BOOKS: HOW THE MIGHTY FELL

Russia's oligarchs were outsiders who became the ultimate insiders. Some of them started off as furtive traders in contraband goods. A few years later they morphed into multimillionaires, emerging from their lavish villas and chauffeured Mercedeses to call the shots at the highest levels of government. Then came the punishment for their hubris. The economy collapsed and their former friends in high places turned against them. These days some of them are back on the outside, tasting the bitter fruits of exile.

In terms of sheer drama, it's an irresistible tale, and David Hoffman's new book, "The Oligarchs: Wealth and Power in the New Russia" (564 pages. PublicAffairs), milks it for all it's worth. He's right to do so. You just can't tell the story of how Russia staggered from the centrally planned command economy to the imperfectly market-driven business world of today without dwelling on the exemplary fate of characters like Alexander Smolensky. As Hoffman (full disclosure: a former colleague and friend of mine) describes him, Smolensky was a "rebel against the system" who ran afoul of the Soviet authorities in the early 1980s for printing black-market Bibles. As Mikhail Gorbachev began edging the Soviet Union away from socialism, Smolensky amassed a fortune by building private houses for the Communist Party elite. By 1997, he had put together Russia's biggest private banking empire--only to see it crumble in the wake of the 1998 crash.

But like most of his oligarch colleagues, Smolensky had already moved the money into other, less vulnerable companies, salvaging much of his fortune but leaving his investors--ordinary Russian depositors as well as Western business partners--in the lurch. As Hoffman writes, when Smolensky is interviewed about the mess, the diminished tycoon says unrepentantly that anyone who was stupid enough to put money in his bank deserved "dead donkeys' ears."

The leading characters in this book make Donald Trump look tasteful, unassuming and well-behaved. Soviet mathematics professor Boris Berezovsky survived a gangland assassination attempt to appoint prime ministers and bend Boris Yeltsin's entourage to his will. Finally, at the peak of his power, he ran afoul of his protege, Vladimir Putin, who unleashed a flood of corruption charges that soon drove the magnate into luxurious London exile. Small-time theater director Vladimir Gusinsky built up the new Russia's most formidable media empire, but met a fate similar to Berezovsky's when Putin took offense at the critical reporting of Gusinsky's television station and print media.

To be sure, Hoffman's narrative ranges well beyond the simple rags-to-riches story. Some of the tycoons, like Vladimir Potanin and Mikhail Khodorkovsky, started their careers as well-connected members of the Soviet elite who exploited the chances offered by Russia's shift toward a market economy. And certainly not all of them were ruined by the 1998 financial crisis, when Moscow simultaneously defaulted on its debt and devalued the ruble; after all, the government gave the oligarchs three months to hide their assets before creditors could descend. While Hoffman gives some of the oligarchs points for sheer chutzpah, he also shows how most of their fortunes were built by exploiting state-managed resources rather than creating new businesses. Their triumph was a victory of cronyism rather than competitive capitalism.

Hoffman deserves credit for providing one of the most vivid and well-researched accounts to date of this tumultuous period in recent Russian history. By the end, though, I found myself wishing that he'd gone just a bit further. Western governments and businessmen were clearly complicit in some of the funny business he portrays, but, he writes, "this issue is beyond the scope of this book." A pity. Perhaps more seriously, he's often coy about the oligarchs' complicity with organized crime. Throughout the book, the oligarchs are portrayed as corrupt but still somehow distinct from the "unsavory gangs" who are competing with them. In fact, you could argue that murder was as much a tool of Russian business life in the 1990s as share dilutions and pyramid schemes; Hoffman's book prefers to focus on the latter.

I am sure other critics will argue that Hoffman's book is simply passe. After all, Putin has gone a long way toward cutting the oligarchs down to size. Aside from driving Berezovsky and Gusinsky out of the country, he's essentially told the tycoons who remain that they can keep their ill-gotten gains as long as they stay out of politics. And yet it was the oligarchs who brought Putin to power, and the system that reigns in the country today is the legacy of what they created in collusion with their patron saint, Boris Yeltsin. For that reason, I'm sure that many future readers will find themselves returning to Hoffman's book to find out what, exactly, makes Russia tick.

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