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"The Russian Kleptocracy and Rise of International Organized Crime" by Johanna Granville

"The Russian Kleptocracy and Rise of International Organized Crime" by Johanna Granville

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Published by szerzo
Russia watchers in the West expected the Russian economy to prosper, as did the Chinese economy, once Boris Yeltsin, the first freely elected Russian president, cast off the communist mantle in 1991. Instead, he fostered the growth of crony capitalism, deliberately enriching a handful of men in return for their political support. Since Yeltsin's resignation in 1999, journalists and scholars have begun to analyze his regime more frankly. Although Gorbachev established in Russia the principles of free speech and democratic accountability, Yeltsin failed to expand the aims of glasnost and perestroika. The "democrats," led by Yegor Gaidar and Anatoly Chubais, freed prices in 1992 and unleashed hyperinflation before they privatized Russia's assets. Most Russian citizens lost their savings in only a few weeks. While the few billionaire "oligarchs" liken themselves to the American "robber barons" of the nineteenth century, no real comparison can be drawn. Those well-connected young men made fortunes not by creating new enterprises that increased their country's wealth, as did Carnegie (steel), Rockefeller (oil), Ford (automobiles), and Morgan (finance). Instead, they played the role of old state trading monopolies, arbitraging the huge difference between old domestic prices for Russian commodities and the prices prevailing on the world market. Instead of investing in the Russian economy, they stashed billions of dollars in Swiss bank accounts. Experts estimate that as much as $15 billion leaves Russia each year as either "capital flight" or laundered money from illegal transactions.
Russia watchers in the West expected the Russian economy to prosper, as did the Chinese economy, once Boris Yeltsin, the first freely elected Russian president, cast off the communist mantle in 1991. Instead, he fostered the growth of crony capitalism, deliberately enriching a handful of men in return for their political support. Since Yeltsin's resignation in 1999, journalists and scholars have begun to analyze his regime more frankly. Although Gorbachev established in Russia the principles of free speech and democratic accountability, Yeltsin failed to expand the aims of glasnost and perestroika. The "democrats," led by Yegor Gaidar and Anatoly Chubais, freed prices in 1992 and unleashed hyperinflation before they privatized Russia's assets. Most Russian citizens lost their savings in only a few weeks. While the few billionaire "oligarchs" liken themselves to the American "robber barons" of the nineteenth century, no real comparison can be drawn. Those well-connected young men made fortunes not by creating new enterprises that increased their country's wealth, as did Carnegie (steel), Rockefeller (oil), Ford (automobiles), and Morgan (finance). Instead, they played the role of old state trading monopolies, arbitraging the huge difference between old domestic prices for Russian commodities and the prices prevailing on the world market. Instead of investing in the Russian economy, they stashed billions of dollars in Swiss bank accounts. Experts estimate that as much as $15 billion leaves Russia each year as either "capital flight" or laundered money from illegal transactions.

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Categories:Types, Research, History
Published by: szerzo on Apr 01, 2009
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03/25/2013

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Copyright: Johanna Granville, "
 Dermokratizatsiya
and
 Prikhvatizatsiya
: TheRussian Kleptocracy and Rise of Organized Crime," in Demokratizatsiya(summer 2003), pp. 448-457. Review article of 5 books.
 Dermokratizatsiya
and
 Prikhvatizatsiya
: The RussianKleptocracy and Rise of Organized Crime
Robert I. Friedman,
 Red Mafia: How the Russian Mob Has Invaded America.
Boston: Little,Brown, and Co., 2000; 296 pp.; ISBN 0-316-29474-8 (cloth);$25.95.Paul Klebnikov,
Godfather of the Kremlin: Boris Berezovsky and the Looting of Russia.
NewYork: Harcourt, 2000; 400 pp.; ISBN 0-15-100621-0 (cloth); $28.00.James O. Finckenauer and Elin J. Waring,
 Russian Mafia in America: Immigration, Culture, and Crime.
Boston: Northeastern University Press, 1998; 320 pp.; ISBN 1-55553-508-9(paper); $18.95.Chrystia Freeland,
Sale of the Century: Russia's Wild Ride from Communism to Capitalism.
New York: Crown Publishers, 2000; 389 pp.; ISBN 0-8129-3215-3 (cloth); $27.50.Jeffrey Robinson,
The Merger: The Conglomeration of International Organized Crime.
Woodstock, N.Y.: Overlook Press, 2000; 383 pp.; ISBN 1-58567-030-8 (cloth); $27.95.
- p. 449 -As the erstwhile British prime minister Benjamin Disraeli once sourlyremarked, "What we anticipate seldom occurs, and what we least expectgenerally happens." Russia watchers in the West expected the Russianeconomy to prosper, as did the Chinese economy, once Boris Yeltsin, the firstfreely elected Russian president, cast off the communist mantle in 1991.
 
Instead, he fostered the growth of crony capitalism, deliberately enriching ahandful of men in return for their political support. Since Yeltsin'sresignation in 1999, journalists and scholars have begun to analyze hisregime more frankly. Although Gorbachev established in Russia theprinciples of free speech and democratic accountability, Yeltsin failed toexpand the aims of glasnost and per-- p. 450 -estroika. The "democrats," led by Yegor Gaidar and AnatolyChubais, freed prices in 1992 and unleashed hyperinflation beforethey privatized Russia's assets. Most Russian citizens lost theirsavings in only a few weeks. While the few billionaire "oligarchs"liken themselves to the American "robber barons" of the nineteenthcentury, no real comparison can be drawn. Those well-connectedyoung men made fortunes not by creating new enterprises thatincreased their country's wealth, as did Carnegie (steel), Rockefeller(oil), Ford (automobiles), and Morgan (finance). Instead, they playedthe role of old state trading monopolies, arbitraging the hugedifference between old domestic prices for Russian commodities andthe prices prevailing on the world market. Instead of investing in theRussian economy, they stashed billions of dollars in Swiss bankaccounts. Experts estimate that as much as $15 billion leaves Russiaeach year as either "capital flight" or laundered money from illegal
 
transactions.
1
According to Swiss attorney general Carla del Ponte, by 1999 Russianorganized crime gangs had "infiltrated some 300 Swiss companies" and were"using Switzerland as a piggy bank."
2
Failing to create a broad class of shareholders, Chubais' voucher privatization in 1993-1994 merely cededRussia's industrial assets to corrupt enterprise managers or to the newMoscow banks. Chubais and his allies subsidized the new banks by grantingthem Central Bank loans at negative real interest rates, giving them theaccounts of government institutions, and manipulating the governmentsecurities market in their favor. In the rigged loans-for-shares auctions of 1995-1997, Chubais sold off the remaining gems of Russian industry to a fewinsiders. By 1999 the Russian economy was half the size that it was a decadebefore; the top 10 percent of the population owned half of the nation's wealth.
3
Without much exaggeration, one may call the legacy of Boris Yeltsin one of almost unmitigated failure - the biggest disaster (economically, socially, anddemographically) since the Nazi invasion of 1941. For ordinary Russians, a"democrat" is construed to be a crook, and "democracy" a curse word. Onthe streets of Moscow they call the latter "shitocracy"
(dermokratizatsiya)
andprivatization "grab-it-ization"
(prikhvatizatsiya)
.
4
The Russian state has metamorphosed into a full-fledged "kleptocracy"-dedicated to enriching those in power and their associates, usually organizedcriminal groups. As U.S. congressman Benjamin Gilman observed as early as

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