MMM collapse could kill Russia's free market
Tuesday 02 August 1994
Galina Starovoitova, a liberal close to President Boris Yeltsin when he came to power but now out in the political wildnerness, said the fall of MMM had been a disaster for millions of people and could result in 'disillusionment in the market economy and in the possibility of civilised business'. MMM shareholders might opt for 'anti-reform forces' at the next elections.
Financial experts warned that the collapse might have a knock- on effect in the economy. MMM, headed by Sergei Mavrodi, Russia's fifth-richest man, was only the largest and best known of dozens of pyramid schemes doing nothing more than recycling money, and these in turn could fold. Share prices in general are depressed because of the scandal.
Prime Minister Viktor Chernomyrdin admitted over the weekend that the government had been slow in giving Russia's wild capitalism a legal framework but said the state could not compensate MMM's five million investors. Mrs Starovoitova said this was not good enough. The government, as well as state television, which ran nightly adverts for MMM, had been guilty of 'unforgivable inaction when the crash could have been predicted easily', she said, suggesting the state should issue long-term bonds to cover shareholders' losses.
Speaking more generally about the balance needed between economic freedom and social protection, Mrs Starovoitova said: 'The rich must remember that they have to share their wealth with the poor so as to avoid upheavals and revolutions.' Unfortunately this is not a fashionable concept in today's Russia, where a new generation of entrepreneurs have wholeheartedly embraced the money- making aspect of capitalism without learning anything of business morality and responsibility.
Many of the victims in the MMM collapse were innocents such as pensioners who believed they were investing in a genuine savings scheme. Such people are likely to have been put off capitalism for life. But plenty of shareholders were almost as cynical as Mr Mavrodi. They knew they were gambling but it seemed to beat doing a day's work and they thought they could get out with their money before their luck ended.
The gambling types have learnt nothing from the experience. As there is no law against pyramid schemes, MMM has not been closed down and yesterday it issued new shares for which some 5,000 people were queuing outside the company's headquarters.
The government is determined to be stricter in future. The Finance Ministry is likely to audit MMM and this time it will not be fobbed off, as it was previously, by a plea from Mr Mavrodi that a van carrying his accounts had been hijacked and the papers stolen.
Just a few roubles more, page 15
- 1 Stolen Instagram photo sells for $90,000
- 2 Before you complain about your GP, this is what you need to know about actually doing the job
- 4 'Don't blame all men for rape' campaign backfires spectacularly
- 5 Charlie Charlie Challenge explained: not a Mexican demon being summoned — it's gravity
UK's biggest male rape charity Survivors UK has state funding slashed to zero despite 120% rise in men reporting sexual violence and seeking help
Priest warns pupils the 'Charlie Charlie Challenge' is 'demonic activity'
'Don't blame all men for rape' campaign backfires spectacularly
Iran launches anti-Isis cartoon competition 'to expose true nature of Islamic State'
Fifa corruption arrests: Sepp Blatter 'quite relaxed' and confident he is 'not involved'
EU referendum: David Cameron's rules are a 'democratic disgrace', says French-born Scottish politician set to be denied a vote
The day that Britain resigned as a global power
SNP fury as HS2 finds 'no business case' for taking fast train service to Scotland
Australian man punched in the face for defending Muslim women from abuse on train
A nation of inequality: How the UK is failing to feed its most vulnerable people
David Starkey 'tells Amal Clooney to shut up and stop over-promoting human rights'
£20000 - £30000 per annum: Recruitment Genius: A multi-skilled engineer with a...
£17000 - £21000 per annum: Recruitment Genius: Engineers for field & bench ser...
£30000 - £40000 per annum: Recruitment Genius: A fantastic opportunity for a t...
£35000 - £50000 per annum: Recruitment Genius: This global provider of call ce...