Friday, April 04, 2014

Ukraine/Russia, part two: the other side of the coin

If you do a Google search on "how did russian oligarchs get so rich" the results are interesting. One, there are a great many articles answering the question with a title almost identical to the question. Two, there are a lot of answers from relatively reputable sources, and some from less reputable sources.

But the answers are interesting, and they start with the failure of the Soviet Union. Did the Soviet Union really fail, and if so, why?

Yes it really failed. It was not a coup, it was not a foreign orchestrated collapse: it failed. It failed because the only way it could keep going was to borrow money from some of the very same concerns that it's founding philosophy reviled and threatened to tear apart. This is an important point: a house divided against itself cannot stand.

Why did it need all that money? A simple answer is that the Soviet Union plowed billions of dollars worth of effort, that is man years and materiel, into building a modern society without providing increasingly valuable material incentives to the people doing the building. What does that mean?

What it means is that if one has a leaky roof and miserable food, and you give one a chance and say "hey, work for me and you can earn a fixed roof and better food", then they will work for you only if that actually happens. In many cases, that did actually happened in the Soviet Union: people got more than they had by working for the state apparatus.

But, once you have a fixed roof and better food, then the next stretch of work you do should earn you even more and better: a patio, or a bigger apartment, etc.. Thatt only makes sense: because if effort "X" pushes you five miles, then that same effort should push you another file miles, or at least close to that. If it doesn't, then you don't expend the effort. Why bother?

Once they saw that that next five to ten miles was going to be very hard, the Soviet state put huge amounts of effort into telling people that the things they had were enough, and not to look at the things people in the West had as desirable, while at the same time all Soviet plans revolved around making the Soviet state have everything and more than the West had. It couldn't, because it wasn't realistic, and things that are unrealistic become unreal. So the Soviet union collapsed.

I didn't mention anything about corruption, because it is a term that implies a certain context. The context is that there is a society which values rules based on the rules' intrinsic value: you are honest because it is a virtue, because truth is highly valued, because truth is what lies at the basis of all advancement and knowing. This is a belief system, you can ascribe to it or not. This particular society chose not to ascribe to it. There was no corruption because it was all corruption. Rules were written, there was a constitution and written documents describing rights, but there was a societal unspoken agreement that these things were meaningless: for show.  People couldn't leave the country, they simply were not allowed to unless they escaped.

Why was there such an agreement? Because people had been systematically murdered, imprisoned and banished based on being processed by state sanctioned miniature lynch mobs who decided that the accused had too many material possessions or were otherwise undesirable. So it had been established as a key tenet of the system that human life was not intrinsically valuable, therefore anything deriving from the notion that human life had intrinsic value was null and void. So the State could write these things in as flowery a language as they might like in order to impress Western idealogues, but everyone involved knew it was a fabrication: that some denouncements in the right ears could ruin a career or end a life. The only way to get ahead was to game the system, to build alliances. So people became very smart at doing that.

Back to the subject at hand: because the State did put a lot of money and effort into certain things, when it collapsed, those things still existed on a fairly large scale: paper mills, concrete plants, oil refineries, aircraft manufacturers. Because people also knew where the state started, and where it ended off. They were clever survivors, they were the industrious, they did build things, they were smart: people who wanted to accomplish things and found a way to do this despite everything else. Because they had some values that made then want to build a better world for their own pride and for their children. Because they were people who cared about learning, because truth could be found there.

But, at the time things collapsed, all of it was in disrepair, almost all of it had been mismanaged. Some factories produced aimlessly. Others were filled with betrayed and hostiled workforces.

Even so, these things were worth something. How much? and to whom?

Now, what SHOULD have happened? Wasn't all this now the property of the people? Shouldn't some sort of voucher or share system been put into place, where everyone got an equal number of shares? Then, shouldn't it have been sold off to the highest possible bidder, who would then fix it up and get it running again? Then shouldn't the people have been able to redeem their shares, or hold onto them?

Maybe. But who would make sure that would happen? Probably.But the government wasn't going to sprout a unified patrician wing overnight, if ever.

It seems like the absence of the notion of a socially active, philanthropic patrician class in Russian society is a product of its isolation. i'm not an expert, but it seems like the most notable projects to "improve the quality of Russian life" were undertaken, this was of the sort of scale and type that would further enrich the rich. Philanthropy is viewed skeptically, as a way to avoid taxes, launder money, or provide a project as means for an associate to snag a lucrative contract. It takes many years, maybe generations, of wealth and stability to produce such a patrician outlook, tempered with pragmatism, and with a certain preference for a cherished cause. You have to focus on something.

But that didn't happen because of all that had gone before. To someone in the West, it was a huge gamble to invest. Some investment occurred, and some of that was gleefully gobbled up by ex-Soviets with a grudge. Very risky, very adventurous investment that would not pay off in the short term. But, for someone in Russia, there was no capital other than state owned, which meant borrowed or "liberated" capital.

How could anyone afford anything? Well, because Soviet society was corrupt, shrewd and connected people of course did have more than others and that was that. Because the remaining society continued to be corrupt, certain clerks could be handsomely bribed to record various transactions that transferred the ownership of any number of these things that had never had ledger sheets, or appraisals, or valuations. Who could blame them? All of a sudden you are in a position where you can finally leave this ailing country that was falling down around your ears: a nice bribe under your belt would do the trick. From the point of view of the would-be oligarch, a million dollar bribe that helps close the deal on a $100 million dollar business is a huge return on investment. Theoretically, if the government is corrupt all the way up, so much the better. It's just a matter of the right amount in the right pocket.

This same sort of things happened in the 1980s in Texas in the US, although somewhat in reverse, when real estate had been artificially elevated through the machinations of government assessors working hand in hand with real estate speculators with large "extended families".  Rural real estate near booming cities could be had cheaply. They would pick some of this up, flip the land between one another, sometimes within hours, back and forth, and with each transaction the value would go up. Use the equity to secure loans to build developments on that land: a game of hyper-Monopoly that was finally unraveled when the developments didn't sell as well as projected.

Nobody is unblemished by some kind of corruption, either handed down by history or directly. But how many revel in corruption, owe their existences to it?

So, the oligarchs are really the most advanced products of Soviet society: cunning in their ability to work the crumbling Soviet system, shrewd in their choices of business alliances, quick to learn the nuances of gaming the Western system: setting up offshore holding companies where they could hide their direct association with transactions, pragmatic in their acquisitions and willing to apply ruthless, violent force if needed.

There is a saying: "Earth's Security, Human Integrity". It is true: if large scale abandonment of integrity occurs, this includes the abandonment of the discernment of the valuation of truth and the lack of courage to state it, this results in the inabilty to be true witnesses to the evidence of the real consequences of our actions, and we lose the planet.


Post a Comment

Subscribe to Post Comments [Atom]

<< Home