Roanoke Times
Copyright (c) 1995, Landmark Communications, Inc.
DATE: THURSDAY, August 4, 1994 TAG: 9408050041
SECTION: BUSINESS PAGE: B-8 EDITION: METRO
SOURCE: Associated Press
DATELINE: MOSCOW LENGTH: Medium
A dubious investment company collapses and millions of Russian investors get burned. How do they respond to this rude brush with capitalism?
By jumping off window ledges?
Hardly. Raw, reckless capitalism is perhaps the best description of Russia's emerging free market, and many Russians refuse to abandon their get-rich-quick dreams despite an economy that's still floundering.
Economic news from Russia has been relentlessly awful this year: Some 10 million are jobless, inflation will be close to 100 percent and the gross domestic product is down 17 percent. Even President Boris Yeltsin and his most optimistic advisers aren't predicting an upswing until the end of 1995.
But amid this hardship there's an anomaly: Many of the longest lines are at investment companies selling shares and at upscale shops selling expensive imported goods.
The bread lines of 1992 are long gone, and now Moscow's queues are made of teen-agers outside the Reebok shoe store, stylish women at the Yves Rocher boutique and couples streaming in to buy Sony televisions at electronics shops.
By hustling a ruble here and a ruble there, ordinary Muscovites have made clear the economy is still functioning and they offer a glimmer of hope that the country can find its way out of its economic morass.
Russians have been scooping up imports since the country began moving to a market economy more than two years ago. And many economists say the official statistics exaggerate Russia's decline and fail to account for the new street-level capitalism.
But economists also caution that such buying is not necessarily a sign of economic health. They say Russians are spending their savings as fast as they can rather than watch their money lose its value to inflation.
Last week, the wildly popular MMM investment company collapsed, with its shares crashing from more than $50 to less than 50 cents in a matter of days. Some 5 million to 10 million Russians had invested in MMM, which ran non-stop TV ads promising instant riches.
The fictional pitchman for MMM, Lyonya Golubkov, is seen dozens of time daily on television, lazing on a California beach or telling his wife about riches that lie ahead.
On Wednesday, he was burned in effigy on a central Moscow square in a show of discontent by hard-liners angry about Russia's emerging capitalism.
``Golubkov is dead, and so is MMM,'' a demonstrator said as he set fire to a box representing Golubkov's coffin.
Critics, including Yeltsin's government, had warned that MMM was nothing more than a pyramid scheme, whereby money from new investors was used to pay earlier investors, and ultimately the company would crumble.
When the crash came, thousands of people rushed to MMM offices. But most blamed the government rather than the company.
The government ``robbed us once before, wiping away all our savings,'' said retiree Vladimir Larichev. ``At least MMM was trying to do something to give us a chance.''
Many wanted to buy shares at the new low price. Others got at least some of their money back and quickly moved it into another investment company, Tele-Market, despite its equally suspicious investment strategy.
Perhaps the best example of the new consumerism is the ironically named Exhibition of Economic Achievement, a series of grandiose, cavernous pavilions that served as museums to Soviet industry, agriculture, science and other fields during the Communist era.
Today it's a huge shopping arcade where Muscovites cart off newly bought Sony and Panasonic televisions so fast it looks like a looting spree.
The Cosmos space museum used to be the main draw, attracting throngs of tourists to see replicas of the Sputnik and Soyuz spacecraft and a model of the capsule that made Yuri Gagarin the first man in space.
A huge picture of Gagarin is still on the wall, but now his warm gaze stares down on rows of used Cadillacs and Mercedes-Benzes. There's a 1987 Jaguar for $25,000, a 1972 Rolls Royce for $39,000 and even a couple of stretch limos if you have $100,000 to burn. A neon sign boasts that you can order any car in the world.
``I am in shock, I am in shock,'' visitor Leonid Chizhov said as he surveyed the scene. ``I think we have become the 51st state of America.''
The American equivalent would be for the entire Smithsonian Museum complex in Washington to be converted into a shopping mall, with the Air and Space Museum turned into a Toyota dealership.
Yevgeny Leonov, who co-manages Olbi Autoland at the Cosmos hall, conceded that some older Russians grumble when they wander into the hall looking for space history and find used Buicks.
``The Cosmos museum symbolized the Communist glory and when people came to Moscow they all visited here - just like Lenin's mausoleum,'' Leonov said.
by CNB