The enthusiasm for the West was real, and it was at least in part explained by the next stop on Mrs Thatcher’s itinerary. In the longstanding tradition of Potemkin villages2 – fake facades to impress outsiders – the prime minister was taken on a tour of a supermarket that had been specially stocked with supplies of bread and cheese, tinned fruit and fresh veg. Looking back, it is amusing to imagine what Mrs Thatcher thought to herself when she saw this array of very basic foodstuff – which for us back then represented unimaginable luxury. Those reporters who stayed behind after the motorcade had departed saw the efforts of local shoppers trying and failing to empty the shelves before the goods were all packed away.
Five decades earlier, the great Russian poet Anna Akhmatova had recorded in her epic verse drama, Poem Without a Hero, how a brief encounter with a charming British diplomat had opened her eyes to another, undreamed of universe beyond the grim reality of Soviet life. Akhmatova called him a ‘guest from the future’, because she regarded him as the intimated herald of a future that Russia, too, might one day enjoy.
The future ripens in the past …
All the mirrors on the wall
show a man not yet appeared
who could not enter this white hall.
He is no better and no worse,
but he is free of Lethe’s curse:
his warm hand makes a human pledge.
This guest from the future, can it be
that he will really come to me…?
In 1987, Mrs Thatcher with her self-confident optimism and unwavering belief in Western values, her stylish hats, glamorous sable- collared coats and beige suede boots, also seemed like a ‘guest from the future’, a portent of what Russia’s future could be if the right choices were made and history were to look kindly on the nation’s efforts.
CHAPTER 3
A TURNING POINT
Gorbachev’s reforms created opportunities for those capable of seizing them. But decades of the Soviet state had destroyed people’s capacity for initiative and few took up the challenge of private enterprise. People were so used to the state taking all the decisions for them – providing them with a minimal wage for minimal work, basic accommodation, heating and food – that they had lost the ability to think and act for themselves. For those of us willing to risk it, perestroika offered the possibility of great rewards. Menatep Bank thrived; by the standards of the time, my partners and I were well off.
But there was a problem. The hardline communists were angry at Gorbachev’s flirtation with capitalism and were threatening to overthrow him. In August 1991, they staged a putsch. Tanks were on the streets, Gorbachev was detained in his holiday home in Crimea and the coup leaders were promising to take Russia back to the old days by reversing his political and economic reforms. If they succeeded, our businesses would have been crushed and there could have been personal consequences for us and our families. People were scared that all the rights and freedoms that had come to us since perestroika began would be lost forever. That’s why I joined Boris Yeltsin on the barricades around the Russian parliament, even though not everything about the Yeltsin administration – including the nepotism and incipient corruption – was to my liking. The coup plotters ordered tanks and troops to take over the streets of Moscow and sent the elite Alfa KGB unit to storm the Russian parliament building to destroy us. The people of Moscow linked arms and swore to stand in the way of the tanks. Some of them were shot or crushed to death, but we were defending freedom and democracy. We were defending ourselves and everything we had achieved. That is why we took the decision not to surrender. It was one of the most emotional moments of my life.
When I stood on the barricades in those dramatic August days, I was 28 and a successful businessman. Since earlier that year, I had been an adviser to the prime minister of the Soviet Union, Ivan Silayev. I had a personal stake in the economy and in the reformist policies of Gorbachev and his team. I went to defend the Russian White House because Silayev was there and because it was my duty to stand up for the liberal policies we had been promoting, policies that the coup plotters were seeking to destroy. Perhaps I didn’t fully realise the significance of what was happening, but I went with passions running high. The August events confirmed my commitment to democracy and the market economy.
August 1991 changed everything for Russia, and for me. The heroism of the Russian people and the collapse of the coup secured the way for a free-market democracy. In a few turbulent months between August and December 1991, the USSR was dissolved and Boris Yeltsin, president of a newly independent Russia, inherited power. Mikhail Gorbachev had started the move towards a market economy, but his measures were limited and tentative. He wanted to strengthen the communist system by encouraging a minimal amount of economic enterprise; the last thing he wanted was to bring communism crashing down. But that was exactly what happened.
People stand on a barricade in front of the Russian White House in Moscow, 21 August 1991
The unexpected turn of history thrust Boris Yeltsin into a role that I don’t think he had fully anticipated. In opposition, he had espoused radical economic reforms, including an end to the old centralised Soviet command system, but now he had to implement them. In the exhilaration of his victory over the hardline communists, Yeltsin committed himself to the programme of ‘economic shock therapy’ propounded to him by Western economists. These were the so-called ‘Chicago Boys’, young technocrats led by Harvard University’s Jeffrey Sachs, who came flooding into Russia at the behest of the US leadership, aiming to transform Russia from a stagnant communist central command system into a rejuvenated market economy where private enterprise would breathe new vigour into the state. Their ideas were enthusiastically backed by economic liberals in Yeltsin’s Reform Cabinet, most notably Prime Minister Yegor Gaidar and the privatisation guru Anatoly Chubais. The Chicago Boys convinced Yeltsin that he had no time to lose, that delay would increase the scale of the task, and that the transformation had to be completed before the communists could regroup and turn back the clock. Only by creating a new business elite and a middle class with a stake in the system, they argued, could they be sure the communists would never regain power; leaving the economy full of nationalised industries would make it easy for communism to return. The Chicago Boys had previously had some success in post-Jaruzelski Poland, and even more so in Augusto Pinochet’s Chile – but these were countries with a living memory of capitalist traditions, while Russia, a country that had no such history, was totally unprepared for the radical changes they were proposing.
The reformers accepted that the speed of the change would cause short-term pain, but believed the long-term gain would make it worthwhile. Yeltsin’s first step in late 1992, masterminded by the Chicago Boys and implemented by Gaidar and Chubais, was a voucher scheme that aimed to transfer ownership of Russia’s state industries to the Russian people. Every citizen was sent a voucher worth 10,000 roubles (approximately $60), each one representing a very small stake in the country’s economy. It was an attempt to create a shareholding middle class, but it was destined to fail.