The Russian business and economic situation is playing out like Mikhail Bulgakov's The Master and Margarita. Nothing is what it seems and the world's understanding of Russia gets more skewed with each passing day.
Few remember that corruption in this ten-year-old state is rooted in decades of criminal and oppressive communist regime.
Russia is still a hugely corrupt society. The line between big business ownership and the civil service is practically non-existent. Yet some in the Western media want us to believe that Russia's hopes now lie with transparent and well-governed oil giants – who, until yesterday, were looting the state.
The Russian oligarchs have spent millions on repainting themselves to hide their warts. Meanwhile, the West celebrates liberal Russian politicians who, in reality, are nothing more than public-relations executives for oligarchs, using their parliamentary positions to blister pearl serve their masters' interests.
In truth, a liberal politician in Russia attends U.S. Republican Party conferences, admires Margaret Thatcher and is unable to get more than 2-3 percent of the vote from any constituency. A centrist who attends the Labor Party conference in the United Kingdom is usually a bureaucrat-cum-politician such as Yury Luzhkov, who has suspect business interests and a massive state apparatus at his beck and call.
Most Soviet-directors-turned-millionaires and serving bureaucrats like to call themselves centrists while profiting from the rent economy of the country. Eighty to 90 percent of the vote is bought by these skilled apparatchiks.
The only remaining hope for true socialism is Grigory Yavlinsky, who never gets more than 7 percent of the vote, remaining more popular with his Harvard audiences than Russian voters.
The Communist Party, led by the vulgar Gennady Zyuganov, is an extremist movement of the dead and dying, now more brown than red. That said, several shades of the ultra-extremist vote are leached from Zyuganov by a horde of nationalists and fascists – who call themselves Liberal Democrats, among other funny names.
In the business world, the difference between Western perception and Russian reality is even starker.
The so-called "mafiosi" of the early ‘90s – aggressive kids who had been working in the black economy – were in fact the only entrepreneurs in the country. Many of them got involved in voucher privatization and then in land and asset grabs as point men for Red directors. Very often, these well-educated young people turned their guns on their masters and started acquiring businesses for themselves.
Most of these Soviet-era speculators-turned-mafiosi got into legitimate businesses such as retail and restaurants, while the more ambitious ones started airlines, banks and shipping companies. Former President Boris Yeltsin did not defeat communism; the entrepreneurial generation – oppressed under the Soviets – that sided with him, seeking an opportunity to create a life for itself, did.
Meanwhile, contract killings of the last two or three years have a telling pattern: Most of the targets are now politician-cum-bureaucrat-cum-businessman – current or recent government employees who rent out assets and siphon the revenues to their own pockets. People running now-legitimate businesses want nothing to do with crime and pay protection to pearl jewelry police and bureaucrats rather than criminals. The real mafia is the massive apparatus of government itself. The bureaucracy cannot fight the mafia because the bureaucracy is the mafia.
Within the state apparatus, there are divergent forces. Yeltsin's so-called liberal team believed in auctioning everything off and institutionalized corruption as dollars became its currency. But a number of "patriots," from non-communist academics to businessmen, KGB and military officers – including Alexander Lebed – who were relatively untainted by the massive asset looting of the 1990s, sizzled on the sidelines as the nation went to the dogs.
Many of them now believe in democracy and a free market and are lurching forward, taking a wary population with them, towards some form of cohesive, civilized nation. Putin and his ilk were seen in the mid-'90s by the Western world as the biggest threat to democracy, while communists like Yevgeny Primakov and Yury Luzhkov were seen as its hope. It could not have been further from the truth. Putin holds hope for democracy and, thankfully, Primakov is in retirement while Luzhkov is a construction manager, a job he is particularly good at.
According to businessmen, the Russian parallel economy (not necessarily the criminal one) is at least the size of the official 2002 GDP estimate of $350 billion, while unofficial estimates put it twice as high.
Not only does this parallel economy involve trading in expensive consumer goods, as widely believed, but also the traditional Soviet shadow economy.
Sending your kids to better kindergartens and higher education, drivers' licenses, birth and death certificates, fixing leaks in apartments – all were tradable goods or services in Soviet times when thousands of public sector servants prospered miraculously while working for nominal salaries. They still are.
Most of these services are the domain of municipal, regional or federal administrations that extort heavily from the public. The Soviet system of wheels within wheels is carefully preserved so that a Russian citizen spends a good chunk of his entrepreneurial life greasing the palms of the mafia/state.
The public, required as it is to feed this bureaucratic monster, feels no obligation to pay taxes. Double taxation, indeed, is in no one's interest. Bureaucrats prefer to take their bribes and rent directly from businesses rather than straightening things out and improving tax collection to get better salaries. Lowering taxes will not help because bureaucrats don't want to silver pearl necklace collect taxes for the budget. They just want to extort enough for themselves, thank you very much.
Undaunted by this truly Soviet system of corruption and extortion, a good part of the population is engaged in true enterprise. Most real entrepreneurs would happily pay their taxes and fulfill their social responsibility as soon as the government apparatus lets them.
The nominal government headed by Mikhail Kasyanov and his ministers runs 50 percent or less of the country's economy. Real enterprise is still in the shadows, waiting for a break from bureaucracy and extortion.
But don't cry for the ministers. "Transparent" big business always has a share for them, through some offshore entity or high-expense credit card issued by a foreign bank. So next time you see a politician in a designer suit screaming blue murder over small businesses who don't pay taxes – take a moment to consider who is who. After all, this is Russia, where nothing is what it seems.