The Oligarchs (8 page)

Down to his last days in the army, Smolensky was a rebel. When
the other soldiers were sent home at the end of their term, Smolensky was not given his release papers, a slight from a commanding officer for all the trouble Smolensky had caused him. One day, Krasnyansky and Smolensky went to see the officer, grabbed the papers off his desk, ran out of the office, climbed over a fence, and ran away, the release documents in hand. They got to the airport, but Smolensky had no ticket. Krasnyansky knew someone at the airport and fixed a ticket for his friend to fly back to Moscow.

On his return to the capital after two years in the army, Smolensky's prospects hadn't improved. The only thing he knew how to do was set type. Krasnyansky tried to get him admitted to the Polygraphic Institute, but Smolensky had two sisters and his mother to support, and instead of school, he went to work in a print shop. “I was an enemy of the people,” Smolensky recalled, “or rather, son of enemies of the people. I couldn't find a decent job.”

His bitterness deepening further, Smolensky proved a good hustler in the shadow economy. For three years after the army, he worked in the printing shop and then became a shop steward at the publishing house of a Soviet industrial ministry. His salary was 110 rubles a month.
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He also moonlighted at a bakery. In theory, holding a second job was forbidden, but Smolensky got a laborer he knew to fake a permission slip. Smolensky earned another sixty rubles a month and gave ten to the laborer for the certificate.

Smolensky wore his first pair of jeans for a year. Like many of his generation, he spent hours complaining about his misery in the privacy of the kitchen. “The system was organized in such a way to make us think about food for half our life,” he said, “and the second half was devoted to buying clothes to cover your ass.”

To survive, Smolensky made good use of his press at night, printing Bibles in defiance of the system. It was his way of striking back. Smolensky said he was also trying to help the Church by printing the Bible “free of charge.” The Russian Orthodox Church, he insisted, “was an institution that could help destroy everything that existed, the system.” However, the church hierarchy was loyal to the state, so it is not clear why Smolensky thought he was striking back.

A more plausible explanation was profit. Smolensky found a crack in the system: there was a demand for Bibles and he had a means to print them. Alex Goldfarb, a biologist who was a key link between foreign journalists and dissidents at the time, had established his own
channels for smuggling in books through diplomats and journalists. “The Bible was not only a thing of value in itself, but a major currency,” he told me. “It was a way to support people. If you got a shipment, you gave them to families of people in prison, to support them.” Smolensky may have easily reached the conclusion that fighting the system and making prohibited profits on the side were one and the same thing, Goldfarb explained. “Business activity was an act of political dissent,” he said. “In those days, the system of values was different. People who stole printer's ink and printed Bibles were heroes; they were the good guys. The bad guys were the ones who informed for the KGB.”
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Someone informed on Smolensky, and the KGB arrested him in 1981. It was the peak of the years of stagnation, and Smolensky was only twenty-seven years old. He was charged with “theft of state property,” accused of stealing seven kilos of printer's ink and carrying out “individual commercial activity,” which was prohibited. But Smolensky's case was treated as a minor one by the KGB. He recalled that they also tried to prove he stole the paper but could not. “Since there were no anti-Soviet leaflets, they said, ‘Okay, we shall take pity on you.'” The case was turned over to the local police. Smolensky was sentenced in the Sokolnichesky Court in Moscow to two years on a prison construction brigade in the town of Kalinin, outside of Moscow. He was prohibited, by the court order, from holding any position for three years in which he would have a “material responsibility.” In other words, the anticapitalists did not want Smolensky handling money. He had dared to engage in “individual commercial activity,” and in 1981 that was still considered criminal.
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Smolensky's rebellious instincts were reinforced by the arrest. “All those procedures when the state thought they could tell me what was right and wrong,” he told me later, his eyes still burning at the memory. “When it created conditions so I couldn't get a job anywhere, I couldn't earn money in an honest way, I couldn't enter a decent institute. They actually blocked all the ways for me! I couldn't go abroad. I just wanted to go as a tourist, and they said ‘no, you can't.'” Smolensky said he was barred even from going to another country in the socialist bloc. “And I said, ‘Do I have leprosy?' And they said, ‘You are a dangerous element.'”

Smolensky found few open doors, but he was saved by the shortage economy. The Soviet central planners could never keep up with the
demand for building construction in Moscow, and there was more than enough work. “In construction, you could always earn money,” recalled Krasnyansky. Smolensky became a boss in a department of Remstroitrest, a state-owned apartment building and repair enterprise. He had a dump truck and a standard two-room, twenty-eight-square-meter apartment.

Moscow in those years was bursting with people, and the system had failed to provide them with enough housing. The wait for a new apartment lasted a decade or more. The state construction machine could not keep up with demand. Living space was in severe shortage, like everything else. Although the state had established the minimum housing space as nine square meters per person, nearly half the population of 9.5 million had even less than that.
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The only safety valve was the wooded countryside—the villages of crudely built dachas that filled the forests outside the metropolis, where Muscovites escaped on warm summer evenings and where Smolensky would taste his first profits.

At the time, construction projects suffered from shoddy work and took years to complete. Massive, ugly apartment blocks were erected around the city out of prefabricated concrete slabs. There were no private construction companies. Factory construction also limped along, especially in those industries outside the favored military-industrial complex. In the last years of the Soviet Union, as factory managers gained more and more autonomy, many of them sought to plan their own projects. Often the only way to build something within a reasonable period of time was to hire small construction brigades that could work quickly, usually in the shadows.

In this world, the key skill Smolensky learned in construction was how to get his hands on scarce raw materials. If he needed nails or sand or cement blocks, he could not just go buy them. They could not be bought for any amount of money. They had to be procured, traded, or stolen—usually from some other project or site. Smolensky was good at getting.

Smolensky shared his generation's disgust with the doddering Soviet leadership. He was excited when a popular French rock group came to Moscow for a concert. Smolensky marveled at their shiny new equipment as it rolled out of the trucks and onto the stage. But Chernenko, the general secretary, then signed an article in a party newspaper saying that instead of subversive rock bands, the concerts
should feature traditional Russian balalaika, accordion, and songs and dances, that “Western culture cannot come to our Soviet future.” Smolensky groaned. “Oh God, no!” he thought. “It was such a bore, all over again.”

His fears were unfounded. Chernenko's term was brief, and Gorbachev came to power. Smolensky, a small-time construction boss and rebellious
tolkatch
, or hustler, was uneducated yet shrewd. When the system began to change, he sensed it right away. He immediately saw something different in Gorbachev. Visiting Leningrad a month after taking office, Gorbachev spoke without written notes, which was unheard of for a Soviet leader. Gorbachev appeared with his wife, which was also extraordinary. He spoke freely. Smolensky was mesmerized ; he recalled Gorbachev as the first Soviet leader he actually found appealing.

Yet, as Smolensky discovered, change was agonizingly slow. The Soviet Union was one of the hardest-drinking countries in the world. Vodka infused life and alcoholism gripped the population, taking a devastating toll on health and life expectancy. Moreover, the system encouraged the disease by providing enormous volumes of alcohol to the population as a way to make money for the state. In the shortage economy, there was always an ocean of vodka. One of Gorbachev's first moves was a campaign against excessive drinking. Smolensky said he was ordered by local party officials to take the reins of the antialcohol drive in his construction group, perhaps because he was known as a clever hustler who got results. But Smolensky immediately realized that it was a futile campaign. Every week, the party demanded that Smolensky bring them a report of how many drunks he had punished. How many? Well, he recalled later, for starters they could take all of the hundred construction workers in his outfit. Take them all—they worked in the open air, and Smolensky knew they started drinking in the morning and continued until they left in the evening. He could easily “punish” everyone working for him. Smolensky understood the scourge of alcoholism, and he knew how his workers burned themselves out on vodka. They even drank cheap cologne. The antialcohol campaign was ill-fated, he thought, just another absurd facade of the system and its endless propaganda campaigns, which no one believed. It was ridiculous: the state television broadcasts showed weddings of people with happy faces drinking juice. In real life, he knew, everyone kept drinking vodka. Despite his joy over
Gorbachev's ascension, the antialcohol campaign led Smolensky to wonder: would their life ever change?

 

On the economic front, Gorbachev's first two years were not promising. The young and energetic general secretary seemed to be groping for a way toward what he called “radical reform” of the socialist system, without breaking the grip of the Communist old guard. By his own later admission, Gorbachev wasted time.
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The summer of 1986 brought a bizarre backward step, the fight against “unearned income.” The idea seemed to be to crack down on corruption, but the Politburo was unable to define “unearned income.” In fact, the entire shadow economy pulsed with it, that vast network of
blat
and
svyazi
that had kept the country alive. Did you get “unearned income” by using your car for a taxi? Selling your homegrown cucumbers and tomatoes? The campaign was launched with vigor but spun out of control. In the Volgograd region, private tomato-growing hothouses were destroyed at the behest of the police and the militia. On the roads, police confiscated and destroyed the tomatoes. The newspaper
Literaturnaya Gazeta
published a long story about the affair headlined, “The Criminal Tomato.”
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Later Gorbachev took two fundamental and far-reaching steps that began to unwind the socialist experiment. To help alleviate the shortage economy, and partly as a reaction to the misguided campaign against unearned income, a law was drawn up in 1986 allowing Soviet citizens to carry out “individual labor activity.” The idea was to fill the gaps in the creaking, deficit-ridden economy by allowing people to become self-employed entrepreneurs. A large number of private activities soon became possible, including handicrafts and consumer services. A teacher could tutor students after school. Many teachers already were doing this, but the new law made their moonlighting legitimate; they no longer had anything to fear. Moreover, the law said nothing about prices—individuals could charge what they wanted. The law was a first tiptoe away from state controls. Still, there were strict limits. The new entrepreneurs could hire only family members; they could operate only where the socialist sector had failed, primarily in consumer shortages. The expense and difficulties of starting up were immense, and some activities were still forbidden, including all kinds of printing and printing presses.

Gorbachev's next step was even more profound. In a speech in 1986, he had drawn attention to the cooperatives, a type of quasi-private business that had its roots in the New Economic Policy of the 1920s. In English, the word “cooperative” has a socialist connotation, but in fact the cooperatives, as they were reinvented by Gorbachev, became the first private businesses in the Soviet Union. They marked a revolutionary departure from the decades of anticapitalism. Gorbachev's initial words were cautious, but their impact was far-reaching. The state began, gingerly, to allow these new autonomous businesses to take shape in 1987 in very narrow sections of the economy : recycling, baking, shoe repair, laundry services, and consumer goods. Although limited in scale, the cooperative movement seized public attention. The idea of private enterprises opening up amid a sea of socialist stagnation was a remarkable sight. One striking example was the appearance of pay toilets in central Moscow, operated by a cooperative. They were clean, played music, and offered rose-tinted toilet paper and new plumbing fixtures. Most people had never seen such a facility, certainly not in their own homes. Other enterprises soon followed, including youth discos and restaurants. When the formal Law on Cooperatives was adopted in 1988, many cooperatives were already well on their way to becoming private businesses. The threshold of a new age had been crossed.

The Law on Cooperatives contained a hidden time bomb set to explode the dreams of the Communists. One line in the text, littlenoted until later, allowed the formation of financial or credit businesses as cooperatives; in other words, banks. Smolensky would eventually make a fortune from this small crack that had opened in decaying socialism.