CAPITALISM'S ACHILLES HEEL Dirty Money and How to

154 CAPITALISM’S ACHILLES HEEL
of affairs, with exporters drawing their commercial invoices to show only a
part of the real value of the shipment, so that repatriation of the stated
amount is still less than the total value.
So, the central bank has now strengthened oversight requirements
placed on commercial banks processing export transactions. But who owns
these commercial banks? Why, the exporters themselves! In the beginning of
1988 only four banks existed in the whole of the Soviet Union. By 1996
there were some 2,600 in Russia itself. Large and medium-sized Russian
manufacturers and traders set up their own “pocket” banks to handle their
own trade documents to export to their own overseas buying offices. The
bank executive telling the corporate executive to bring back his export proceeds
to Mother Russia is the one-and-the-same executive talking to himself.
Little wonder then that exports in the tens of billions of dollars continue to
go out of Russia annually at a fraction of their true value.
The looting of Russia was accomplished by people using techniques already
well established in other countries. Most were driven by almost
unimaginable levels of greed, while some attempted to justify their actions
on what was, in their view, best for the country.
In the early 1990s, many Americans, Europeans, and Russians themselves
believed that the only way to prevent communism from returning to
Russia was by getting capital and property out of the control of the state.
Among young reformers in the government, Anatoly Chubais took up the
task of creating the State Privatization Committee, Gosudarstvennyi Kommitet
Imushchestva (GKI), which he quickly established in 1992 with offices
in every region of the country. To make his privatization program
politically acceptable, he agreed that managers and workers would be allocated
shares in their companies for purchase at nominal prices. In addition
he gave vouchers worth 10,000 rubles (about $25) to an estimated 144
million Russians, everyone born by September 2, 1992, which could be
used to buy reserved shares, invested in mutual funds, or traded for other
property. Instead of spreading the benefits of ownership, what happened
was the opposite. Vouchers found a market and were gobbled up into increasingly
narrow hands. And factory directors bought shares belonging to
their workers, often using money embezzled from the factory itself. Concentration
of ownership further contributed to the massive shift of wealth
out of the country.