The Oligarchs (12 page)

Later Luzhkov enrolled at the Gubkin Institute of Oil and Gas, one of the premier training grounds for the rapidly industrializing Soviet Union. In the high-ceilinged halls and laboratories of the institute, the Gubkin students learned mechanical engineering, oil and gas geology, mining and refining from one hundred professors, including two prestigious academicians. Although the requisite Marxist-Leninist training was present, the curriculum was heavily weighted toward technical
training. Overall, the school played a critical role—turning out specialists—and each student was given a very specific training over five years to fit into a given place in industry when they finished.
⁴

Luzhkov graduated in 1958. He expected to go into the oil industry but was assigned to plastics. He protested loudly, to no avail. Nonetheless, Luzhkov did well. Plastics and petrochemicals came into greater demand in the 1960s, and he moved up the ranks. In 1974 he was appointed director of a design bureau in the Ministry of the Chemical Industry, and later he became director of Khimavtomatika, a maker of specialized equipment for chemical factories with twenty thousand workers. It was the largest single enterprise in the ministry and was divided between scientific research and factory work. It was here, as a top Soviet industrial manager, that Luzhkov took his first, tentative steps away from socialism, and it was a painful departure, seared into his memory.

In 1980, at the end of the Brezhnev period, Luzhkov proposed a somewhat unorthodox idea, that the science half of his enterprise be put on a very elementary self-financing scheme. “Self-financing” was a watchword of earlier attempts to reform the centrally planned economy, and it often went hand in glove with the growing independence of factory managers. Roughly speaking, it allowed factories to retain their own earnings. Luzhkov suggested selling the research results at Khimavtomatika as a commodity; when they developed a scientific process, they could peddle it and keep the profits. Luzhkov's proposal went to the top decisionmaking body of the ministry, the collegium, a group of senior managers who sat around a horseshoe-shaped table while an audience of 150 less senior workers looked on. Standing at a podium, Luzhkov outlined his plans. His idea was immediately and dramatically shot down by a representative of the Communist Party, who declared that Luzhkov wanted to violate the precepts of Marx and Engels. The party man opened up a volume of Marx and read aloud: science was the product of human thinking and could not be evaluated in monetary terms! Luzhkov was violating Marx!

That was the end of the idea. Luzhkov's minister had no desire to fight the party. What had been a modest step away from socialism had turned into a political hot potato. Luzhkov's idea was buried and forgotten. But he had marked himself as a man willing to experiment.
⁵

At the beginning of
perestroika,
Luzhkov was fifty years old, but nothing at the time marked him as a political leader. By the same age,
both Gorbachev and Yeltsin held high-ranking party posts.
⁶
Luzhkov had joined the party in 1968, but his preoccupation was Soviet industry and not ideology. Nevertheless, it was common that a top industrial manager would be drawn into city affairs. In 1975 Luzhkov was chosen to serve on a local district council, and two years later he became a member of the rubber-stamp Moscow city council, known as the Mossovet. Its size varied, but the Mossovet at this time had about a thousand members. The entire city was run by the party, and the Mossovet was an enormous, unwieldy legislature, a facade of authority that decided very little. Luzhkov accepted a part-time post as head of the city commission on consumer services. It was an important choice because it was here that the seeds of change would be planted in Gorbachev's early years of
perestroika.
⁷

In 1986 Luzhkov resigned from his industry post and moved full-time into the city administrative system. Yeltsin had arrived from Sverdlovsk and broke the news to Luzhkov personally; he had been made one of the deputy chairmen of the
ispolkom
, the city executive committee. His new duties included supervising the budding cooperatives in Moscow.

As already noted, the old party stalwarts of the time were suspicious ; they saw the entrepreneurs in the cooperative movement as profiteers, speculators, and subversive enemies of socialism. When Luzhkov set up a commission to license the cooperatives in Moscow, the whole experiment stood on wobbly legs. “This was a mission, a very dangerous one,” Luzhkov told me. No one knew if it could survive the dead hand of the old system, which had stifled so much individual initiative over the decades.

One unlikely champion of the cooperatives was a man who spoke in the dry, measured tones of a bureaucrat, Alexander Panin, a Leningrad management specialist who became Luzhkov's right-hand man in dealing with the cooperatives. Panin was among legions of experts who, in between endless cups of tea and idle hours in their institutes, were supposedly working to perfect socialist management techniques. Panin, who had been discreetly reading Western management texts, concluded that the most important thing was to unlock the brilliance and imagination of individuals. He took a courageous decision and wrote a letter to the Communist Party Central Committee in Moscow. His ideas flew in the face of decades of party doctrine. He was summoned to the Central Committee offices at Staraya Ploschad,
or Old Square, and the party people listened, for a while. Panin told me that, by necessity, he had to dress up his notion of individual initiative with a lot of rhetoric, insisting that allowing individual initiative did not contradict socialist dogma. The party apparatchiks told Panin they could not help him, but they urged him to keep spreading his notions and approach the Communist Youth League, the Komsomol, which had a little more leeway for free thinking about such things. Amazed by their reaction, Panin kept up his campaign. He suggested a modest experiment in individual initiative—allowing people to start their own cooperatives, which would be very small private businesses, such as baking pies. Finally, the authorities agreed to let him try, and Panin became executive director of Luzhkov's Moscow committee on cooperatives—to oversee baking of the first pies of capitalism.
⁸

Luzhkov and Panin began in a room as large as a dance hall on the sixth floor of the Mossovet building in central Moscow. Simple folding tables were brought in to one side of the room. The staff worked by day; then Luzhkov, in shirtsleeves, came in the evenings, usually after 7:00 P.M., often holding meetings with the new entrepreneurs until well beyond midnight. The new businessmen thronged the halls with their proposals, their paperwork, their questions, and their substantial problems, not the least of which were how to get supplies from the state-run economy and how to get a room or garage for their new venture. “Bearded, shaggy, and looking God-knows-how,” Luzhkov later recalled of his impressions of the new businessmen, “but all of them were energetic, independent, and interested. One was offering to produce useful goods out of waste garbage. Another found consumer demand at a place where the state structures had no field of activity at all. Ingenuity, inventiveness, creativity—we saw so much of it in our room.”

Luzhkov's young, stern aide was Yelena Baturina, whom he married after his first wife died of cancer in 1988. Baturina recalled how the people who came to the room were so different from the bureaucrats who worked in the Mossovet building, and how shocked the bureaucrats were to find the ragged entrepreneurs in their halls. “We were constantly transferred from room to room,” she told me, “because neighbors complained that bearded, dirty people were sitting in the corridors and actually spoiled the image of the building!”
⁹

Viktor Loshak, the
Moscow News
journalist who had been watching
the drama unfold, recalled that Luzhkov had to defend the pioneering cooperative businessmen against bureaucrats who wanted to crush them. One group of bureaucrats were the fierce, large women who were official guardians of public health and safety. The bureaucrats had no idea that a new economy was being born in front of their eyes; they were supposed to uphold the dictates of the old system. “They resisted every microscopic step of the cooperative movement,” Loshak told me.

“I was waiting for the first meeting of this commission. I remember the first woman who was going to be in private business—she was a theater specialist by profession. She had two or three children. She wanted to bake cakes for people for holidays, as a business.

“And Luzhkov said, ‘Great!' And two or three others said ‘Okay.' Then the opposite side started looking for reasons why they could refuse her. ‘What is the size of your apartment?' they asked. And it turns out the apartment is big enough. ‘Do you have a medical certificate ?' She had a certificate. ‘Will you be able to go on taking care of your children?' And it turned out her mother was in the same block of flats and could help.

“Then this bitch from the sanitary epidemiological service asked, ‘Do you have secondary industrial ventilation in your apartment?' And this woman didn't even know what that woman was taking about. Nobody knew what it was, and I didn't know what it was. And that woman from the sanitary epidemiological service found some point number 3, article number 8, that when making cakes for sale there must be that industrial ventilation.

“Then Luzhkov said, ‘Go—you know where! I'm chairman of this commission and this woman will start her business!'” Luzhkov won the vote and moved on to the next person, who wanted to open a bicycle repair shop.
¹⁰

One evening in those early weeks, a party boss came and insisted that Luzhkov move “this entire public out of here.” Luzhkov explained that the whole point was to let off the steam of public discontent. “The wave is rolling already,” Luzhkov told the party man. “If we don't cope, we will find ourselves under this wave.” At the same time, Luzhkov privately feared he was being set up for failure, that the cooperatives were going to be crushed and he would be blamed. “The future cooperators were eager to start business, but they were fearful of the future and they wanted to receive some kind of
support from me. I cheered them up the way I knew how, but my heart was filled with anxiety and worry.”
¹¹

Valery Saikin, chairman of the executive committee and Luzhkov's boss, told Luzhkov that the nascent private businessmen were subversive and fretted that they might come and demonstrate openly against the party chieftains. “Objectively, they are against the state economy. Against socialism,” he said to Luzhkov. “I warn you: if they come to the Mossovet, you will be the one to go and meet them!”

“With pleasure,” Luzhkov replied. “I will take my favorite cap, come to the balcony, and will wave to them like Lenin did when saying farewell to troops on the way to the civil war.” Saikin was not amused.

Later, recalling those months of frenetic activity, Luzhkov said the evenings were not just bureaucratic work but offered a glimpse of the market economy—people anxious to work for themselves, not the state. “Dealing with the new people formed a new world outlook,” he said. “I began understanding things that before I used to guess only vaguely. . . .”

But things were never clear-cut at the beginning. The first tiny steps toward a market economy were confused, inchoate, and shrouded in suspicion. Were the new businessmen taking bribes or paying bribes? Reaping windfall profits? Luzhkov heard the rumors. The confusion was partly justified; Panin noted that the pies made by the cooperatives cost seven or eight kopeks each, compared with five kopeks in the state store. To the people on the street, that seemed like profiteering. Sometimes they were better, sometimes not. The cooperatives began the long march toward the market saddled with great suspicion in a society that had known nothing like it.

The first cooperatives were dramatically different from the old state establishments. The cooperatives actually
cared
about their customers. “In the Soviet Union, the counter was like a barricade, with enemies on either side,” Loshak recalled. “And suddenly they were not enemies. These people, the ‘cooperators,' were interested in their clients, in having them buy something. When the first cooperative restaurant appeared, it differed drastically from all the others, from state restaurants.”

David Remnick, a
Washington Post
correspondent, described the amazing scene at the first cooperative restaurant at 36 Kropotkinskaya Street. He said the menu included soup, suckling pig, salad, and coffee. “So attentive was the management to good service that it soon fired
one waiter for being ‘tactless.' The café was a sensation not only for the well-to-do Soviets and foreigners who could manage the dual feats of getting in the door and paying the check, but also for ordinary people who heard about it in the press. There were rumors of fantastic profits being made and charges of ‘speculation.' The Communist Party newspaper Pravda asserted that the new system allowed some people to make ‘significant sums that did not correspond to their expected labor.'”
¹²

In this environment, Luzhkov was a curator of the new experiment who protected, nurtured, and monitored the cooperatives as they took hold. In his first four months, the number of Moscow cooperatives zoomed from four to more than a thousand. Luzhkov sponsored an exhibition of their work to mark the first hundred cooperatives and spread the idea. Yeltsin showed up to encourage him. A photograph shows Luzhkov admiring the exhibit stand of a cooperator making his own musical instruments. Baturina recalled, “The cooperatives worshiped Luzhkov because, out of all the official persons at that time, no one risked speaking out in their favor, in their defense.” But Luzhkov, who in later years was famous for roaming city construction sites, rarely visited the cooperatives. Panin said Luzhkov was still cautious and saw himself as a “monitor” of the new businessmen. Neither the party bureaucrats nor the public was really prepared for what was being unleashed, he recalled. “It was a test, as usual, in the beginning,” Panin told me. “You understand, if we hadn't monitored them, they could have poisoned people or used bad raw materials. And had they done that—we would have had a lot of problems ourselves. That would have been the end of the cooperatives.”