Marketing Hope

Get-Rich-Quick Schemes in Siberia

Leonie Schiffauer

• Publisher: Berghahn Books
• Year: 2019
• ISBN:
  9781789200133
• Edition: 1
• Topic: Business
• Subtopic: Marketing
• Index: Business

Multilevel marketing and pyramid schemes promote the idea that participants can easily become rich. These popular economies turn ordinary people into advocates of their interests and missionaries of the American Dream. Marketing Hope looks at how different types of get-rich-quick schemes manifest themselves in a Siberian town. By focusing on their social dynamics, Leonie Schiffauer provides insights into how capitalist logic is learned and negotiated, and how it affects local realities in a post-Soviet environment.

1

CAPITALISM IN AGA

With the demise of the Soviet Union, the last significant bulwark against global capitalism collapsed. The West saw itself as the winner of the Cold War and the ideology of the free market was able to expand into new territory. As the states that had been part of the Soviet Bloc sank into a deep economic crisis, they were immediately offered the remedy of neoliberal doctrine: shock therapy was to guarantee a quick and smooth transition to a capitalist market economy. Supported by the IMF and the World Bank, privatization was initiated, state subsidies were cut, free trade was introduced and prices were liberalized.

As a number of anthropological studies of postsocialist societies have shown, shock therapy largely failed to achieve what it promised. In many places, particularly in rural regions, its effects were far from what economic theory predicted and market liberalization disadvantaged many people (Humphrey 1999; Humphrey and Mandel 2002; Sneath 2012; Verdery 2003; Woodruff 1999). All these studies draw attention to the fact that shock therapy was not implemented on a tabula rasa. The past could not simply be erased overnight and be replaced by a functioning market. Instead, there were particular economic moralities and practices in place that determined and shaped the sort of capitalism that developed.

This chapter is an account of how the onset of the capitalist era was experienced in Aga, tracing economic development in the district after the end of socialism. My account is necessarily sketchy because it covers nearly a quarter of a century. Many of the issues raised could be discussed in greater detail, but the objective here is to convey a basic idea of how capitalism as a set of practices, as well as an idea, unfolded within and in response to the given context. The chapter serves to provide the background information needed in order to understand the logics and the appeal of MLM and pyramid schemes in Aga. In the first part of the chapter, I focus on the possibilities of making a livelihood in the new market environment and on the economic difficulties people are experiencing, in particular in the face of debt. The second part of the chapter will be devoted to nonmarket forms of giving and exchange that are often based on the logic of mutual support. As I will then show, market and nonmarket economic activities and rationalities do not simply coexist as parallel systems, but frequently crosscut and intermingle. I argue that informal economic activity, which was crucial to circumventing the shortcomings of the socialist planned economy, has not lost its significance. Instead, it has adapted to new economic realities and plays a crucial role in dealing with the challenges of the capitalist economy.

Aga’s Economy after Socialism

The economic crisis that followed the demise of the Soviet Union was devastating especially in rural regions (Burawoy 1999; Humphrey 1998; Verdery 2003). With a GDP reaching only 31 per cent of the Russian average in 2003, the situation in Aga was particularly precarious (Nezavisimyi Institut Sotsial’noi Politiki 2004). The area of today’s Zabaykalsky Krai had been an important military zone during Soviet times and the military infrastructure had played an enormous role in the region’s development. With the dismantling of the military zone in the 1990s, the region became one of the poorest parts of Russia. The enterprises that had catered for the military infrastructure collapsed and the most important market for agricultural products was lost (Nezavisimyi Institut Sotsial’noi Politiki 2004). Moreover, state subsidies, which had been crucial for the operation of collective farms, were cut. Without state support, the privatized farms could barely make a profit in a liberalized market (cf. Humphrey and Sneath 1999: 78–90). As the collective farms could no longer pay wages, it became difficult to make a living in the countryside. In the search for alternatives, many people left their villages in order to look for employment in towns or cities. The population of the district centre, Aginskoe, grew significantly during this time due to the influx of villagers.

Life in Aga in the 1990s was a struggle. With the dismantling of the planned economy, a large number of jobs were lost, not just temporarily but irretrievably. These included jobs on collective farms such as tractor-drivers, milkers or shepherds, jobs in the administration and management of collective farms and in the district centres, and jobs in educational institutions that had prepared youth for specialized professions in the agricultural sector. The rate of unemployment was high and those who had a job were paid only irregularly. There was a time, one of my informants remembered, when teachers had not received their wages for eight months and children sat in the schools in hats and winter coats because there was no money for heating. The social privileges of the Soviet system were gone and what the people had received free of charge before, most notably medication and education, now had to be paid for. As neither institutions nor the people had money, a ‘barter-and-subsistence economy’ developed during this period (Humphrey 1999: 20). People survived on potatoes and cabbage harvested in their yards and on meat and milk products from their cattle. Those who were desperate enough went ‘to the trains’ (na vagony). This meant going to Moguitui, a small town with the only train station in Aga. Moguitui was a stop for freight trains going from China to the west of Russia at that time. When a train came to halt, one person broke open a wagon and the horde of people who had come ‘to the train’ stormed the wagon and grabbed as much of the freight as they could get hold of. People hoped to be able to trade the goods for other things they needed. Raiding the trains involved risking their lives because the guards watching the trains stood ready to shoot at them. The 1990s were an economically destitute decade in this part of Russia and in rural regions many men (and smaller numbers of women) found comfort only in alcohol.

One of the few possibilities to make money during the economic crisis of the 1990s was to engage in trade. As private trade had been illegal during Soviet times, this was something people felt uncomfortable about at first. However, the circumstances left no alternative. Some people grew cabbage for sale in Chita and others brought newspapers, groceries or alcohol from the city to earn a few roubles by selling the goods at a slightly higher price in the district. Due to the geographical closeness to the Chinese border, crossborder trade began to flourish. It became profitable to travel 300 kilometres to Manzhouli, the Chinese border town in order to import cheap low-quality clothes and household items for sale in the improvised market in Aginskoe’s town centre. The high demand for affordable Chinese consumer goods fuelled Manzhouli’s rise from a small town with a few wooden houses to the glittering consumer paradise that it is today. In contrast, Zabaikalsk, the border town on the Russian side, has remained what it was: a few Soviet concrete blocks surrounded by small houses, a few run-down cafes and tiny shops along the main road and a hard-to-find bus station from which traders and tourists can depart to China.

During the first decade after the end of the socialist era, most people could afford only the most indispensable items. Even if guests came to visit, people remember today, they could offer hardly more than tea, bread and sugar. The glamorous world of capitalism remained distant, confined to the TV screen. The American TV series Santa Barbara gained huge popularity during the early 1990s along with a number of Latin-American soap operas. For the first time, people in rural Siberia received nonpoliticized and idealized images of consumerist worlds with alternative lifestyles, fashion and domestic interiors. People were fascinated with these worlds, and the fates of the people inhabiting them were subject of endless discussions. These series contributed greatly to shaping ideas of the world beyond the reality surrounding them.

In the late 1990s, Aga saw an economic miracle that over the following years improved the situation in the district considerably. This was certainly not anticipated at the time and is now looked back upon as a stroke of genius. This is what happened according to Makhachkeev (2007) and to accounts of my informants. Bair Zhamsuev, a local politician who had made a political career in the Komsomol and the Communist Party, was elected as a deputy in the State Duma in 1993. In Moscow, he managed to establish good relations with a number of influential politicians and entrepreneurs. These relations were an important basis for the support of Zhamsuev’s policies as head of the district’s administration from 1997 until 2008. Having been elected head of the administration, he suggested making the district a special economic zone. Aga’s autonomous status facilitated a legal arrangement that allowed the district to create a tax haven and to boost its budget. In order to realize his plan, Zhamsuev needed a strong lobby in Moscow. During his time as a deputy, he had met Iosif Kobzon, a famous Soviet singer and influential politician who is suspected to have sustained ties with the organized crime networks known as the Russian Mafia. As Zhamsuev said in an interview, he had approached Kobzon with the suggestion that he should run as Aga’s State Duma Deputy to support the district’s interests in Moscow. Kobzon agreed and was elected, and Zhamsuev’s strategy proved to be successful. Thanks to Zhamsuev’s and Kobzon’s contacts, a number of large corporations registered in Aga and began paying taxes in the district. Between 1999 and 2004, Aga’s GDP rose significantly and unemployment decreased from 25 per cent in 2002 to less than 10 per cent in 2004. However, despite the economic upswing, wages remained among the lowest in Russia (Nezavisimyi Institut Sotsial’noi Politiki 2004). The local political leadership used the money to promote production, small entrepreneurship and agriculture, and to pave roads, renovate schools and build sports facilities. Those who were in charge at that time remember almost with disbelief that there was a time when they did not know how to spend all the money they were accumulating. Today, there are different opinions on whether best use has been made of the money brought in by the tax haven policy, but Zhamsuev remains a very popular politician because he managed to create these favourable economic conditions and Kobzon, Deputy of the Zabaykalsky Krai since 2008, continues to enjoy his role as the district’s patron, using his networks to support the Aga Buryats.

Aga’s economic boom years came to an end when the district merged with the much larger Chita Oblast’ in 2008 into the territorial-administrative unit of Zabaykalsky Krai. Whereas in the 1990s, Chita had been economically stronger than the small enclave, Aga’s economy was clearly better developed by the time of the referendum that was forced upon the district’s citizens. The unification was obviously not in their interests, either economically or in terms of ethnonational political representation. Curiously, a majority of people voted for unification. Their decision appears to have been due to pressure from above: public-sector employees report that they had been warned that they might lose their jobs if they voted against unification. This was a serious threat to those with a stable income on which whole families depended, and most complied. Moreover, as Long and Graber point out, people were aware that the unification plans were part of a political process initiated in Moscow. Several administrational units in Russia were amalgamated at that time and people knew that they were not the only victims. Therefore, the majority took a pragmatic stance with their vote, even if they did not enthusiastically support the development. Rather than risking conflict over a matter that they perceived as already lost, people preferred to underline their general support of Russia’s national politics (Long and Graber 2009: 151–52).

With the administrative amalgamation, Aga lost its autonomy and, as a consequence, it lost its status as a special economic zone and the monetary blessing came to an end. Six years after the end of the cash injection, Aga still appears to be a little paradise within the territory of the Zabaykalsky Krai. On taking a closer look, however, one can literally see facades crumbling. The development that was initiated during the ‘good times’ could not be sustained without the influx of tax money from outside. The local court does not even have money to buy envelopes, an employee explained to me in the post office. As a consequence of the economic crisis resulting from EU sanctions against Russia, further cuts in the district’s budget were expected during the time of my research.

Aga’s industry, consisting of a small number of mining, food processing and timber processing enterprises, is weakly developed and accounts for less than 20 per cent of its revenue.¹ People rely heavily on subsistence-based agriculture and livestock herding, and for the most part only small surpluses of meat, potatoes or cabbage are sold in order to gain some cash for household expenses. It remains very difficult to earn a regular income through farming. In the liberalized market, locally produced milk, for example, cannot compete in price with its mass-produced Tetra Pak rival. There are plans to create new forms of agricultural cooperation to increase the competitiveness of livestock holders as well as plans to promote the processing industry. However, the crisis has postponed the prospect of this happening into the indefinite future. Jobs in the public sector, for example in schools, hospitals or administrative structures, are highly desired in Aga. These jobs are one of the few sources of regular income in the district (the other major source being pensions) and signify financial stability. Despite the fact that about half of the district’s population is Russian, the leading positions in state institutions are overwhelmingly occupied by Buryats. Access to these jobs depends much more on kinship networks than on professional qualifications, a fact that restricts the Russian population’s access to this job market. Although these public-sector jobs are associated with financial stability, employees complained about delays in the payment of wages (zaderzhki), sometimes over the course of several months, during my research in 2011 as well as in 2014–15.

Private small-scale entrepreneurship has developed since the late 1990s and a number of hairdressers, convenience stores, cafes, taxi services, pawn shops, traders and repair services compete for customers. In most cases, the new entrepreneurs have no professional training in their sphere of activity and they work alone or in small teams, often consisting of family members. The situation for many of them is ultimately precarious and uncertain. Their income is unstable and dependent on the financial situation of their family, as well as being highly vulnerable to fluctuations in the national and the global economy. Crossborder trade, for example, is becoming less and less profitable, particularly in light of the drastic drop of the rouble as a consequence of the EU sanctions imposed upon Russia in 2014. Frequently, small enterprises close down, to be replaced by others who run into similar difficulties to their predecessors after some time. A major problem reported by Aga’s entrepreneurs is the lack of purchasing power amongst potential customers. People have no money, they say, and their customers have become used to buying everything on credit. Most debtors repay the money when they receive their salary or pension or when they are able to borrow money from someone else. However, there are always those who do not pay their debts. Many traders have cash-flow problems, which lead to difficulties in stocking their stores because they have not been paid for goods already sold. They find pursuing debtors difficult, tiresome and too often unsuccessful.

During the time of my research, I became good friends with a group of young Aga entrepreneurs, all men in their early thirties. Whenever we sat together, they would sooner or later start discussing their ideas for new business projects. They were all struggling to earn a livelihood and therefore they were constantly concerned with how to make the most money in Aginskoe. Aldar,² who worked as a private moneylender, considered opening a hair salon as he found it increasingly difficult and frustrating to recover debts from his customers. When I left Aginskoe after my fieldwork, he was still trying to find money to buy the basic equipment for his new business. Baatar had a repair service for electronic devices, but had to give it up in the spring of 2015 because he had not paid the rent for his shop for six months. He started operating a taxi service instead and worked as a driver himself. Amgalan also ran a repair service. He enjoyed speaking about advertising and considered himself to be an expert in this regard. And, indeed, as the first and only entrepreneur in town, he had a neon sign installed in his shop window. Amgalan, like Aldar and Baatar, was always seeking the most profitable business opportunities. During the time of my research, he decided that in a place where nobody had money, this would be a pawn shop. Shortly before I left, he had finally managed to overcome all the bureaucratic obstacles and opened the pawn shop next to his repair service.

Money always seems to be scarce in Aga, even for those who have jobs. People constantly refer to a lack of money. The general tenor of their remarks is that they have enough to cope, but not enough to live. Money to buy bread can always be found, but people cannot earn enough to finance the lifestyle they desire. Wages and pensions are low in Aga and state benefits are a symbolic rather than a practical support.³ The registered number of unemployed people is low only in official statistics, which is easily explained by the fact that people have no motivation to register themselves as unemployed.⁴ The procedure of registration is a bureaucratic nightmare and the subsidies one may receive are so insignificant that it makes more sense to spend the time earning small sums by chopping wood, working as an unlicensed taxi driver or as a transport worker at the Russian–Chinese border. In the light of the scarcity of money, subsistence farming continues to be highly significant as a source of a stable food supply for households.

Debt in Aga

People in Aga who grew up during the socialist era are nostalgic about the times when money did not particularly trouble them. What they needed was either inexpensive in relation to their salaries or it was free. This perception is unsurprising, given the restricted function of money in the Soviet planned economy in comparison to today’s capitalist economy (Rona-Tas and Guseva 2014). In Soviet times, the state provided a number of free services such as education and healthcare, along with maternity and disability leave, and subsidized housing and vacations. Moreover, desired consumer goods were rationed and it was mostly a question of access rather than of money as to whether they could be purchased. Informal social networks were crucial to getting information about where and when television sets, refrigerators or cars would be sold or to obtain certain consumer goods underhand. For these reasons, possession of money was often not the most significant factor in terms of whether people could access their desires (Rona-Tas and Guseva: 31-44). With the demise of the Soviet Union and the retreat of the welfare state, money immediately became an object of scarcity. It became difficult to earn and was not only needed for necessities, but was also desired for the attractive new consumer goods that swept on to the postsocialist market.

Before Perestroika, financial operations at the household level were minimal.⁵ There was a single state bank that regulated monetary operations and financial transactions. The bank offered citizens a savings account in which they could deposit their money. Wages were paid in cash and payments at the household level were also made in cash (Curtis 1996). Thus, money was a very visible and tangible means of exchange. For larger purchases such as a refrigerator, a motorbike or furniture, consumer credit was available. As high rates of interest were seen to be immoral and detrimental to the consumer, rates of interest were regulated and very low (Prokhorov 1973).⁶ Moreover, payments were often deducted directly from wages. Therefore, borrowing was largely devoid of risk (Rona-Tas and Guseva 2014: 33).

The transition from the socialist economy to a capitalist economy included a major restructuring of the banking sector. A two-tier system with one central bank and numerous commercial...

Table of contents

• Cover
• Title Page
• Copyright Page
• Dedication
• Contents
• Acknowledgements
• Note on Transliteration
• Introduction
• Chapter 1 Capitalism in Aga
• Chapter 2 American Dream or Pyramid Scheme?
• Chapter 3 Spiritual Capitalism
• Chapter 4 Pyramids of Intimacy
• Chapter 5 Pyramids and Their Products
• Chapter 6 Power in the Pyramids
• Conclusion
• References
• Index