By Irina Glushchenko
and Renfrey Clarke
MOSCOW — Russia's capital, it was reported recently, has now entered a select group of world centres. For anyone not content with a bread-and-potatoes standard of living, Moscow has become one of the 10 most expensive capital cities on the planet.
Not only that, but Russia's largest city has attained world ranking in another respect. It now has one of the worst crime rates of any major capital.
Just what it means to live in one of the world's centres of gangster violence — "Chicago with onion domes" — was brought home to Muscovites in several spectacular incidents during July. In the first of these, the car showrooms of the city's Alfa-Romeo dealer were riddled with bullets. Four people were killed and four more wounded.
The following day, three armed men drove up to the Stork Cafe in central Moscow. They sought out the manager and shot him dead with a submachine gun. A grenade that was thrown into the cafe — apparently to eliminate potential witnesses — failed to explode. Two stall keepers in a kiosk outside were shot dead, again evidently to stop them describing the assailants.
According to official figures, Moscow this year has averaged three murders a day, and Russia as a whole, 80. In proportional terms this latter figure represents more than twice the murder rate in the US, and 25 times that in Britain. Russian interior minister Victor Yerin reported recently that the number of murders in Russia in 1993 was up by 50% over that for the corresponding period of last year.
According to Yerin, there has been a 200% increase this year in crimes involving guns. In a society where even the possession of a hunting rifle used to be strictly policed, illicit firearms, from pistols to assault rifles, are now abundant and cheap. Often, the arms traffic starts at the factory gate, with workers stealing weapons and components to supplement tiny wages.
Pro-government journalists have tried to reassure a horrified public by pointing out that Moscow's murder rate is still well below that of New York. Also, the rise in the overall number of reported crimes slowed during the first half of 1993, after annual rises in previous years of as much as 30%.
But the figures still contain frightening omens. To cite just some of them, youth crime this year is up by 16.5 %, and reported rapes by 15.8%.
The increase in crime rates has proceeded closely in step with the pro-capitalist "reforms". Pro-government news outlets have done their best to avoid admitting that there might be some link between the two processes. But when a country in catastrophic depression boasts a large crop of new, big-spending dollar millionaires — 20,000 of them in Moscow alone — it's obvious that a great deal of the new "biznes" consists of the shameless theft of state property.
Russia's new economic elite consists partly of "mafiosi" — often people who accumulated large rouble hoards through racketeering in the 1980s — and partly of former party and state functionaries who gained their original capital through corruption. Today, it is often impossible to draw a clear line between banditry and business.
"There is now no doubt that organised crime in our country has reached major dimensions, and has penetrated all ... the structures of power", observes Mikhail Slinko, a special investigator for the Moscow prosecutor's office. Slinko distinguishes several types of organised criminal formation, from small gangs of burglars and extortionists to "mafia formations". The latter combine legal and illegal activity. Such syndicates always have a legal cover, in the form of various commercial structures.
"Since the beginning of perestroika", Slinko writes, "the sphere of operations of organised crime has changed substantially. If it was once possible to divide organised crime into general criminal activity and economic crime, these two strands have now become intertwined."
According to Interior Minister Yerin, Russia now has 3000 criminal gangs, including 150 major syndicates. The power and boldness of the latter have been highlighted recently by reports that organised crime is aiming to seize control of Russia's commercial banking system. "In the recent period 10 leading bankers have been murdered or have been the targets of assassination attempts", Izvestia reported in late July.
In fact, Russia's commercial banks have always been closely associated with mafia structures — and not simply because much of the capital deposited in them derives from criminal activity. Without the help of mafia groups, many of the banks in Russia would be unable to operate.
In Russia's chaotic commercial world, legal action as a means of recovering debts is usually worthless. In cases of non-payment, bankers have two options — either to beg debtors to pay up, or to arrange some unofficial encouragement. It goes without saying that Russian bankers are not noted for their sentimentality.
Organised crime thus feeds off business, and businesses in turn often use banditry as part of their operations. The capitalism that is growing up in Russia is a very different system from the one that liberal ideologues imagined a few years back.
When entrepreneurs in Russia today set out to vanquish competitors, for example, their preferred methods often have nothing to do with lower prices and improved service. The type of competition that is flourishing was illustrated in mid-August when the warehouse-showroom of the Russian-German firm Bauklotz, Moscow's largest operator in the hugely profitable building materials trade, was demolished by an explosion.
Competition as understood by liberal theoreticians is not a popular concept among Russia's mafiosi capitalists. Like racketeers in the West, these groups generally aim to divide up territory and raise prices to the maximum possible. The presence of a large criminal component in Russia's new capitalist class thus reinforces the strong element of monopolism in the country's economic structures — and high prices are among the results.
The criminal groups also have a massive impact on the general price structure in Russia through the heavy payments that most small and medium-sized businesses are forced to make to protection racketeers. The commercial kiosks that line Moscow's major streets must normally hand over at least a third of their takings if they are not to be fire-bombed.
Of the huge profits made by the Russian criminal groups, barely a kopeck is invested in production. The sums that are not squandered on luxury consumption tend to be converted into hard currency and deposited in Western banks.
The features of the system that is emerging out of Russia's "reforms" — monopolism, high prices, impoverishment of the population, capital flight and collapsing production — have been explained quite satisfactorily by economists as the result of applying neo-liberal dogmas in the highly specific conditions of the Russian economy.
But it is curious, at least, that exactly these features should also reflect the operations of the criminal elite. Russians can be forgiven for thinking that the difference between liberal reformers and mafia godfathers is not worth dwelling upon.