Our visit to the former defense plant in western Ukraine was supposed to begin at 10:00, but was delayed until 11:00. It was a gray, cold day in a long series of gray, cold days that we had dubbed a “two sock day”, so cold that if you didn’t have two pairs of socks on, your feet would freeze. It was a meeting during which none of us took off our coats for the same reason. It was February, 1996, about five years after the money from Moscow had stopped coming.
The meeting began with small plates of the traditional salo s’chesnikom and vodka. Salo is the fat from the shank of a pig, basically lard, which had a near- religious significance in Ukraine because salo was one of the main means of sustenance for Ukrainians during WWII. It is edible only when accompanied by garlic (chesnikom) and, especially, vodka. The vodka was poured time and again, in an increasingly demanding tone as the vodka began to take effect. The flow from aperitiv into lunch was seamless. The vodka was supplemented by several bottles of wine in case anyone was interested.
It was like this every day at the plant. The management team met in the morning when they were all reasonably sober, but things fell apart rather quickly thereafter. Nothing constructive was even attempted after lunch. Sooner or later, everyone drifted home, with no visible work being done. It had been like this for much of the time since the USSR had dissolved. Many workers had left, but many still came to the plant. Their stipend had been reduced to a monthly bag of groats and a bottle of cheap wine from Moldova.
Our visit, to determine if we could be helpful to the plant in finding new business, was a failure. We met with more than 1500 plants and other businesses in Ukraine over the seven years from 1995 – 2002, and only found 100 with which we could work, and which would work with us.
The collapse of communism took a toll on men, especially. Women had been placed in the "less important jobs" such as retailing, food and banking. Now that defense plants were basically shut down, the women found themselves in charge of much of what remained of the economy, while men had little to do but drink. Many men died prematurely of alcoholism. The life expectancy of males in Russia (I assume much the same for Ukraine) dropped from 64 in 1990 to 58 by 1995, almost a statistical impossibility. Their useful lives had ended when the Soviet Union collapsed. Most of the older, and more senior managers, had little propensity or desire to learn how to function in a market economy. When the money stopped coming from Moscow, they tried to steal what they could from the system. They cheated their employees. Their employees cheated on expense accounts (whenever we arrived at a train station, there were always men asking for our ticket stubs so they could turn them in for phony expenses). What few orders came to the plant were only accepted after agreeing on the amount of the bribe.
Now we see President Obama is preparing to sell the government’s shares in General Motors for a loss of 11 billion dollars, a loss to the taxpayers, that is. We are spending far beyond our means, and everyone, including Standard & Poor’s, knows it can’t last forever. S&P has downgraded the long-term outlook for US credit as “negative”, a step down from “stable”. The main reason given by S&P is its lack of confidence in the government of the United States to work cooperatively toward a solution; in other words, a bet on partisan politics to a fault.
The US Government’s financial leaders, Secretary of the Treasury Timothy Geithner and Chairman of the Federal Reserve, Ben Bernanke, are playing a dangerous game, betting on the recovery of the country when the odds are even , or worse, that there will be no such recovery, only a bad case of inflation, or even hyperinflation. No one knows. The Germans didn’t know either in 1923 when suddenly the conversion rate of the German currency to equal one dollar leapt to 4,200,000,000,000 marks. At one point, prices doubled every two days. How much warning did the average citizens get?
We already know from previous crashes that when there is a collapse in the US market, the collapse is huge. It would make sense for this government to do at least one thing to re-assure Americans that it is aware of the uncertainty and potential instability that exists; instead, every move of substance has been just the opposite, as if their goal was to destroy the American economy wholly and completely … and suddenly.
The more Americans rely on money from the government, mostly in the form of entitlements, the harder we will fall when the money stops coming from Washington. Can’t happen here? Please pass the lard.
