For a hedge fund manager, Bill Browder writes an engaging and interesting story. His judgement only failed him at the end, when he wrote as this book’s subtitle ‘How I Became Putin’s No. 1 Enemy.’ This may or may not be true. But the book’s subtitle should have been ‘The Education of Bill Browder’. For this is what the book really is about, even if it starts in November 2005 when, on a routine flight into Moscow, he was stopped, held overnight, and then deported back to London, where he was living at the time with his second wife. All this is told in the present tense, before switching into the past tense to describe the events leading up to the book’s writing in 2014. Those events are described in an autobiographical way and recount the author’s education, fascination with the post-Communist world in Eastern Europe, his subsequent disillusionment, and transformation into a lobbyist for travel and foreign asset restrictions on Russian officials involved in human rights abuses.
It is a story of material success and then some, written in a racy style, with dialogue and short chapters, starting with the author’s climb to the pinnacle of high finance, his first gatecrashing of Davos in 1996 to his acceptance there; then come the first puzzling, unsettling incidents of corporate financial skulduggery, leading to the murder at the climax of the book, which reveals that doing business in Russia can have fatal consequences.
What adds a certain piquancy to Bill Browder’s story is his family background, as the grandson of Earl Browder (1891-1973), the Secretary General of the Communist Party of the United States of America (of whom more below). The older Browder’s family paid the consequences of his politics in the anti-Communist fervour of the mid-20th century. But, true to their Marxist inspiration, they excelled academically. Only the grandson Bill rejected his family’s socialism, and determined early on to become a capitalist. However, without capital this is not really practicable. The nearest substitute is to go to a prestigious business school and make one’s way up the bureaucracies that manage big business and big finance. In a counter-intuitive calculation, Bill Browder added his grandfather’s name to give distinction to his application to Stanford Business School, and got in.
The fall of Communism opened up what seemed to be huge new possibilities for capitalism in Eastern Europe. Bill Browder recalls his excitement at these new possibilities, only to end up in Sanok in a relatively isolated part of South-Eastern Poland, in October 1990, advising on the rescue of the Autosan bus plant. Production had stopped there, when the Polish Finance Minister, Leszek Balcerowicz, a fanatical devotee of fiscal austerity and the kind of trade and corporate liberalisation that the International Monetary Fund inflicts on weak governments that use its services, cancelled government orders for its buses. At a loss to know what to recommend by way of industrial rescue, an older colleague at Boston Consulting advised him on the options as follows: ‘They don’t have any fucking options. They have to fire everybody.’ (p. 36).
Disheartened, Browder moves on to working for the toxic print magnate Robert Maxwell, before finding the one capitalist activity in which he will not need to behave brutishly, or suffer brutes – fund management. With privatisation all the rage in Eastern Europe, and anyone with cash able to buy ‘assets’ (industrial, corporate, even fictional) for next to nothing, and then re-sell as more familiar corporate balance sheets, for good money, Browder persuaded the Lebanese banker Edmond Safra to put up the money for Browder’s Hermitage Capital fund.
‘They don’t have any fucking options. They have to fire everybody.’
The fund was successful, despite setbacks in a spat with a Russian oligarch, Vladimir Potanin, and later the 1998 Russian crisis, in which, luckily, the International Monetary Fund and the World Bank came to the rescue of the Russian economy. This part of Browder’s story could be no more than the hubristic biography of any successful fund manager attributing the levitation in the market value of his assets to his own unique insight. But this is not the usual success story.
Along the way Browder’s first marriage broke up. Then came some strange, rather excessive, tax demands; then that deportation. Browder managed to get the fund’s money out of the country. But Browder’s tax attorney Sergei Magnitsky had discovered that the identity of investment vehicles used by Hermitage had been stolen and used to obtain tax refunds by people he was able to identify.
The differences with the way in which financial business is conducted in the United States were emerging. In the US, finance buys government, and corporations settle their differences in the law courts. In Russia (as indeed in most countries) governments buy finance, and corporations settle their differences using more traditional, political, even police instruments.
The horrifying climax of the book is an account of the murder of Magnitsky in police custody in Moscow, in 2009. This shocked Browder into a determination to secure justice for Magnitsky. Lobbying in Washington finally secured in 2012 the passing by the US Congress of the ‘Sergei Magnitsky Rule of Law Accountability Act’, banning the granting of US visas and freezing the US assets of the officials involved in the death of Magnitsky. Browder now considers himself a human rights activist, an activity not known to please the Russian authorities. The ‘Red Notice’ of the book’s title is a reference to the warrant for Browder’s arrest that the Russian Government issued to Interpol in May 2013. Interpol officially rejected it within days of receiving it.
There is no doubt that Browder’s indignation at the brutal treatment of Magnitsky, for carrying out his work with integrity and professionalism, is both heartfelt and fully justified. But Browder’s anger at the opaque relationship between the Russian state and its new capitalist oligarchs comes across in this account as more than a little naïve, as if, as a distinguished alumnus, he was explaining to the most recent class of graduates at Stanford Business School the horrors of doing business in exotic parts of the world where business disputes are settled using gangsters rather than law courts. It is this that leads him to his conclusion that the Russian state under Vladimir Putin is essentially a kleptocracy.
But government structures in all countries whose history and society are poorly known are bound to appear enigmatic. In this sense Russia, of which most people know only that it is vast, has mineral resources and nuclear weapons, and was ‘freed’ from Communism in 1991, is no different to other countries. Its brutal internal politics then appear enigmatic, or a throwback to Stalinism, so that events arouse more speculation than understanding. The recent killing of one of Browder’s Russian supporters, the liberal politician Boris Nemtsov, is a case in point. The official version (murder by Islamist rebels from the Caucasus) is patently too crude a fabrication to be believable. Speculation then rests on the identity of factions in the Russian state, most commonly the siloviki [power structures] of the security agencies and the Ministry of the Interior, who like to solve problems in the old ways or, in Bill Browder’s version, operate the state as a giant protection racket. Against them are supposed to be civilian factions based in the media, finance and business, that prefer less brutal ways of handling matters.
But the Russian state is not a kleptocracy, and Putin is not on the same scale as Zaire’s Mobutu Sese Seko.
But the Russian state is not a kleptocracy, and Putin is not on the same scale as Zaire’s Mobutu Sese Seko. This much is obvious from Putin’s actions in the Ukraine and his diplomacy in the Middle East, which suggest that nationalism and security are also important priorities alongside exacting tribute from Western financiers.
Browder’s Russian difficulties concern the economic and financial significance of the Russian state. To grasp that significance it is necessary to understand Russian history, geography, and society. It is helpful too to read the literature on the role of the absolutist state in the transition to capitalism, Alexander Gerschenkron on Russian finance, Rosa Luxemburg on the development of Russia, John A. Hobson and Thorstein Veblen on the cultured discretion of haute finance, roaming the world for the highest return, and shuddering at the practices of appropriation that it finds there. The enigma of the weak development of commercial and human rights law is as much a puzzle of its development in Western Europe and North America, as it is of its underdevelopment in Russia – an underdevelopment apparent not only in Russia, but also in China and India, the latter in particular showing how such law cannot just be legislated to be effective.
As I write this review, I
have next to me a book by Bill Browder’s grandfather Earl Browder Marx and
America (London: Victor Gollancz 1959) based on lectures he gave at Rutgers
University New Jersey, and at the New School for Social Research in New York.
The dust jacket on the book proclaims that its author was expelled from the
American Communist Party in 1945, which must have appealed to Isaac Deutscher,
from whose library I have this book. Deutscher’s annotations indicate that he
did not think much of Browder’s attempt to prove that capitalism would not make
American workers worse off. But the book does at least engage with American
economic development and its peculiarities such as the presence of slavery and
the availability of ‘free’ land for settlement. It is this kind of broad
understanding of Russian social, political and economic development that is
necessary to understand the Russian state as it is today. But they don’t teach
you that at Business School.
Bill Browder's 'Red Notice: How I became Putin's No. 1 Enemy' is published by Bantam Books
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