even begin restructnring,before a cash sale by competitive bid.But this takes time, up to six months or ayear per firm. Russia had tens of thou-sands of large firms, and even moresmaller and medium-sized ones.

Eqtially important, the process thathelped to finish off the Soviet Union—the abandonment, by officials, of stateinterests for private interests—was paral-leled by the spontaneous appropriationof state-owned industry by managers.Even before Ciaidar abolished the eco-nomic ministries, managers expandedSoviet-style black-market operations:trading, foT barter or cash, the productsthat "their" firms produced or obtained,pocketing much of lhe proceeds, andbuying off some of their workforces.

Whereas Gaidar had legiiimalcd man-agerial larceny, Ghubais sotight to ttirn itto the country's advantage.

C hubais's approach was tac-tically brilliant. He dele-gated responsibilit)' for theprivatization of lessei-scale

businesses to regit>nal and munici-pal governments, to make them self-interested beneficiaiies, and he himselfconcentrated on large firms. Ai med witha program of "mass privatization." heendeavored to beat back anti-privateproperty forces in the parliament; to winover existing stakeholders (the sticky-fin-gered managers, some of whom opposedprivatization for fear that they wouldlose their de facto ownership rights):and to ci eatt' more stakeholders amongthe citizenry. Vouchers were distributeclto everyone bcUveen October 199*2 andFebruary 1995. In preparation for sale,all firms were compelled to incorpo-rate—bui as open joint-stock companies,to preempt tlie insider-le<l formation ofcollective-farm-style closed partnerships.And vouchers were made tradeable, per-mitting the acquisition of significantshare blocks by "outsiders." hi the hopethat they would bring pressure on man-agers to restructure. Some firms in des-ignated industries were not incltidedin this first wave of privatization, butwithin two years some 15,000 large andmid-sized enterprises were registered asprivate.

Offered three models by which to pro-ceed, almost three-quarters of tiie firmschose the opiion whereby managementand workers piu chased a 51 percentcontrolling block of their company's vot-ing eqtiily. In these cases, a finther 29percent of shares were sold at open "atic-tions" to voucher-holders, which moreoften than not included employees andmanagement who had bought addi-tional vouchers on the open market. Byhistoric al standards, the degree of em-ployee ownership was extraordinai y. andperhaps a threat to any restrucltiring re-quiring extensive layof"fs. Still, a substan-tial equity stake was kept by the state—by federal, provincial, and/or municipalgovernments. In theory, those sharescould be sold to a "strategic investor,"who might demand restructuring evenif supposedly self-interested managersfailed to do so. Investment by foreignfirms was excluded, in a supposed bowto nationalists who railed against the saleof Russia's patrimony.

Still, foreign constiltants were tibiqui-tous. USAlt) ftuided the design andthe implementation of the Russian pri-vatization program, subcontracting thework to the Harvard Inslitute for Inter-national Development (liiin). IfnderAndrei Shleifer. the project directoi\ mm

28 THE NEW REPUBLIC APRIL 13,1998

received more than s40 million in non-competitive grants over several years.AddiiioTial hiiiKlreds o(" inillions coor-dinated by iinn were provided by pri-vate foundations in America, the WorldBank, the European Reconstrtiction andDevelopment Bank, and others. In con-nection with the voucher proi^ramalone, some .$7.7.5 million was spent onten "consultants" hired throtigh llllt).They worked intimately wilh Cluibais.who bypassed the troublesome Russianlegislature and obtained the aiithorit\' toact from autocratic presidential decrees.He set tip privaie agencies, staffed byselect goveiimient oftkiais, to handlethe ftmds. Efficacy took precedence overarc()untabilit\\

Hint used part of its LSAID funding lo"stipport" the writing of an informativeand self-congrattilatory book by Shiciferatid two other members of the team,Maxim Boycko and Robert Vishny Inthat book, they laud privatization as a"rare success story of Russian economicreform," adding that by 1994 it "waslargely done." But they themselves ac-knowledge that the success ot privatiza-tion "tiltimately" will be determined hy"the speed and scope of restriictitring,"and that "the restructtiring of industry"has barely "begim." Even with .such anadmission, their first-piiiiciples dc(en.seof Russia's privatization would be easierto take had t.sAlD not suspended theHarvard grant in 1997 alter allegationsthat, in violation of university regula-tions, Shleifer's wife and another consul-tant's girlfriend made profits in RussianInvestments using privileged inlbrma-tiou controlled by iiiii).

A more scruptiloits assess-ment of Russian privatiza-tion conies from a hookbased on another Htii>

sponsored pi<)ject. BetAveen 1992 and1996. Joseph R. lilasi, Maya Kjouniova,and Douglas KJ use visited hundreds ofcoin|)iinies in almost all legions of theRussian Kedeiation. On average, theywrite, managers and general directorsadmitted paying about 40 times lessthan their companies were worth. Andeven higher mtiltiples have been docu-mented. The automobile manitfacttirerVAZ, for example, was purchased atvoucher attction foi .It4.5 million, whereasin 1991 Fiat had offered S'2 billion (andbeen turned away). The decision not toallow foreigners to participate in auc-tions meant forgoing a critical lever forassessing and raising the worth of "Rus-sian patrimony." The authors note thatthe voucher valtie of all Rtissian indn.s-try—including some of the world's rich-est deposits of oil and natural gas—cameto about %\2 billion, or less than ihevalue of Anheuser-Bttsch.

Small wonder that Ytni Ln/hkov. thesa%'\y mayor of Moscow, ptilled out allthe stops to exempt Moscow propertiesfrom the vottcher schetne. Like CieneralKuttizov against Napoleon, Clhubais sur-rendered Moscow to win the war. Assetsin the country's capital were offered forcash sale, generating sizable revenuesthat have been used not onlv to line thepockets of officials, but also to rebtiild thecity s inriastructure and to pay for ser-vices. Much of the rest of Russian indus-try, however, was given away for smalll)cci\ to make privatization "irreversible."

I t all might have been benefi-cial had the Russian economytaken off. But the survey byBlasi. Kroumova. and Krtise

also uncovered little evidence of restrtic-turing. They note that outsider influ-ence over firms remains negligible, andtliat substantial passive state ownershippersists in most inms. "Privatization,"they conclttde, "was a seed that fell onhard, dry gronnd"—except in Moscow,which they do not examine. (Nor dothey investigate the experience of theprovincial governments, most of whichhave used privatization to consolidatepolitical control, with economically var-ied results.)

Neither book on privatization treatsihe impact on the industrial lobby. Still,it is not hard to snrmisc what happened.Newly propertied managers split intotwo (amps. There were those in profit-making ventures, who wanted a relative-ly siable macioecononiic environment,and there were the r'est, who sotight con-tinued btidget stibsidies to prop thenrtip. Paying lip service to the latter, ('her-riomyrdin backed the former, who in-cltided a handful of manufacturers butover^whclmingly comprised firms sellingresources at world ptices (such as Gaz-prom, the prime minister's former baili-wick). The men rirnningsirc h (ornpanicswhisked their considerable windfalls intooftshor-e accounts, thotigh some of thecleverer ones botrght up media proper-ties and created commercial banks.

The state treastrry has seen little ofthis money. On the contrary, the combi-nation of premeditated shock therapy(inducing a free-fall in industry) withselective budget concessions opened amonstrous deficit. Heirce the infaniotrs"loans for shares" second stage <jf privati-zation, begtin in mid-1995. Private banksloriricd by snatching state assets; and,enriched by lucrative government ac-cotiriLs, they offered to cover the deficitwith "loans" if the government wouldput up, as collateral, tlie shares that itretained in coveted properties dealingin oil, gas, nickel, and othei' minerals.Should the government fail to repaytbe obligations—a sure bet—the shares

would lie sold at auction. Incredibly,Chubais allowed the banks Uiemselves toset up and to run the auctions. 'Thebanks that organized the atictions re-peatedly disqtialified their competitorsand won the bids," Blasi. Krottmova, andKrurse write, adding in miderstatementthat "mcst bids were fairly low." In manycases, in iact, the outcomes were riggerl:presei\iiig the appear'ance of competi-tion, the bankers negotiated a division ofthe spoils. The upshot was the creationof a small group of billionaires, whorepaid the favor by helping proctireBoris Yeltsin's reelection in 1996. (TheIMF also kit ked in stibstairtially.)

L ately, the billionaires havebeen scooping up control-ling stakes in a variety ofenterprises and firing man-

agers; but restrtrcttiring remains einsive.The problem is not some innate incapac-ity on the part of Soviet-era managers towork in market conditions. (After all, tofulfill the plan most of them had to bewheeler-dealers on the vast black mar-ket.) The problem is that many, and per-haps most, of the enterprises purchasedwith votichers—even the ones subse-quently taken over by outsiders—facewell-deserved extinction. It is one thingto procure state licenses to export oiland gas for dizzying profits, or to ex-propriate the profitable sirbdivisions offactories; it is quite another to restrtrc-ture a rust belt encompassing literallyan entire country, hi the 1920s, belbreStalin's industrialization, heaw industryaccotmted for about '20 percent of theSoviet economy. By tbe late l9H()s, theproportion had switched. The economywas almost 80 percent hea\y indu.stry.

Not all enlerprises inherited by Russia(rom the Soviet Union were antedilu-vian. The best were in defense, but thenecessarv downsizing of the military-indtistiial complex brought many woild-class manufacttirers to tbeir knees.Other- top-notch branches, stich as bio-technology, suffered from the lack ofindustrial triage in (iaidar's btoad-fiontattack on the founder ing planned econ-omy Notwithstanding the abolition ofplanning and industrial decline, Russia'seconomy is still dominated in employ-ment terms by P"or-disl plants typical ofthe interwar period (even if they werebttilt in the postwar" period). Think of(iary, Indiana and Yotmgstown, Obio,multiplied several thotisandfold, andyou will have some idea of the challenge(and the financial sums) necessary forRussia to create a new economy. Mean-while, the long obsolete fossil-fuel indns-trialisni of the Soviet era continues to becannibalized for short-term gain.

With the dissolution of the SovietUnion, abundant bureaucrats in Mos-

30 THE NEW REPUBLIC APRILI3, 1998

cow lost their sinccuri's as vaiioiis slaieagencies were abolished. Bui many ofthese reappeared undfr new names,and countless new offices were created.Buildings that used to house partyapparatchiks now hold state functionar-ies. Ilie ])()st-l99l Russian republic fiasnioir oI'lK-fholders tlian the SovietUnion had, to serve not much morethan lialt ihe Soviet Union's population.Since Moscow's tiomain has shrunk, itsdirect responsibility for local affairs hasdiminisfied, and iis ability to projectpower beyond the CIS has virtually dis-appeared, tlie state has become particu-larly t<)|>hea\'\' and sell-absorbed.

T he story ol the Russianstate's consolidation ac-quires a new light in BorisEVtsin: nt mssx'p.ta do zakata,

or Boris Yeltsin: From Dawn to Dusk, amemoir by Aleksandr Korzhakov re-(eTitK' published in Russia (and not yettTanslaled into Kugiish). A career KGBof'iicer, and tlie beefy son of two tex-tile workers from a rougli-and-iumhleMoscow nei^liborhood, Kor/hakox- wasassigned lound-tho-cUtck guard duty ofBoris Yeltsin in late 19H5, when tfie partyIjoss of the Urals was transferred toMoscow and made a caiididale-memberol' tlie Politljuro. Even afier Yeltsin wasbouiuect [roin the leadership and de-moted lo head a consiiuclion trust in19H7, they remained in close contact.Korzhakov professes that he had noinkling thai Yeltsin would later rise tostipreme power, that his continued asso-ciation with a disgraced official cotildinstead have flama^cd his career in theKremlin. Soon enouj^li, however, Yeltsinwas eleried to higli oi'lk e. Ajfain he i ateda bodvjfuaid. He and tlie bodyguard Kor-zhakov bonded over volleyball, tennis,steam baths, and moonshine.

No less seli-serving than Yeltsin'smemoirs, Korzhakov s romp abounds ininsider details. He recounts tlie Yeltsinteam s postSoviet scrum for Kremlinoflucs and state aparlnients. {Ciaidai' issaid lo ha\e l>een "in eesiasv over gettingfiee housing.") fie divulges tlie presi-dent's passion lor playing spoons, nsnallyon the head of a kneeling aide. (Whenihe wooden souvenir type could notbe lound, Yeltsin used metal ones.) Welearn ihal the president, when forbiddenU) cirink by duelors, would secretly slipmoney to an aide to go out and hu\- hima liotile. (The evei-vigilanl Kor/hakoviniercedefl, substituung watei" foi vodka,bui adding just a pinefi ol tlie hard stuffto fool the boss.) Numerous familyphotographs, with imagined captionsconiaining Yeltsin's 'Vollotiuial" lirandol Russian, add weight lo tlie revelaiiontliat Kor/hakov and Yeltsin were "bloodbrothers," having iwiee cut themselves

and tiiingled their plasma.Trying to minitni/e l)ad news, orvvhai

a disheartened Yeltsin would denounceas "again more shit," Korzhakov tookii upon himself to regulate the trafficJTi and out of the president's office. YetYeltsin became depressed anyway and, inKorzhakov's euphemism, periodicallysouglit t(j "resolve matters once an<l forall— Sometimes he'd end up lockedIn the sauna, sometimes lie'd be fbtmdin a river." It was Korzhakov who invari-ably came to the rescue. The sicker andmore tmbalaneed the president became,the gieater became the hodygtiard'ssphere of aulhority. Kor/liakov improba-bly sloughs oil' responsibility for theChechen war, but he admits that wellbefore Yeltsin's violent showdown withparliament in October 199.S he "told thepresident it's time to bang a fist on thetable. Enough already tolerating thiswhorehouse environment, this power-lessness. There should be a single matiof the house."

Jtist ptiof to the onset ofthe armed melee. Korzhakovwrites, Yehsin retired at 11p.m., having instructed his

bodyguard to sit at tlie coimtry's com-mtinications command post. "I sat in thepresident's chair almost the whole nightfrom the 'Md to the Ith of ()cu»ber." heboasts. "I heard I'cpoits. issued orders,gathereti information.'" When he discov-ered that Defense Minister Pavel (Irach-ev had not moved in troops as he wasordered, Koizhakov supposedly wokeand dragged the president to the tempo-rizing ministry. Several hours later, afterYeltsin was again awakened to shore upthe motale of the elite Alpha troops.K<nvhako\' accotnpanied them on tlieiiassault on the parliament btiilding. Hav-ing captured Rusian Kliasbulatov andAleksandr Ruiskoi, he sped to the Kretn-lin, only to discover that those who hadwaffled or stood aside were liotirs inio acelebiatory banqtiet. Without Kor/hak-ov, we are led to believe, the outcomewould have lieen different.

After relying oti Koivliakov to dispersethe madcap parliament. Yeltsin s entour-age forced through a constitution whosebalance of powers is neatly summed upin the provision that treats of votes ofno-confidence in the government: afterone such vole, nothing happens; after asec<.)nd such vote, nothing happens; aftera third su< h vote, ihe presiflent may dis-miss parliament and call for new elec-tions. Stteh arrangements, generou.slydescribed as a "presidential state," havebeen attributed to the authoritarianpolitical culttire of Rtissia, or to Yeltsin'spcrsonaliiv. fiiit Kor/bako\'s memoirliighlights how, in battling against the"threat" of a (Communist revanche and

Letters ofHeinrich andThomas Mann,1900-1949Edited, with an Introduction, byHans WyslingTranslated by Don Reneau,Foreword by Anthony Heilbut"Beautifully edited and translated....The letters of the brothers Mannconstitute a crucial document of20tb-century German culture andpolitics, and they are by any stan-dard fine reading."—Kirkus Reviews"A welcome addition to the Manncanon..,.A fascinating and usefulcollection."—Library journal"A record of two eloquent mindsin vivid mutual engagement."

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Exiled inParadiseGerman Refugee Artists andIntellectuals in America from the1930s CO the PresentBY ANTHONY HEILBUTAvailable again, with a new Pref-ace—"Heilbut has exercisedimpressive scholarship, and even atouch of poetry, to get to thebeart of this diaspora."—Time$19.95 paperback

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APRIL 13,1998 THE NEW REPUFJI.K 31

Notes from the ProvincesSomething about that musicfrom the corner bar &: grill—tfie blue notes drifiing out like smoke ..

Each time she walks by, or he does,he licks his lips appreciatively—but he docs it so no one will notice.

Sunset, down on the town square,as they lower the flag, raise their rifles.Fire at the ernptv' heavens.

Children running in circles,old men in a chisterdiscussing their tight black shoes.

Through an open windowtwo lovers locked togetherupright, or maybe not.

Smell of somebody's cookingarriving on a windby way of |upiter Street.

What was it you stepped out to look for?Cool air, a piece of string,a few fresh herbs from your garden?

DAVID YOUNG

for the cause of "reform," anything couidbe justified. Russia had no organizedpolitical center to speak in the name ofthe rule of law. There were only danger-ous Communists and anti-Communists.(Here Gorbachev's pre-1991 refusal tosplit the ranks and form a social demo-cratic party looms large.) A strong execu-tive also seemed necessary owing to thechimera of a directed transition to ihemarket, while ihe redistribution of prop-erty provided more than enough incen-tive to hold power, whatever the politicalprice.

The unchecked presidency happensto be occupied by an invalid president.After Yeltsin suffered anoiher heartattack around New Year's Eve, 1995-96,Korzhakov and other handlers holedtht president up at the governmentdacha complex in Barvikha. "Occasion-ally," Korzhakov writes, "Boris Nikolae-vich would ask in a sad voice, 'How'rethings down at work? What's new?'" Thisis Brezhnev, with elections. One dayYeltsin lifted his head with difficultyfrom the pillow and in a barely audiblevoice declared, "fve decided to run."The president's popularity hovered nearzero, and Kor/hakov concedes that theinner circle had its doubts. Trying to winover Chernomyrdin, the prime minister,to an election nullification scheme, Kor-zhukov resorted to flattery. "It's not rightthat only the chief of personal security

decides what's goodand what's bad," herecords himself as hav-ing said. "The primeminister is not the lastperson in our state, infact, he's probably thenumber two person.You should also havesome weight."

More details of thediscussions are notprovided, but Kor-zhakov writes thatChubais, backed bybillionaires who werenervous about politi-cal instability, advisedthat, with a lot ofmoney and the manip-ulation of state tele-vision and private tele-vision, reelection waspossihlc. As Yeltsin wasshown on TV holdinga shovel and tellingimpoverished viewersthat he and his familyplanted and harvestedtheir own potatoes,which they "lived on allwinter," the tables atcampaign strategy se.s-sions groaned under

the weight of delicacies reminiscent ofthe Romanovs. Within the Yeltsin camp,however, the uncertainty of a real voteincreased tensions, while the campaignrearranged the internal correlation offorces. At the end of one meeting atheadquarters, Korzhakov asked Chubaisto keep his ugly mug out of public view,since it was turning off too many voters.Usually ruddy, C'htibais turned so pale,according to Korzhakov, "that he beganto look like a normal white person."

Korzhakov, who held responsibility forguarding campaign finances, provoked ashowdown. He writes, in Soviet jargon,that "information came forward" thattens of millions of dollars were beingstolen from the campaign. More prc*cisely, on the night of June 18, Kor-zhakov's men surreptitiously entered theroom holding campaign finances (it wasalso an office of the deputy finance min-ister), opened the safe, and allegedlyfound s500,000 in neatly wrapped bank-notes, along with receipts for depositsin offshore accounts. The next day, twocampaign workers showed up and re-trieved the money. They were detained.Korzhakov's close associate Mikhail Bar-sukov, chief of the FSB {a successorto the KtJB), sent a team to condtict aninterrogation. A call came in from thepresident's younger daughter, TatyanaDyachenko, who demanded the releaseof the two detained men. Supposedly

coached by Boris Berezovsky, a tvcoonwith close contacts to the government,she accused Korzhakov of sabotaging thepresident's campaign. In the middle ofthe night, NT\', a private station ownedby Vladimir Gusinsky, another financier,interrupted its insomniac programmingto report an attempted coup.

That morning Yeltsin met with Kor-zhakov and Barsukov, and reportedly for-gave them; biu later, under pressurefrom his daughter and Chubais, he de-manded their resignations, The presi-dent went on television, explaining thatthe two security men had "taken a lot onthemselves and not given much." The re-marks alarmed Korzhakov's mother, whothought that Yeltsin was referring tobribes rather than power, and scoldedher son for not sharing some of what hetook wilh the president. Dismissed, Kor-zhakov nonetheless rettirned for work inhis Kremlin office—and was admitted.When he was informed of this, Yeltsinwas enraged; and an aide hurried to tellKorzhakov it was for real, he had to go.Two days later the president sufferedanother heart attack. The runoff was aweek away. On the day of balloting, theformer bodyguard told a wall of TV cam-eras that he voted for Yeltsin. Korzhakovadmits believing that a reflected presi-dent would stmimon him back. Btit Yelt-sin already had his strong-arm constitu-tion, and for the time being he neededneither cancellation of an election normilitary operations against parliament.Escaping, now and again, from the ho,s-pital to the Kiemlin, Yeltsin has madenoises ihat he wanted to free himselffrom the money men as well. Constitu-tionally, he has the power to dismiss hisgovcrnmeni—as he did, theatrically, lastweek. But Yeltsin's illusory show of lead-ership (possibly abetted by his daughterTatyana) cannot curb the parasitic powerof the financiers and energy interests, oreliminate any new government's depen-dence on them. And intrigue, too, hasits price.

I n stealing the state, only a fewformer Soviet officials rippedout the phones, carpets, andwood paneling before fleeing.

Most of them remained at their desks,using their positions—connections,licensing power, affixing of seals—for pri-vate gain. It seems remarkable, in retro-spect, that before the great bank run stateassets were not spontaneously appropri-ated by the officials at all levels, for thesewere the people who exercised day-to-daycontrol over their disposition. Of course,embezzlement and bribe-taking werecommonplace under Communism. Butcompared with what has happened since?Wlial an irony that Mikhail Gorbachev,who had risen to power as the leader of an

32 THE NEW REPUBLIC APRIL I3,1998

.inlicoi ruptioii tfain assfinhlfd by YuriAndro|X)v, instigntf d a reform ihat great-ly accelerated the insider theft of stateproperty by officials. And what a coupthat Boris Yeltsin, assisted by Russian andforeign champions, claimed the credit,(ailing the iheft a transition to the mar-ket. In away, it was.

Just as no So\iet leader could have eas-ily forestalled tlie di.ssolution of the su tic-turally vulnerable Union, so no Russianleader could have prevented the totalappropriation of bank accounts andproperty that the state owned on paperbtu did not control. For that reason, thiswas nex'n an engineered move to theniaiket. Tlie Rtissian transition formeda continuation oi' the Soviet collapse,which in ttu n was driven by the dissolu-lion of structural controls over staleagents and managers. Exempting him-self, Gorbachev established mnlticandi-date elections and dealt an tinintcndcdbody blow to planning. Yeltsin, with thepeople's support, pushed a "radicaliza-tion." Cielling rid of the remaining mech-anisms of the socialist economy provedto be child's play. Legalizing and therebygaining some influence over the sponta-ncotis appropriation of state propertytook greater skill. (Something other thanreformist lalent was involved in who gotthe choicest assets and how.) But themain task all along was the rejilacement

of the gigantic rust-belt economy, and itremains as daunting as ever.

Privatization, along with macroeco-nomic stabilization, has not broughtabout the miraculous transcendence ofthe rust belt. Nor have the reforms in-stitutionalized contract and propertylaw, regularized tax collection, or re-duced official venality as welt as othercrime. Few people seem to have studiedthe causes of the developed world'sshift from "primitive accumulation" toa permanent legal framework benefit-ing all property holders. Russia mayyet provide some clues. Hope lies inthe thousands of new small btisinessesthat have arisen, and in the immensesums of domestic capital known to bekept abroad. Russian banks and hold-ing companies have been buying upproperties and businesses beyond theirborders, in the "near abroad" of formerSoviet territories, and throttghotit theformer satellites of Eastern Europe, andin Western Europe and Asia. Should themoney begin to come home and beinvested, the results could be extraordi-nary, And some foreign investors arebullish. Prior to his loose talk aboutrobber-baron capitalism and the taint-ing of Anatoly Chubais, George Sorosformed part of the winning bid for thecontested qtiarter stake in Russia's Svyaz-invest. G(} figure. •

The Old and the NewBY ROBERT ALTER

The Castleby Franz Kafkatranslated by Mark HarmanISchocken, 328 pp., S2S)

y \ci\iliiiig about Kafka iscomplicated and elusive:his life, his intentions

# about the publication oflii.s work, tlitf texts of his novels and sto-ries, the course of the posthumous pul>lication of his writiiifrs, the challengeot representing him in translation. TheCastle, his lasl and famously incompletenovel, first appeared in English in 1930,(bur yt'ars after its publication in only1,500 copies in German. This early En}̂ -lish version, by the Scottish critic andpoet Edwin Muir and his wife Willa, wasthe version through which countlessthousands of British and American read-ers experienced The CastU, as Kafkaswelled in reputation in the years after

World War II. Once the cult figure ol asmall literary elite, Kafka came to be pro-moted into a major modernist—indeed,into a kind of touchstone of modernistfiction.

The first problem with the Muirs' ver-sion was scarcely their fault: it was basedon the German text assembled fromKalka's manuscripts by his friend and lit-erary executor Max Brod. In the courseof time, it has become clear that Brod'sway with Kiifka's texts was often cavalier.(Walter Benjamin wryly characterizedKafka's relationship with Brcjd as "afriendship which is not among the small-est mysteries of Kafka's life.") Brod pre-simied to excise certain passages not tohis taste; and he made some attempts to

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