MMM collapse could kill Russia's free market

REFORMERS expressed concern yesterday that the collapse of the MMM investment fund might discredit the whole idea of the free market for many Russians and send them into the arms of those who advocate dictatorship.

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

Start your day with The Independent, sign up for daily news emails
ebooks
ebooksAn introduction to the ground rules of British democracy
Latest stories from i100
Have you tried new the Independent Digital Edition apps?
Independent Dating
and  

By clicking 'Search' you
are agreeing to our
Terms of Use.

iJobs Job Widget
iJobs General

Recruitment Genius: Massage Therapist / Sports Therapist / Physio / Osteopath

£12000 - £24000 per annum: Recruitment Genius: An opportunity has arisen for o...

Recruitment Genius: Account Manager / Sales Executive - Contract Hire

£35000 - £60000 per annum: Recruitment Genius: This industry leader provides c...

Recruitment Genius: Project Coordinator

£28000 - £30000 per annum: Recruitment Genius: A Project Coordinator is requir...

Recruitment Genius: Area Sales Manager - Midlands

£20000 - £25000 per annum: Recruitment Genius: This is an exciting opportunity...

Day In a Page

John Palmer: 'Goldfinger' of British crime was murdered, say police

Murder of the Brink’s-MAT mastermind

'Goldfinger' of British crime's life ended in a blaze of bullets, say police
Forget little green men - aliens will look like humans, says Cambridge University evolution expert

Forget little green men

Leading evolutionary biologist says aliens will look like humans
The Real Stories of Migrant Britain: An Algerian scientist adjusts to life working in a kebab shop

The Real Stories of Migrant Britain

An Algerian scientist struggles to adjust to her new life working in a Scottish kebab shop
Bodyworlds museum: Dr Gunther von Hagens has battled legal threats, Parkinson's disease, and the threat of bankruptcy

Dying dream of Doctor Death

Dr Gunther von Hagens has battled legal threats, Parkinson's disease, and the threat of bankruptcy
UK heatwave: Temperature reaches 39.8 degrees on Central Line - the sweatiest place in London

39.8 degrees recorded on Tube

There's hot (London) and too damn hot (the Underground). Simon Usborne braved the Central line to discover what its passengers suffer
Kitchens go hi-tech: From robot chefs to recipe-shopping apps, computerised cooking is coming

Computerised cooking is coming

From apps that automatically make shopping lists from your recipe books to smart ovens and robot chefs, Kevin Maney rounds up innovations to make your mouth water
Jessie Cave interview: The Harry Potter star has published a feminist collection of cartoons

Jessie Cave's feminist cartoons

The Harry Potter star tells Alice Jones how a one-night stand changed her life
Football Beyond Borders: Even the most distruptive pupils score at homework club

Education: Football Beyond Borders

Add football to an after-school homework club, and even the naughtiest boys can score
10 best barbecue books

Fire up the barbie: 10 best barbecue books

We've got Bibles to get you grilling and smoking like a true south American pro
Wimbledon 2015: Nick Bollettieri - Junk balls and chop and slice are only way 5ft 1in Kurumi Nara can live with Petra Kvitova’s power

Nick Bollettieri's Wimbledon Files

Junk balls and chop and slice are only way 5ft 1in Kurumi Nara can live with Petra Kvitova’s power
Ron Dennis exclusive: ‘This is one of the best McLaren teams ever – we are going to do it’

‘This is one of the best McLaren teams ever – we are going to do it’

Ron Dennis shrugs off a poor start to the season in an exclusive interview, and says the glory days will come back
Seifeddine Rezgui: What motivated a shy student to kill 38 holidaymakers in Tunisia?

Making of a killer

What motivated a shy student to kill 38 holidaymakers in Tunisia?
UK Heatwave: Temperatures on the tube are going to exceed the legal limit for transporting cattle

Just when you thought your commute couldn't get any worse...

Heatwave will see temperatures on the Tube exceed legal limit for transporting cattle
Exclusive - The Real Stories of Migrant Britain: Swapping Bucharest for London

The Real Stories of Migrant Britain

Meet the man who swapped Romania for the UK in a bid to provide for his family, only to discover that the home he left behind wasn't quite what it seemed
Cheaper energy on the way, but it's not all sunshine and rainbows

Cheaper energy on the way, but it's not all sunshine and rainbows

Solar power will help bring down electricity prices over the next five years, according to a new report. But it’s cheap imports of ‘dirty power’ that will lower them the most