A New Russia with an Old Problem

The Oligarchs: Wealth and Power in the New Russia. By David E. Hoffman (New York: Public Affairs, 2002). 567 pp. $21.

In the 1990s, Russia was a country run amok. In The Oligarchs: Wealth and Power in the New Russia, David E. Hoffman takes us on a tour. From the collapse of the Soviet system, through the treacherous swamps of unregulated financial markets, to the devastation of devaluation and debt default, Hoffman details the new Russia. Our guides through this Dante-like landscape are six men who bribed and stole their way into nearly unlimited wealth and power before finally being caged by their own creation, the current president, Vladimir Putin. These men, collectively known as "the Oligarchs" were: Alexander Smolensky, Mikhail Khodorkovsky, Boris Berezovsky, Vladimir Gusinsky, Yuri Luzhkov, and Anatoly Chubais. The first four are businessmen and the last two political insiders, entirely appropriate given the complicity between politics and capital.

Mr. Hoffman was the Moscow bureau chief for The Washington Post from 1995 to 2001, and he bases this book on what must have been hundreds of hours of interviews. Thus, he is able to shine a thin beam of light into the shadowy origins and machinations of the men who remade Russia. The result is an extraordinarily readable and mesmerizing story. The author's greatest success is to take concepts that could fill an economic textbook—"state capture," "capital flight," and "spontaneous privatization"—layer them with palatable quotes and anecdotes, and serve them to the reader in bite-sized and very digestible portions. Ultimately, however, this book leaves many questions unanswered and fails to reconnect with the reality of everyday Russia.

The reader is introduced to Russia during the last gasps of communism, an era characterized by disillusionment, chronic shortages of the most basic necessities, and an enormous, unfulfilled demand for meat, blue jeans, and automobiles. The first section of the book devotes a chapter to each oligarch and how they rose from humble origins—construction worker, bureaucrat, scientist— and carved out valuable empires from the carcass of the communist Empire. The pattern is as follows: the young oligarch exploits his connections within the Communist Party, which allow him to abuse gaps in poorly written legislation to make a lot of cash very quickly. This cash is then used to buy further political protection. The cycle is repeated until the deals get bigger and more daring as power and capital are amassed and consolidated. The author is quick to emphasize that, unlike the American "tycoons," these men "built very little that was new" but rather, created wealth from currency speculation, ledger-book tricks, and the "purchase" of undervalued state assets.

These first chapters seem to have been organized to stand alone as reference for researchers, and a very helpful index makes this feasible. Unfortunately this format also makes for a great deal of repetition, which can be jarring and frustrating—as when a minor character gets the same full introduction in different chapters. By the sixth oligarch the reader feels trapped, like Bill Murray's character in Groundhog Day, doomed to relive 1990-1992 over and over again.

The second section of the book deals with the various themes and stages of the power struggles between and among the oligarchs and their rivals. One important step in the amassing and consolidating oligarchic power was privatization, run by Anatoly Chubais. The author presents Chubais as an idealist, but fatally mistaken in his approach, which was to give the assets away first, for a fraction of their value, and then let the regulatory systems arise to match the market forces. Chubais was not alone in this misconception. Western economists, such as the famous Jeffrey Sachs of Harvard University, were advocates of this strategy.

Another important step, ably described by the author, is the "loans for shares" deal, which stripped the state government of the rich resources that were an important source of hard currency for the state, and that...