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
News
ebookA unique anthology of reporting and analysis of a crucial period of history
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: Multi Skilled Engineer - Electrical / Mechanical / Maintenance

£20000 - £30000 per annum: Recruitment Genius: A multi-skilled engineer with a...

Recruitment Genius: Electronic Service Engineer - Television & HI-FI

£17000 - £21000 per annum: Recruitment Genius: Engineers for field & bench ser...

Recruitment Genius: Digital Designer - Award Winning Agency

£30000 - £40000 per annum: Recruitment Genius: A fantastic opportunity for a t...

Recruitment Genius: Project Manager

£35000 - £50000 per annum: Recruitment Genius: This global provider of call ce...

Day In a Page

Blundering Tony Blair quits as Middle East peace envoy – only Israel will miss him

Blundering Blair quits as Middle East peace envoy – only Israel will miss him

For Arabs – and for Britons who lost their loved ones in his shambolic war in Iraq – his appointment was an insult, says Robert Fisk
Fifa corruption arrests: All hail the Feds for riding to football's rescue

Fifa corruption arrests

All hail the Feds for riding to football's rescue, says Ian Herbert
Isis in Syria: The Kurdish enclave still resisting the tyranny of President Assad and militant fighters

The Kurdish enclave still resisting the tyranny of Assad and Isis

In Syrian Kurdish cantons along the Turkish border, the progressive aims of the 2011 uprising are being enacted despite the war. Patrick Cockburn returns to Amuda
How I survived Cambodia's Killing Fields: Acclaimed surgeon SreyRam Kuy celebrates her mother's determination to escape the US

How I survived Cambodia's Killing Fields

Acclaimed surgeon SreyRam Kuy celebrates her mother's determination to escape to the US
Stephen Mangan interview: From posh buffoon to pregnant dad, the actor has quite a range

How Stephen Mangan got his range

Posh buffoon, hapless writer, pregnant dad - Mangan is certainly a versatile actor
The ZX Spectrum has been crowd-funded back into play - with some 21st-century tweaks

The ZX Spectrum is back

The ZX Spectrum was the original - and for some players, still the best. David Crookes meets the fans who've kept the games' flames lit
Grace of Monaco film panned: even the screenwriter pours scorn on biopic starring Nicole Kidman

Even the screenwriter pours scorn on Grace of Monaco biopic

The critics had a field day after last year's premiere, but the savaging goes on
Menstrual Hygiene Day: The strange ideas people used to believe about periods

Menstrual Hygiene Day: The strange ideas people once had about periods

If one was missed, vomiting blood was seen as a viable alternative
The best work perks: From free travel cards to making dreams come true (really)

The quirks of work perks

From free travel cards to making dreams come true (really)
Is bridge the latest twee pastime to get hip?

Is bridge becoming hip?

The number of young players has trebled in the past year. Gillian Orr discovers if this old game has new tricks
Long author-lists on research papers are threatening the academic work system

The rise of 'hyperauthorship'

Now that academic papers are written by thousands (yes, thousands) of contributors, it's getting hard to tell workers from shirkers
The rise of Lego Clubs: How toys are helping children struggling with social interaction to build better relationships

The rise of Lego Clubs

How toys are helping children struggling with social interaction to build better relationships
5 best running glasses

On your marks: 5 best running glasses

Whether you’re pounding pavements, parks or hill passes, keep your eyes protected in all weathers
Joe Root: 'Ben Stokes gives everything – he’s rubbing off on us all'

'Ben Stokes gives everything – he’s rubbing off on us all'

Joe Root says the England dressing room is a happy place again – and Stokes is the catalyst
Raif Badawi: Wife pleads for fresh EU help as Saudi blogger's health worsens

Please save my husband

As the health of blogger Raif Badawi worsens in prison, his wife urges EU governments to put pressure on the Saudi Arabian royal family to allow her husband to join his family in Canada