Issue #17/72, October 16, 1999 
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by Matt Taibbi
IN REMAINING faithful to its habit of always arriving fashionably late on the Russian political analysis scene, the New York Times--actually the Times magazine--finally published its own definitive "Who Lost Russia" article last week. Written by former Financial Times Moscow bureau chief John Lloyd (no relation to the famous tennis mediocrity of the same name), the article is 8,000 words of everything you'd expect from the New York Times in a serious eulogy of the Russian reform movement: presumptuous posturing, long-windedness, the occasional factual inaccuracy, and suspiciously enthusiastic apologies on behalf of the guilty.
For those of you who don't remember the 'Who Lost Russia' pieces, they were soporific essay/features in which the hack/author weightily surveyed the wreckage of the Russian reform movement after the August crisis, asked aloud Where the West Went Wrong in its handling of postcommunist Russia, and went on to blame everyone but himself.
Humorously, most of the press outlets which throughout the Yeltsin era most enthusiastically cheered on the West-friendly heroes of the Russian reform movement (i.e. Chubais, Gaidar) changed their tone in these post-crisis essays, lambasting the excesses of "crony capitalism" as a key reason the West's best laid plans for Russian democracy were undermined in the 1990s.
This new Lloyd/NYT magazine piece is a good example of the revisionist tradition. At first read, it appears to say a lot of the right things-- namely, that the privatization process in Russia was corrupt from the start, and that the West suffered a profound failure of vision in its approach to postcommunist Russia, among other things.
But in the end, the article goes out of its way to avoid linking anyone by name with any kind of conscious wrongdoing, leaving readers with the impression that all the mistakes made by the West and its allies were of the well-meaning variety, and that all the bad deeds were done by villains and wreckers still at large.
Lloyd starts off his tale of the Russia reformers' journey into the heart of darkness with a melodramatic scene-setting paragraph -- a description of a 1991 meeting of high-level economic reformers Lloyd attended at a dacha on the outskirts of Moscow:
'Within three months of the meeting, many of these men were ministers in the first Government of an independent Russia in more than seven decades. Pyotr Aven.. Konstantin Kagalovsky... Anatoly Chubais, a former academic researcher, was Minister for Privatization. My guide and their chairman, Yegor Gaidar, director of a small academic institute, was soon to become acting Prime Minister. Their mission: to make Russia a free, democratic, capitalist state." Lloyd here is painting a picture of a sort of reformers' Garden of Eden, a snapshot of the magic dacha before the fall of man, when hearts were pure and the aim was true.
But how does Lloyd know--what emboldens him to assert not as opinion but as plain fact-- that the Gaidar/Chubais "mission" was to "create a free, democratic capitalist state", as opposed to something else, i.e.? How can he be sure, for instance, that they weren't just out for power and money?
Lloyd's answer to that would probably be that that's what Gaidar and Chubais told him themselves. This would be, needless to say, not a good enough answer.
I can imagine Gaidar, cocktail in hand, siding up to Lloyd in the middle of this dacha conference and whispering matter-of-factly: "See, the thing is, Jack, our mission here is to create a free democratic state. Right, fellas? Isn't that what it is? [grunts, hoots in the affirmative, "Yeah, right, Yegor, that's it", etc.]. You see... Listen, you want another drink?"
Reporters in general shouldn't be in the business of ascribing mythical ambitions to celebrities. It builds them up in readers' minds, makes it harder for people to believe if and when they do base things later on. And Lloyd, as he wrote this passage, definitely knew the Base Things were coming, later in the piece. He was softening his audience up.
The mythmaking continues later on, as Lloyd describes the early struggles of the reform effort:
"Gaidar, assailed on every side by enterprise managers screaming for a continuation of subsidies, gave in inch by inch. But he was determined to proceed with the privatization of state assets, which all the reformers agreed would break the power of the Communist-era bosses and was, accordingly, at least as much a political as an economic policy. It was an article of faith that privatization would foster honest dealings and civic behavior by creating a middle class with a stake in the country, while cleaning out the Augean stables of the bureaucracy. "
In one short paragraph, Lloyd here has described squalid, bald little Yegor Gaidar--who just moments before was Adam to Anatoly Chubais's Eve in the lead of the piece-- as both a Christ-like martyr punished for his "faith" (one can almost imagine the "assailed" ex-Premier Gaidar bleeding stigmata-like wounds suffered from the attacks of the "screaming" enterprise managers), and as Hercules, the hero of heroes, ridding Russia's "Augean stables" of filth. I believe that exceeds the U.S. R.D.A. for heroic imagery in a paragraph. And this is what the Times gives us for cool, impartial analysis? I'd like to see them when they're hysterical.
There's no mention, of course, of the fact that it was Gaidar's freeing of the ruble, and his judicious handing out of banking and currency trading licenses, which single-handedly created the real Augean Stables of postcommunist Russia, the transparently corrupt banking elite.
Lloyd was similarly sympathetic in his piece when it came time to discuss the role of the International Lending Institutions in the Russia mess:
"Much later than the radicals had hoped, the I.M.F. and the World Bank began substantial lending. So long as Yeltsin was President and a few reformers remained in Government -- Chubais was the constant figure until 1995, sporadically thereafter -- the official view in the West was that reform was on track and our money was keeping it so. In background briefings from World Bank and I.M.F. officials, I was told of the anguish they felt when money disappeared and public silk purses had to be made out of private sows' ears. "
Bullshit. If they were so fucking "anguished", why did they keep giving Russia money? And if they're so "anguished", why won't they go on the record to say so?
This on-the-record/off-the-record thing is an important distinction. No one should get credit for having a heart in private if he won't have a heart-- and a conscience-- in public. For example, if you decide to bomb Kosovo, you can't take public credit for feeling sorry for the civilian casualties. After all, YOU KILLED THEM.
The World Bank anguished? Those guys made eight percent on every dollar they lent-- even the ones that vanished. Again, it just isn't Lloyd's job to play character witness to public figures. This is supremely disgusting reporter behavior, giving people credit for their off-the-record emotions. That's what p.r. people are for, not reporters.
But this is all a warmup for the real show. Lloyd ventures enthusiastically into the realm of factual inaccuracy when he goes on, in the body of the piece, to reconstruct the history of loans-for-shares. In it, he rewrites the entire timetable of the loans-for-shares story, and allows its central villains to come out looking...well, not all that bad.
It doesn't seem that way at first. Here's his lead-in to the loans-for-shares segment:
'In this febrile atmosphere, as Russia veered between a success always just around the corner and the reality of a plunging economy, there emerged, in1995, the bones of a plan that became the most important element in the reform process -- what has come to be called "loans for shares." Regarded today almost universally as an act of colossal criminality, it has defined the Russian economy and Russian business to the world. It completed Boris Yeltsin's retreat into an isolation from his country and created billionaires without the tedious process of building wealth from below. For Anatoly Chubais, it was a "pact with the devil."'
"Colossal criminality", "pact with the devil", fine... But Lloyd never goes on to say which "devil". And he undermines completely the "pact" aspect of the quote by avoiding the suggestion that loans-for-shares was conceived from the very start as a deal to secure financial support for Yeltsin's 1996 re-election campaign. The way Lloyd tells it-- and I'll cite his article every step of the way to illustrate his argument-- the sequence of events was as follows:
1. Loans-for-shares is conceived in good faith by bankers anxious to run state assets more efficiently;
2. A reluctant [!] Chubais agrees to the idea, apparently convinced by the 'better manager' theory;
'Potanin was persuasive, and Chubais, at first scornful of the idea, agreed to it at a Cabinet meeting in March 1995.'
3. The communists win big in the Duma elections;
'But there was -- as always in Russia -- a catch. The deal presupposed a continuity of Government. By the end of 1995, Yeltsin remained deeply unpopular, as well as remote and ailing, and 1996 was a presidential election year. His rival for the presidency was Gennadi Zyuganov, leader of a Communist Party he had built up from near extinction to win a strong representation in the parliamentary elections of December 1993 and a dominant one in the elections of 1995.'
4. Chubais is fired by Yeltsin under pressure from the communists simply for being a free-marketeer who was "too hot" for their tastes;
'Too hot, after a huge parliamentary victory by the Communists, to keep in the Government, he had seen his loyalty to Yeltsin rewarded by being fired.'
5. Chubais, "depressed" and out of work, decides on a whim to go to the Davos conference;
'Hanging out in Davos was Anatoly Chubais, by now an out-of-work politician.'
6. At that same Davos conference, the loans-for-shares winners are approached by an apparently omniscient George Soros, who informs them that the communists are going to win the presidential election and arrest them all, and that they better ready their private jets and follow their money out of Russia;
'The financier George Soros reportedly told them over coffee that the Communists were going to win and that they should ready their private jets for takeoff.'
7. The banker-savages, apparently having never considered this possibility before, fall into a panic, clutching frantically at the bones in their noses at this revelation by the God-like pith-helmet-wearing white man (read: famous American investor);
'The bankers were horrified. They had a habit of putting their money abroad, but they did not want to follow it. Yet what to do?'
8. Chubais, apparently having overheard Soros talking to the bankers, has a lightbulb-over-the-head insight, deciding that it might be wise to organize the bankers behind Yeltsin's re-election campaign;
'Sitting there, solitary and depressed, his spirits began to revive as he sensed a new political opening.'
9. The bankers, liking the idea, decide to pay Chubais $3 million to lead the effort;
'Desperate to avoid a Government that would threaten their wealth, they made him an offer: lead the campaign against the Communists, and we will open our purses and our influence to you. He was paid, some of the bankers told Freeland, a $3 million fee in the form of an interest-free loan.'
10. It works, and Yeltsin wins;
'Yeltsin, through Chubais, called in the chips. And he won.'
11. The bankers' morals unexpectedly go into remission, and they "revert" to their previous habit of asset stripping and thievery;
'The bankers -- or oligarchs, as even they call themselves --consolidated their power, but they did not invest, reverting to their past practice of asset stripping and banking abroad.'
12. Chubais's well-meaning "reforms" are sunk by unspecified anti-market forces and an uncooperative population;
'Reforms, which Chubais and others pushed from a position of, at first, unrivaled power after the elections, once more foundered on a recalcitrant bureaucracy and a sullen country.'
13. The government is unable to collect enough taxes;
'Successive Governments grappled in vain with a tax system that could not develop a reliable framework for taxing the new capitalism.'
14. The Asian crisis occurs, sending shock waves through the Russian economy, and causing the firing of Anatoly Chubais;
'Last August, the financial crises in Southeast Asia touched off a collapse in Russia; the currency fell 40 percent, and with it the Russians' already miserable living standards.'
15. Crisis.
There are so many things wrong with this version of Russian history that I don't know where to begin.
First of all, there's no mention of the fact that the auctions were fixed. The New York Times Magazine reader unfamiliar with the facts might conclude from all of this that the state was duped by bankers who only showed their true colors after the fact, which is insane. Chubais and the bankers conspired to divvy up the auctioned properties at rock-bottom prices, and this was well-reported even at the time. In some cases, government funds were used to make the bids.
Lloyd tells his reader none of this. In his version, loans-for-shares was a questionable idea that simply went wrong later on-- not an overtly criminal scheme that was obviously criminal in both its conception and execution, as well as in result.
Secondly, Lloyd here contradicts himself. If loans-for-shares was a "pact with the devil", what did the state get in its end of the deal? The obvious answer is that the auctions were conceived with the elections in mind, that it was a payoff in advance. But Lloyd avoids saying this. In his version, the bankers only thought to get on board with the Yeltsin campaign at the Davos conference-- long after loans-for-shares was over.
And Jesus, what's the deal with the passage which suggests that the bankers only thought to worry about the elections when George Soros pointed out the communists to them? How racist can you get? Lloyd all but has the bankers shuffling around in blackface, thanking Soros for his insights. "We's gonna it right on that, boss!" Does Lloyd seriously think that people like Potanin and Mikhail Khodorkovsky needed George Soros to fill them in on the intricacies of Russian state politics? It's really shocking, when you think about it-- and what's more shocking is that the Times thinks, or maybe knows, that very few of its readers will see anything unusual in such a passage. The instinctive condescension of American readers is now so pronounced, apparently, that most of us actually believe the whole world looks to us to be arbiters of Ultimate Wisdom. Amazing.
Lloyd also blows the bit about the $3 million loan. He makes it sound like it was a legal fee for services rendered, rather than a bribe for the rigging of the AgPromBank auction, which is what it really was. Also, it wasn't his colleague Freeland, whose book Lloyd plugs in the piece (the two both worked for the Financial Times)-- who got that story. Lloyd said that "some of the bankers told Freeland" about the "fee". That's not true. Freeland, like everyone else, read the story in Izvestia, in a 1997 story by reporter Leonid Krutakov.
Lloyd talks about the bankers "reverting" to their habit of asset stripping. If you revert to a habit, that must mean you'd stopped at some point. But there is no evidence that the bankers ever stopped, and Lloyd doesn't provide any. Still, Lloyd uses the word because it helps along his "good faith" argument about the reformers' motives going into loans-for-shares.
Also, of course, the idea that someone would go all the way to the Davos concert to "hang out" is just... well, it's comedy. Only a power-worshipping lackey like Lloyd could conceive of the Davos conference as being a cool place to hang with the in-crowd. One can detect Chubais's highly advanced sense of humor at work in that passage-- clearly he himself told Lloyd that he was "hanging out" at Davos, probably out of curiosity, to see if he would be believed.
Another thing: how can one write as fact the assertion that Chubais was "at first scornful of the idea" of the auctions? Lloyd doesn't even go so far as to say "Chubais says he was scornful". He just writes it that way, in the guise of objective fact. This is just one more example of Lloyd's narration not keeping sufficient distance from his subject.
Also:
Lloyd doesn't mention that Chubais was fired in 1995 in the wake of public outrage over loans-for-shares. He suggests he was fired for being a capitalist.
Lloyd doesn't mention that Chubais was fired in 1998 after being implicated in repeated corruption scandals. He suggests he was fired because the economy was performing poorly.
Most shocking of all was the fact that Lloyd had the balls to blame the failure of reform on a "sullen" population, which apparently couldn't get excited about not being paid its wages and losing all of its social protections. This is worse than incorrect, it's just heartless.
You'd almost wonder why Lloyd would write these things, until you get to a passage later in the piece which lays bare Lloyd's own narrow and arrestingly ugly colonialist personality:
'What happens in the Kremlin happens in the street. In Moscow researching this article, I was arrested for drunk driving, given a Breathalyzer test whose "positive" results I was not allowed to see and confronted with the threat of a disruption to my work so large that I took the usual way out for a foreigner or New Russian. I paid the fine on the spot -- with a $100 bill for which no receipt was issued -- and I was allowed to drive off in a "dangerously drunk" condition. (To add piquancy to the sting, I was lectured by the traffic policeman who "fined" me on NATO's criminality in bombing the Serbs.)'
Kremlin corruption, which has resulted in the grotesque humiliation and impoverishment of the majority of the Russian population-- resulted in hunger and misery and premature death-- wasn't made real for Lloyd until he was annoyed on the way home by a cop looking for a handout. That impressed him: things really must be bad, if even he, John Lloyd, is forced to sit through lectures about NATO. Damn those Russians! Why can't they just be good sports and let us bomb whoever the fuck we want? How dare they...engage us in conversation? What insolence! No wonder reform didn't work.
Incidentally, that's a pretty funny revelation about the drunk-driving incident. Somebody ought to set up a public awareness committee, a Mothers Against Boozing Hacks, to protect us from this guy. It seems to me only fair that the Times fund this effort. Volunteers are encouraged to call.
I heard a lot about Lloyd's piece when it came out. People seemed to think I would like it. The reason for that, I suppose, is that Lloyd tosses around a lot of words which hint at insightful analysis-- "collossal criminality", "pact with the devil", etc. He gives Jeffrey Sachs leave to suggest that maybe "somebody" in the West wanted Russia to fail. He quotes Konstantin Kagalovsky, Yukos president, as saying that "what Chubais did" to secure Yeltsin's re-election was questionable. He has a CIA vet asserting that what the IMF did was use an old playbook for developing countries that in Russia essentially resulted in "financing the great grab".
It all sounds like truth-telling, but upon closer inspection, the criticisms are all hopelessly vague. Lloyd lets someone say, that the IMF financed the "great grab", but Lloyd himself insists they didn't do it on purpose, and were "anguished" about it. Lloyd lets someone talk about "what Chubais did", but in his actual retelling of the facts, he doesn't really tell you "what Chubais did", except to say that he made a deal with some bankers who turned out later to be corrupt.
In fact, if you read through the piece, you find blame foisted most of the way through on unnamed, elusive villains-- a "recalcitrant bureaucracy", a "sullen country", "Communist-era bosses", "Augean stables", etc. All the key players named by name-- Chubais, Gaidar, even Potanin-- come out of this "in-depth" analysis relatively unscathed, seeming like well-meaning market ideologues who made some regrettable but understandable political decisions which, unfortunately, backfired. And some of those people ended up in places they would never have imagined themselves in back in the old Garden of Eden days-- Chubais, an "oligarch in his own right" at UES, or Kagalovsky, the ex-reformer whom Lloyd calls a friend, who made a few personal compromises and is now "a little thicker around the waist" after a tour with Yukos.
Ultimately, that's what Lloyd's piece is-- a kind of Big Chill for reformers. Hey, we didn't end up where we thought we'd be, we made a few mistakes, we've got some regrets, we made a few "pacts with the devil"... but that's life, we're adults now, and let's move forward. Sounds like a good movie, but it's not much of a political essay.
