Chapter Fifteen Underground Big Business in the USSR

One of the most jealously guarded secrets of the Soviet Union, so far as the people of the non-Communist world were concerned, was the highly privileged position of the Jewish minority during the seventy years or so after the Revolution; hence it was only in 1981 that it came to be known in the West that privately owned industrial and commercial business had continued to thrive, nearly all of it in the hands of Jewish citizens.

The story of Russia's Underground Millionaires was first told in the June 29, 1981, issue of Fortune magazine, the plush and expensive sister journal of Time, by no less an authority than a former international law expert in the Soviet Ministry of Justice, one Konstantin Simis, now resident in the United States.

“How to Succeed in Business Where Business is a Crime,’’ declared the second heading over the Fortune magazine review of a book by Simis which was shortly to be published.

Writes Simis:

Everyone knows that the Soviet state is the monopoly owner of all means of production and that private enterprise is a crime. But the remarkable reality is that in the Soviet Union a great many private enterprises operate-at great profit. Indeed, a network of privately controlled factories spreads across the whole country and these factories manufacture goods worth hundreds of millions-perhaps even billions-of rubles,

Private enterprise, Simis goes on, cannot for obvious reasons, handle items like motorcars and machinery, but must concentrate on items of the kind that most people want and can afford to buy, like clothing, shoes, artificial-leather goods, sunglasses, costume jewelry, and recordings of Western popular music, etc.

But how did they manage to do that in a country so rigorously policed by the KGB and where every citizen is encouraged to spy on his neighbor?

Part of the answer:

A private enterprise will coexist under the same name and the same roof with a state factory; it could not exist without this cover.

In this symbiotic relationship the state factory manufactures goods as called for by the state plan. These goods appear on the factory's books and are distributed through commercial channels for sale. But along side these official goods the same factory is manufacturing goods not registered in any documents.

There is no reason to believe that such privately owned enterprises ceased to exist in the Soviet Union with the coining of "glasnost” and “perestroika.”

Goods of the first kind are called "registered for," and others in the jargon of the “underground” are described as “left hand.” Simis tells us that not only are there "tens of thousands” of such factories all over the Soviet Union, most of them concentrated in the great towns and cities like Moscow, Odessa, Tiflis, Riga and Tashkent, but there exists also a vast distribution network handling a “left hand” trade worth possibly billions of dollars a year.

One "company” is mentioned, part of the “Glazenberg empire,” which owned so many factories that it was forced to set up its own marketing group which proceeded to organize outlets of its own in 64 towns and regions - in addition to all the outlets provided by the state.

And who are these daring energetic businessmen who appear to have fashioned for themselves cloaks of invisibility?

Writes Simis;

For historical reasons, the underground business milieu in the large cities of Russia, the Ukraine, and the Baltic republics has been predominantly Jewish. While my clients included Georgians, Armenians and members of other groups, the great majority were Jewish-like myself.

What "historical reasons?"

Simis says that the Russian Jews, after having been discriminated against by the Tzarist regime, were “liberated” by the Bolshevik Revolution, thereafter throwing themselves eagerly into spheres of life previously closed to them, like science, the arts and literature, etc. He tells us that during and after World War II Stalin turned against the Jews, many of whom were then forced to find outlets for their energies in “underground business."

Elsewhere in his article, however, Simis tells us about one Isaac Back, who in the mid 1930s set about creating a family company which by 1940 (when Stalin was at the peak of his power) owned “at least a dozen factories manufacturing underwear, souvenirs and notions, operating at the same time a network of stores in all the republics of the Soviet Union."

Some of these Jewish entrepreneurs, including Back and one of the three Glazenberg brothers, were prosecuted and imprisoned, but evidently not enough of them to discourage the rest. It was decided to ‘'sacrifice'1 young Lazar Glazenberg, says Simis, whose job it was to defend them in court, "at least partly because of his playboy life-style as reflected in his two dozen suits and the wardrobe of his wife . .

Although private business enterprise was always publicly regarded in the Soviet Union as a most dangerous and destructive form of sabotage, being the antithesis of Marxist Socialism, there is no mention of this class of big-fish offenders among the hundreds of individual cases discussed by Alexander Solzhenitzyn in the three volumes of his Gulag Archipelago; indeed, Jewish prisoners are rarely mentioned by Solzhenitsyn, whereas, judging by their names, there was no scarcity of Jews among the slave camp bosses-Aron Solts, Jakov Rappaport, Matvei Berman, Lazar Kogan and, most notorious of all, Naftaly Frenkel, who is said to have masterminded the whole slave-labor operation.

Nor have big businessmen figured at all prominently in the great show trials which the Western media were permitted to report and dramatize, most of these being reserved for Stalin’s Jewish rivals in the great power struggle inside the Communist party which developed in the two decades after the Bolshevik Revolution.

Next question: Why should this kind of activity, with its almost fabulous rewards, plus attendant dangers, be confined almost exclusively to Jewish citizens of the Soviet Union?

Simis gives us what is obviously an important part of the answer:

The sense of national identity among Jewish underground businessmen is strong-much stronger than that of the Soviet Jewish intelligentsia. There may not be many among them who understand what Zionism Is all about-even fewer who are prepared to relinquish their fortunes and emigrate to Israel yet I never met a single one who was indifferent to the fate of that country and who did not feel a blood relationship with it. It came as no surprise to me that during the Six-Day War the underground businessman in many cities donated large sums in dollars-not rubles but dollars-to Israel.

These underground business tycoons would have been much assisted, we may be sure, by another circumstance revealed by Simis:

Nevertheless, many Jewish underground businessmen of all ages eagerly joined the Communist party for desperately practical motives: to enhance their social prestige and gain some shield-beyond bribery-to keep them from being prosecuted by the DCMSP.

Simis seems to have forgotten what he told us a few paragraphs back: that Jews were forced into underground business by discrimination that excluded them from the party and state hierarchy.

Simis explains how the wheels of the "left hand" industry are copiously oiled with bribes. The blue-collar factory workers are bribed with additional tax-free incomes to work for the private operator and keep their mouths shut, as are also the clerical personnel and foremen; bigger bribes are paid to officials whose duty it is to establish quantity and quality norms for goods manufactured for the state, giving the private operator his main supplies of raw materials in the form of surpluses which do not have to be recorded; the biggest bribes of all are those paid to officials of the DCMSP, which is an arm of the KGB, whose precise task it is to '"combat the misappropriation of Soviet property."

It would appear that the ‘'underground” businessmen who are caught and punished are those whose operations have become too glaringly obvious, like one Golidze who “owned two magnificent houses, luxuriously furnished with antiques bought from dealers in Moscow and Leningrad*’ and who “entertained officials with banquets which would go on for hours . .

Most Soviet tycoons try not to be too ostentatious as they stash away most of their wealth in foreign currencies, precious stones, metals and gold coins. Simis tells us that during the 1960s and 1970s the salon of one Elizabeth Mirkien enjoyed great popularity in Moscow, for here middle-aged businessmen could enjoy excellent meals, plus the euphoria of feeling rich as they risked the loss of huge stakes at cards and roulette.

"But all to what end?” asks Simis rhetorically.

Dealers in precious stones in Moscow, Tashkent, Riga and other cities continue to operate diligently to this day, filling the caches of underground millionaires with their wares. These caches amount to vast treasures, probably worth more than all the pirate booty in Caribbean waters. And yet-what about their owners? What are they watting for? A fabulous future time when they will be able to unearth their riches and regally use them? Or the downfall of the Soviet regime?"

So, what does it mean? How is it to be explained, and all the contradictions resolved?

Simis himself does not seem to know, for he leaves many of the most insistent questions unanswered.

If we are to have any hope of getting at the real and final meaning of the Simis story, experience should have taught us that we are here exerting our investigative skills in an area of maximum falsification and concealment in which devices of deception are used which are the product of centuries, even millennia, of practice and accumulated experience.

The Fortune magazine review was evidently based on the original manuscript or on page proofs of the work, for the book when it eventually appeared had been purged of a good deal of the information included in the review.

So how was it possible to “succeed in business" where business “was a crime?1' The first requirement obviously was to be accepted as a member of what Simis called "the Jewish underground,” united by a sense of "national identity.” These were in most cases already installed as managers of the state enterprises, sharing that sense of “national identity” with the man who was for many years chairman of the Kremlin’s Economic Council and Tsar of all commercial and industrial activity in the Soviet Union, one Venimin Dimshits, a post held previously, ever since the Revolution, by Lazar M. Kaganovich, also a Jew and Stalin's brother-in-law-not to mention the succession of Jews who headed the dreaded secret police, first the Cheka, later the KGB.

We are told in a biographical piece in Fortune magazine that from 1953 Simis acted as defense lawyer for dozens of prominent “underground" businessmen, giving up his practice in 1971 to join the Ministry of Justice as an international law expert. In 1976 the KGB raided his apartment and seized the manuscript of a book on Soviet corruption, the first draft of which was already in the hands of an American publisher. Then Simis and his wife Dina, who is also a lawyer, were told that unless they left the Soviet Union they would be sent to a hard labor camp,

Simis could hardly be expected to regard this as severe punishment for so grave an offense, for he was able to join his son who was already established in the United States at Johns Hopkins University as director of a Soviet studies program, thus acquiring a vastly improved launching pad for his literary assault on the Soviet regime.

So how was it possible for so much of the long-concealed truth to be released in 1981? An answer to that question provided in the first edition of this book, written shortly after the appearance of the Fortune article, can now be seen to have been endorsed by subsequent events and is reprinted below.

« The story which the people of the West have been getting since before the Bolshevik Revolution is now going to be adjusted to accommodate and absorb information which has been seeping through and which could quite soon be common property. For the future edification of a deliberately stupefied public opinion in the West, there are to be. as it were, “guided tours" through what were hitherto "no-go” areas in the realm of news reporting, public debate and contemporary history-writing.

• A start must be made in preparing the public mind for changes inside the Soviet Union and in East-West relations which are pending, or, at any rate, intended, These changes could be of a magnitude of, and every bit as traumatic as the Moscow-Berlin pact of 1939 or the process of de-Stalinization after World War II,

• Implied in the policies and actions of the leading Western powers, the United States of America in particular, is the assumption that all are working towards the “ideal" of some sort of convergence of the two worlds, and "idear that does not, however, exclude the possibility of a third world war,

• Meanwhile, it is becoming increasingly obvious that economic socialism of the kind implemented in the Soviet Union by Lenin and his successors cannot ever be made to work.

• It is highly significant, therefore, that there came into existence in the Soviet Union, virtually from the time of the Boshevik Revolution, a vast network of wealthy capitalists complementing in so many ways the super-rich capitalists in the WeBt.

• That would explain quite a lot-would it not?-including the massive participation of Western big business in building up the Soviet Union’s industrial and military might, much of it never to be paid for, most of it at the expense of the Western worker and taxpayer. And Churchill's “riddle wrapped in a mystery inside an enigma" begins to fall apart as we see this network of supercapitalists ideally situated to grab everything and take over total control when the official system collapses, as collapse it must, sooner or later,

Poles Apart in Poland

Closely guarded too by the Western media was the secret of a similar phenomenon in Communist Poland, for it was only in January 1984 that the news was permitted to leak out that in Poland too there was a whole class of prosperous private enterprise businessmen, manufacturers, and distributors of consumer goods, coexisting in perfect amity with 3 strict socialist economic structure.

Reported Tony Barber in a Reuter message from Warsaw:

As Poland struggles to emerge from its economic crisis, some 500 foreign-owned private businesses are scoring successes which both please and perturb the Communist authorities. They are called Colonial" firms, since the owner of all except 40 of them are North Americans, European:; and Australians of Polish descent.

The report goes on:

Granted the right to operate in 1976 as part of a plan to encourage Westerners of Polish origin to maintain ties with their ancestral country, they are all small or medium-sized business with an average of 40 workers each. They produce clothes, shoes, leather articles, perfumes, furniture and a range of other goods that are instantly snapped up by Poland's shortage-plagued and quality- starved domestic market.

The range of products listed corresponds very closely with the list given by Konstantin Simis for the private operators in the Soviet Union,

The Polonian companies, said Barber, made only a small contribution to Poland's gross national product, but were growing fast and their success was a "mild embarrassment* to the authorities whose ideology ruled out the very survival of private enterprise.

He quotes Poland's then Communist party leader and Prime Minister General Jaruzelski as having said: “We shall continue to ensure conditions for their activities. But they should not be an enclave of unjustified privilege in the economy.”

This was a perfect example of Orwellian doublespeak, for Jaruzelski knew perfectly well that those private enterprise businessmen were an enclave of privilege from which the country’s own citizens were totally excluded.

Private enterprise was then booming in Poland, Statistics provided by Mr. Miroslav Galczynski, a spokesman for the Polonian Chamber of Commerce, showed that the number of independent enterprises had increased from three in 1977, with a total revenue of about $180,000, to 500 in 1983 with combined revenues totalling $400,000. Prospects in poverty-stricken and debt-laden Poland must have been bright, for Barber was able to report: They have reinvested their profits in Poland and continue to recruit workers and diversify their activities."

So much for some of the hard facts, but what do they mean? We need an answer to that question because it could throw some light on hard-line Communist regimes which, ever since the Bolshevik Revolution, have been able to establish harmonious relations with some “capitalists” while continuing to belabor capitalists as a class with their Marxist-Leninist propaganda.

Who are these “North American, Australians and Europeans" of Polish descent who returned to Communist Poland to launch themselves in business? How, when and by whom were they recruited? Did they bring their own capital, or was this supplied by the socialist state? The United States, Canada, Australia, Britain and many other countries, including South Africa, have substantial communities of Polish immigrants who never showed any signs of wanting to return to an ancestral homeland while still under Communist rule.

The Reuter report contains no answers to such questions. So we cannot know for certain who were these most fortunate “North Americans, Europeans and Australians of Polish descent" who were to be allowed to form a privileged segment of Poland’s population-but we do know for certain the identity of a similar enclave of privilege in the Soviet Union: the "great majority"; as Konstantin Simis tells us, were Jewish, like himself.

Therefore, it is not unreasonable to assume, until evidence to the contrary can be produced, that the great majority, of not all, these “North Americans, Europeans» Australians," etc., were Jews who had emigrated from Poland and had been welcomed back with their capital and industrial and commercial expertise and strong links with big business outside Poland.