Mmm As a Phenomenon of the Russian Consumer Culture

Natasha Tolstikova, University of Illinois at Urbana-Champaign, U.S.A.
[ to cite ]:
Natasha Tolstikova (1999) ,"Mmm As a Phenomenon of the Russian Consumer Culture", in E - European Advances in Consumer Research Volume 4, eds. Bernard Dubois, Tina M. Lowrey, and L. J. Shrum, Marc Vanhuele, Provo, UT : Association for Consumer Research, Pages: 208-215.

European Advances in Consumer Research Volume 4, 1999      Pages 208-215

MMM AS A PHENOMENON OF THE RUSSIAN CONSUMER CULTURE

Natasha Tolstikova, University of Illinois at Urbana-Champaign, U.S.A.

INTRODUCTION

This paper presents the story behind an infamous Russian financial scandal that happened in the middle of the 1990s. MMM, a newly formed investment fund, sold large number of shares with the promise of fantastic returns. It did so by employing an extensive advertising campaign which was so popular that its characters became almost national heroes. But MMM did not fulfill its promise; it was, in fact, a pyramid scheme. In an attempt to save the money of its citizens, the government took the matter into its own hands and arrested the head of the company, Sergei Mavrodi. From jail, he started an intense political campaign to gain support for his actions. It created an unexpected consumer response and a surprising turn of events which showed that at the time advertising had an enormous power over Russians. The whole incident also demonstrated that Russians were not prepared to handle financial investments without relying on government to help.

This paper examines the example of advertising effects on consumer behavior as a case study of the ways ads were used to contribute to political and economic instability in Post-Soviet Russia.

PREHISTORY TO THE CORE EVENT

A poor economic situation was the most burdensome inheritance that post-Communist Russia received from the Soviet Union. For a long time, the economy of the Soviet Union was characterized by the "stability of stagnation" (Aslund 1995). The most particular features of the Soviet economy were permanent shortages and hidden inflation. Money played a passive role; prices were heavily subsidized by the government and did not reflect what the price in the West is usually ponder: wages, costs, etc. The common practice of hoarding both goods and money was caused by the uncertain availability of commodities (Lane 1994). Thus, the Soviet population had on its hands large sums of money, with approximately 20 per cent of their income going into savings. Nevertheless, with the large number of money in savings there were grave shortages and long queues in shops. Consumer demands went unfulfilled. Because of the faults of the distribution system, goods supply was irregular and unpredictible. At the beginning of 1992 nine out of ten Russian households also had one member spending at least an hour a day queuing for goods (Rose 1994). Russia’s industrial output halved between 1989 and 1994Ca sharper decline than America suffered during the Great Depression ("Survey" 1995). Already in the second half of 1991 the USSR faced complete financial ruin (Aslund 1995).

In the Soviet UnionCa country with virtually no brand namesCadvertising was a rather peculiar phenomenon. It was done either for products or services that did not have any competitors (e.g. "Fly with Aeroflot!@Cas if Russians had any other choice) or for products that were already in short supply (i.e. washing machines, vacuum cleaners). In Russian, the word "advertising" has a negative connotation: to advertise means "to praise without shame." Thus, puffery and hyperbole are naturally expected to be a part of an ad (Tolstikova 1994). In the beginning of the 1990s, Russians were still suspicious of advertising. Socialist ideology warned them of capitalist tricks. For some, advertising was seen as a game between producers and consumersCthe more consumers were regarded as recalcitrant, the more intense advertising would have to be (Frolov 1994).

With his perestroika and new thinking Mikhail Gorbachev started a process that was unimaginable beforeCtransformation of the old mentality about openness, freedom, and choice. Gorbachev was a bold politician, yet his economic reforms were more a means to an end rather then an end in themselves. Two major barriers to the new economic thinking were the limited economic knowledge of the population and vested interests of the swollen Soviet bureaucracy which did not want to lose its privileges (Aslund 1995). In April 1991 consumer prices were increased and partially liberalized. For example, Moscow metro’s charge skyrocketed suddenly from 5 kopeks to 100 rublesCa 2000 percent increase! But wages and social expenditures were also increased which caused a new spiral of inflation.

Under the new economic reality the notion of money became very different. Instead of forced savings, monetary overhang, and the persistent shortage of goods, consumers now faced restricted money availability, voluntary savings and an abundance of goods. Price liberalization mostly wiped out the population’s lifetime savings. So people who existed only on pensions, on stipends, or on single wages could not count on a decent income. Most people were in need of either a second job or good financial investments. "Since the start of the transformation process in 1992, the percentage of Russians able to get by with one job has fallen by 15 per cent, but the proportion able to get by with a portfolio of activities has increased by 26 . " (Rose 1994 49). As one investor put it: "Money is losing value every day because of inflation, you have to invest it in something and turn it around fast" (Erlander 1994).

After the overnight price liberalization in 1992 came mass privatization. Every Russian had een given for free a voucher with a face value of 10,000 rubles (about $25). A citizen had three options to use this voucherCto sell it for cash, to put it into investment fund (so the fund could later invest all the vouchers in bulk), or invest it directly into an enterprise. Many people did not believe in the potency of the program so they sold their vouchers for cashCsometimes for as little as two bottles of vodka! This allowed the development of a large and liquid secondary market in vouchers, which is where most of Russia’s new stockbrokers have developed professionally. Mass privatization boosted Russia’s financial markets. This law allowed practically all forms of property. An enterprise could engage in any activity not explicitly prohibited (Aslund 1995).

The speedy implementation of the market economy was a crucial factor in changing Russian consumer mentality. Russian investors were more eager to invest in pyramid schemes than in former weapon plants that now manufacturing toasters. Because of previous misconceptions, they thought that now under a market economy they could earn a lot of money without putting any effort into it (Bernstein 1994). People realized the dangers of pyramid schemes: the risks were huge, but so were potential gains. Viktor Gerashchenko, then a Russian Central Bank Chairman, suggested a cultural reason for the mania: "Russians are by nature believers in miracles" (Rosett 1994).

Pyramid scheme became famous (and popular) because of Carlo Ponzi. In the 1920s he opened the Securities Exchange Company in Boston. Ponzi did not have any initial capital, however he promised a return of 50 percent of the investment in 45 days and 100 percent in 90 days (Streissguth 1994). The money were not invested in anything, but "profits" of the first investors were paid off by the contributions of the new investors. There is a slim chance that the early investors would win. "To profit from a Ponzi fraud, it’s not enough to be the first one in; you have to be the first one out as well" (Dunn 1975, xi). The classic Ponzi scheme became very popular in Russia.

The basic components of a market economy grew quickly: by the mid-1995 Russia had about 2,500 commercial banks, 600 investment funds and 40 m shareholders ("Survey" 1995). Now that money was real and inflation was high, one had to put money to work as quickly and profitably as possible. "With Russia trying to fast-forward through the kind of capitalist evolution that took decades in the West, flaky finance is in full cry. Hazy laws and feeble property rights, coupled with half-formed securities markets, have created a new class of carpetbag swindlers hawking dozens of dubious investment schemes" (Rosett 1994).

The problem with Russian business in general is that it is very often difficult to distinguish between a regular business and a criminal activity. Not surprisingly, the legal system produces more murk than clarity: every new law generates more crimes, producing an enormous quantity of bribe takers and bureaucrats. Russian laws are such that "everyone has a loophole with a bureaucrat with big pockets guarding it" (Gessen 1994). The population was used to such a system, and thus seemed more inclined to be engaged a shady business. Although some genuine securities were indeed traded in Russia, investors were interested mostly in those on which they could make money from rapid rises in the share price (Scheitz 1994).

The lack of information on financial institutions characterized the Russian investment environment of the early 1990s. In particular, MMM, one of the largest of the suspicious investment institutions, never reported any earnings or investments, and never identified the nature of its business. Share prices for the fund were set by the company itself ("Stock Fund Collapses in Panic" 1994). Nevertheless, the craze of investing became persistent. The new Russian market, rather then growing out of individual ideas and partnerships that incorporate themselves and then seek capital, began issuing paper shares in pre-existing companies. Many new investment companies sold shares together with the heavily advertied idea that a large return was guaranteed to all purchasers (Erlander 1994). In the beginning of 1994 a poll showed that a quarter of Russians owned shares of different enterprises (Amelkina et al 1994). In 1994 the wages of the general population decreased by 17 per cent compared to the previous year. At the same time, profit from entrepreneurial activity doubled and in 1994, composed a third of income (Buida 1994).

As it turned out, the whole MMM AO [ the group’s holding company] was a big-scale fraud. New investments were simply used to pay off obligations to other shareholders (Ignatius 1994). Officially, it was not even an investment institution and didn’t have an appropriate license from the ministry ("Press Conference" 1994). This was illutsrated in a cartoon in one of the Moscow newspapers: a mighty figure with the letters "MMM" on its chest in reality is just an inflatable dummy that can loose its air anytime (Figure).

There were several layers that made up the Russian financial market. The most visible was the MMM-like speculative sector which has been politely called "venture-capital" (10-15 similar companies across Russia that operated like pyramid schemes). The rest were either newly privatized companies backed by real assets or private commercial banks, which had issued stock for several years and paid good dividends (Erlander 1994).

MMM

Sergei Mavrodi, the mastermind of MMM (which reportedly stands for Master Mind Mavrodi) at the time was either the fourth (according to Financial Times) or the fifth (according The Independent) richest man in Russia (Abelson 1994). MMM became famous in 1991, when it paid for a day’s free travel for all Muscovites on the metro in order to publicize the company (several million passengers use the metro on a daily basis). Given the two-hundred-fold overnight increase in the price of a metro ticket, such a scale of action on the part of Sergei Mavrodi, the head of MMM, turned him into a powerful man in the minds of Russians. The action was just a beginning of his fame.

The group of companies under Mavrodi’s leadership had started with the Communist party’s money at the end of the 1980s. At the time, MMM was selling video equipment in the Lenin MuseumCan activity cheered by the party and the government (Liasko and Razin 1994). Very quickly, however, Mavrodi’s empire became a highly complex matterCat one point, it consisted of 21 companies ("Back from the Grave" 1994). The Economist reported in 1994 that MMM AO was the biggest investment company in Russia: it had 60 offices in Moscow and another 76 in 49 cities spread across Russia ("Russia’s Crumbling Financial Pyramid" 1994). MMM was not the first company in Russia who would promise high returnsCthe difference was that MMM offered to its investors absurdly high returns: 3,000 per cent a year. Another factor that made them especially visible was their advertising campaign.

Consumers certainly kept noticing these three letters. It was hard not to. MMM started its aggressive advertising campaign in the press, on billboards, and later on TV. "Thanks to advertising, MMM is one of the best-known companies in Russia. A recognizable and resonant phrase which rhymes too. #MMM. Nyet problem’ [MMM. No problem]Ceasily stuck in the mind of everyone who heard it, simultaneously hinting at the ease of making money and at the unblemished reputation of the company. Very few, however had any idea what MMM did" (Goldman 1993). The slogan was also the only "information" that one could glean from MMM’s ads. The aggressive TV advertising campaign promoting dreams of easy money in the difficult post-Soviet economy ran an average of 30 times a day. A content analysis of 189 minutes of prime time television in 1994 showed that the unconditional leader was MMM AO: its share was almost 18 per cent of all the time measured ("Survey" 1994). The commecials were so familiar that even Boris Yeltsin once mentioned Golubkov, a main character of the MMM’s TV commercials, to illustrate his point.

The TV campaign was made in a form of a soap-opera targeted at different demographic layers of the population. "Marina Sergeevna," a single woman, supposedly caught attention of lonely females, "Julia" and "Vitya" related to students, while an elderly couple corresponded to senior consumers. "MMM’s advertising featured the character Lyonya Golubkov, a bumbling Russian Everyman who effortlessly stumbles onto the good life after buying MMM shares. One vignette has Lyonya sitting at the table spread with vodka and potato salad with his pal Ivan, who chides him, Soviet-style, for being an unproductive parasite. Lyonya replies brightly: "I’m not a parasite, I’m an investor@A (Stanley 1994).

The name of the main character had deep cultural connotations. The last name, Golubkov, has a root "golub’" which means "a dove@Ca symbol of a peace envoy. Also a dove is associated with a Holy Spirit which connects Golubkov with the Russian Orthodox religion. In turn, it calls for contemplation and abandonment of the real world. The economic behavior and the ethics of Lyonya Golubkov reflected these concepts ("Lyonya Golubkov... "1994). On a simplistic level, he had a holy belief in the power of investment. At the same time he made peace between the old mentality and the new reality. The very nameCLyonyaCbrought certain cultural associations in Russians. Brezhnev had the same first name and Brezhnev himself was connected with a period of stagnation. This connection hinted at "Lyonya’s" economic roots. It also sounded similar to the Russian word that stands for "laziness" (lien’). Lyonya’s image is connected to a Russian cultural archetype that is embedded in the collective unconsciousness. On the one hand, it bears typically "Soviet" features: trusting, counting on somebody’s will and power, hatred of the boss, waiting for the wealth that will fall from the sky. On the other hand, Golubkov can be read as a folk character transferred into a contemporary reality. In many Russian fairy tales there is a well known plot about a young and stupid brother who is pitied by everybody, but who at the end becomes a winner. Incidentally, making his characters the underdogs, Mavrodi scored several important points. Lyonya distinguished MMM from the advertising of the competitors which usually showed successful and happy people. In the hard-to-survive Russia such characters were perceived as unrealistic and false. Besides, the underdog created an emotional resonance among the viewers: people could forgive somebody’s luck only if this person was pitiable. Still one more side of this image was a play on of the domestic cinematographic mythology of the early revolutionary times. Lyonya Golubkov resemble Chapaev and Pavka KorchaginCreal revolutionary heroes depicted in the Soviet cinema and literature (Vishnevskaya 1995). New times dictate new images. Lyonya could be viewed as a contemporary revolutionary: he propagated new values, a new mentality, and a revolutionary way of life in the language understandable and familiar to most Russians.

FIGURE

MMM broke advertising stereotypes by making the small talk of its characters a central feature of its commercialsCespecially compared to the "significant" and obnoxious announcements of their competitors. The characters discussed everyday life problemsCincomes, consumer needs, personal affairsCbut in a comic way. The innovation of MMM was in targeting not the rich but the poor. MMM counted on retired people, workers, studentsCthe backbone of the former Soviet Union. MMM opened a secret gate for those who used to get paid very little: they could become rich. At the same time, their residual proletarian ideology of hatred for the nouveau riche and speculators gave the investors a desire to compete with the latter. MMM taught them that they could achieve their wealth via an honest path by becoming shareholders (Dubnov 1994). In 1992 and 1993, against a background of catastrophic decline in the Russian eonomy, Russia was flooded with the books How to Succeed in Business and the like. The authors of self-instruction manuals had set out to convince their readers: "You can do this!". MMM, by contrast, told their clients: "You needn’t lift a finger!" (Kagarlitsky 1994, 26). MMM’s advertising campaign was not just a company promotion. It propagandized certain values and principles. MMM promised its investors khaliava [unearned well-being], a bourgeois way of life without Western efficiency or the Protestant work ethic, consumption not connected in any way with labor (ibid).

Despite the deep cultural associations, Russians did not admit liking the image of Lyonya GolubkovCnot very bright, not very attractive, not very well spoken. One of the Deputies of the Russian parliament expressed an opinion of many TV viewers: "The first time I saw an MMM commercial, I laughed. The second time I saw it as silly nonsense for fools. The third time I saw it as a mockery of Russian people: we were shown as idiots, yet we were told to be moved by it and to give our money to businessmen like Mavrodi" (Fedorov 1994). In a poll, only 12 per cent of Muscovites were favorable toward Lyonya; 17 per cent were indifferent; 58 per cent had a negative attitude. Even among the shareholders Lyonya’s image caused negative emotions (54 per cent) or indifference (20 per cent) ("Izvestiia’s poll" 1994). Nevertheless, those who were annoyed with Golubkov had already bought shares from MMM (Blazhenova 1994).

The repetition of MMM advertisingCfrequent, aggressive, and inescapableCproduced important effects by itself. Those who knew how expensive TV commercials were understood that this technique created an image of MMM as a very rich and omnipotent enterprise. Others who had no idea about the price of each commercial thought of them as the expression of a state will. As a former Soviet first vice-prime minister Vladimir Shcherbakov put it: "We have begun tremendous economic, political and social transformations and must understand that many people have no experience in such things. They believe advertisements in respectable mass media as they would believe an official document" ("Developments in MMM Company Scandal" 1994). The magic of big numbers played its roleCthere is a Russian proverb: "If someone is called a pig one hundred times, on the one hundred and first he will grunt" ("Round Table" 1995). In focus groups MMM commercials never came out as a favorite, but their recall was very high: they were retold in detail by those who liked it and those who hated it (ibid).

The MMM’s investor population was not homogeneous: it consisted of pensioners, single women, and students (low and fixed income groups), people who did not have a secure income (those with single or part-time jobs), and wealthy people who liked to gamble. The collapse of the old system of production and social welfare left them without means of survival, but the boom in the securities market gave them hope (Kagarlitsky 1994). According to Delovoi Vtornik, most MMM shareholders had not been saving for the house in Paris (a plot of one of the commercials) but played to stretch money till the next paycheck (1994). Several million MMM’s shareholders exchanged 3.1 million privatization vouchers for MMM shares ("Back from the Grave" 1994).

THE CONFLICT

Collecting taxes became a real problem in Russia. Having privatized all the former state enterprises that were actually turning a profit, and finding no way to collect taxes from the impoverished population, the government was trying to force entrepreneurs to pay at least a part of what they owed (Kagarlitsky 1994). A half million enterprises were among the violators of tax legislation, and tax evasion had assumed a mass character everywhere ("Procuracy Says Tax Evasion Rampant" 1994). The receipt of the full amount would have ensured the normal activity of the state.

The Russian government made no attempt to close MMM AO since there was no formal base for it: pyramid schemes under then current Russian laws were legal (Rosett 1994). Instead, in the summer of 1994 the state decided to prosecute Sergei Mavrodi on tax evasion charges. The reasoning behind it was purely mathematical: if there are 10 million of shareholders and the buyback price of a single share is 100,000 rubles so the monetary obligation of MMM was 1 billion rubles (for comparison, the budget of the whole Russia for 1994 was a little over 40 billion rubles). However, after a forced audit of Mavrodi’s empire, the head of Russian Taxation police, Sergei Almazov, said the transaction data suggested MMM management has already converted a considerable amount of the shareholders’ money into foreign currency and exported it ("Russia Unveils..." 1994). According to estimates, the losses incurred by MMM shareholders were about $1 billion, which is the equivalent of one-fifth of Russia’s central bank reserves (Scheitz 1994). With a default legislative system in present, the Russian government had to commit what to an observer may seem a strange action.

After Mr. Mavrodi refused to allow police into his apartment..., a specially equipped police unit, dressed into camouflage and black ski masks, lowered themselves by rope from the roof onto his eighth-floor balcony... Mr. Mavrodi was escorted outside, waved defiantly to a crowd of overlookers, and was driven away... (Banerjee 1994).

This dramatic action immediately made Mavrodi a national hero. Most of the shareholders considered him a victim rather than a villain despite the impropriety of his dealings. The arrest also divided the whole population into two camps: for Mavrodi and against him. Immediately after Mavrodi’s arrest, shareholders began to send him shopping bags with food products (Interfax). Several shareholders announced a hunger strike in support of the head of MMM AO. On August 8, several hundred protesters gathered near the key governmental buildings in Moscow. They carried placards saying "Hands off Mavrodi!" and propagandized their intention not to give up a struggle for their economic interests (Byrkin 1994). From the very beginning of the scandal, the shareholder crowd was appalled not with MMM, but with the actions of the government.

In jail, Mavrodi announced a hunger strike. At the same time, he launched a public-relations campaign, that called on shareholders to defend MMM against the government’s "legal lawlessness" and "totalitarian style." On August 19, 1994 only a few hundred citizens showed up in front of the Russian White House to celebrate the third anniversary of their resistance to the coup. They were outnumbered by the MMM shareholders who rallied at the same place in defense of the imprisoned Sergei Mavrodi. Police had to use truncheons to clear the place for those who had defended the White House (Moscow) in August 1991. The next day, more then 10,000 people gathered around the MMM AO headquarters, waiting to buy MMM shares at the set price. MMM AO was the most heavily traded stock for the next several months. Only two weeks after the Moscow court "unexpectedly" ruled to release Sergei Mavrodi, he was elected to the State Duma (Parliament) and thus acquired legal immunity.

In jail, Mavrodi discovered a literary talent in himself. The genre of jail confession has been discovered before (for instance, by Oscar Wilde, Vladimir Lenin, and Adolf Hitler). Mavrodi’s writings however, had a circulation of at least a million copies. Mavrodi organized his writings to evoke associations with revolutionary mythologies. He gave orders ("Order No.1") from the jail, turning himself from a businessman to an underground revolutionary. The jail image thus made Mavrodi’s figure much more significant than before and enhanced it with heroic aspects. Sincerely or not, Mavrodi believed that he "invented perpetuum mobile, that is a self-acting economic mechanism making it possible not just to increase one’s share severalfold in a single month, but also to keep doing that ad infinitum." (Sokolov 1994-I, 44). Mavrodi admitted that his company was a pyramid scheme, but it was a "good" pyramid for the country. He claimed to create mechanisms to pump currency from the West, so that Russia would bathe in money. And it was the government which broke "the toy" (Mavrodi and Piyasheva 1994). Mavrodi publicized this information in what was later to be known as his political campaign.

After the announcement of the Mavrodi’s tax non-payment was made by the Tax Enforcement Service of Russia, Mavrodi promised in print that if the government confiscated the money, the MMM investment fund would cease to exist and would not be able to pay the shareholders back. Mavrodi warned the government that he could not predict the form of the robbed people’s indignation: revolution, civil war or something else. To make his announcements and threats, Mavrodi used advertising space that had been bought many months in advance for his MMM campaign. The impoverished Russian media was not able to return the money, although it did not agree with the new ads’ content. Reportedly, only one newspaper was rich enough to return the money.

The new MMM advertising did not look like advertising at all, but used both the visual and textual form of an editorial. Sometimes it was reminiscent of the Soviet Communist party’s official statements. Their headlines reinforced Soviet imagery of the "enemy of the people’s" times: "Leave Sergei Mavrodi Alone!", "In the Light of Conscience," "MMM as a Symbol of Russian Democratization." With straight and bold language, it was trying to prove MMM’s right and the government wrong. The whole story became a big political snowball. Responding to Mavrodi’s request, several million shareholders wrote letters to MMM. People wrote about their economic situation, about their unhappiness with the authorities, and about their support of MMM’s position. Thousands of letters were published in the newspapers. The unchanged TV commercials reinforced an advertising race. Mavrodi was trying to blackmail the government into bailing out MMM shareholders: "So, the authorities do not like Lyonya. But do 10 million Lyonyas like these authorities?". It was the right time for Mavrodi to become more that just a businessman. Mavrodi announced his candidacy for the Parliament.

Mavrodi was clearly not a politician and had to become one due to circumstances. As many other newly Russian politicians, he even did not have a program. Mavrodi argued: "I feel that political views are not so important in this situation. We have such a critical economic situation that the main thing right now is to feed the people" (Mavrodi and Piyasheva 1994, 6). This populist position and personal economic involvement won Mavrodi a seat in the Russian parliament. The voters’ general opinion was that if he managed to make such money, he must be a talented financier.

Russian politicians could not help but react to this new political force. Zhirinovsky, the leader of the Liberal-Democratic party (usually considered neither liberal nor democratic) quickly rushed to defend MMM. Zhirinovsky admired leading Russian businessmen and their ability to win the market in a competitive game. In a calculated move, Zhirinovsky proposed to Mavrodi to not only stand for parliament in a forthcoming by-election, but to run for president in 1996. It was no surprise for political observers: "After all, Zhirinovsky and Mavrodi are engaged in the same important businessCexploiting human stupidity (one in politics and the other in economics) with particular cynicism and on especially great scale... Zhirinovsky’s constant desperate need for money, and Mavrodi’s equally desperate need for political support simply dictate the necessity of mutual understanding" (Sokolov 1994-II, 56).

The scandal revealed loopholes in the Russian legislative system and in particular a deep crisis in the state regulation of the securities market. ome authorities worried that the situation already was rotten and difficult to reverse. However, overcoming the habitual resistance of a bureaucratic machine, Yeltsin did sign a couple of decrees. In November 1994, largely as a political response to a fallout from financial scandals dealing with the MMM pyramid scheme failure, a Presidential Decree on Measures for State Regulations of the Securities Market on Russian Federation was published. In April 1995, Yeltsin issued an additional decree to protect investors.

Surprisingly, the MMM AO scandal produced some positive effects. The whole scheme drew off enormous funds thus checking hyperinflation (although all the money earned went to a single personCSergei Mavrodi). Some Russian journalists compared Mavrodi to John Rockefeller who in the beginning of the century created the Standard Oil Company and monopolized the market (Grishankov and Shmarov 1994). It is true that Rockefeller monopolized the market, but he was never indicted for any crime. Even if this was a path to becoming a "true" capitalist, Sergei Mavrodi had yet to become one.

ANALYSIS

There were economic, political and cultural reasons for Mavrodi’s popularity (although, it may be difficult to separate them from each another). Some Western scholars argue that there are certain groups of population who are the most vulnerable for the swindlers: unemployed, those on low-income, and senior citizens (Dunn 1975, Lee and Soberon-Ferrer 1997). There were apparent similarities in the Russian case. Those shareholders who wrote letters to MavrodiCsingle mothers, pensioners, invalidsCmostly were trying to make ends meet. In a transitional period, these strata of society suffer the most. They were thankful to MMM for letting them not just exist but live. After all the hardships, the population did not believe the authorities anymore, who were absorbed with political fights. Through his actions and his advertising, Mavrodi presented himself as someone who wanted to help them not only in words but also in deeds. Despite the fact that Mavrodi’s business was not an investment but a speculation, shareholders trusted MMM more than they trusted bureaucrats (Stanley 1994). MMM let thousands of shareholders step above the poverty level.

Like hostages and their kidnappers, shareholders began to bond with the executives who had built the pyramid scheme that was wiping out their investments. Both sides persuaded themselves that they had a mutual enemyCthe Russian government. There was an illusion that governmental action could prevent the MMM’s scandal. "The MMM Investors Union" was formed to support Sergei Mavrodi against the government. Its argument was that the whole conflict simply was an internal affair between MMM and its shareholders and there was no need for the government to interfere. Never before had the jailing of an entrepreneur caused such a reaction. The crowd near MMM’s main headquarters did not want to know that their money had disappeared into air. People argued that the price of a share was growing every day and that MMM had never deceived them (Aridzhafov 1994). One of the several actions of this Union was an open letter to Boris Yeltsin, in which they asked him to help investors and to release Mavrodi so he could pay them back. Shareholders assured the president of their non-aggressiveness but at the same time warned him that they would vote against the government if the country continued to calmly observe the robbing of the population (Rubnikovich 1994). So, on the one hand shareholders wanted the government to leave alone the formation of the market system, while the same time, they wanted the government to protect them from the own errors. Russians were not yet familiar with the idea that under capitalism responsibility rests on the individual, not the government.

In the transitional situation, MMM took on a paternalistic role, a role the government had rejectd. This role was ideologically cohesive. Public opinion polls showed that in this difficult time, Russians wanted stability more than anything else. About half of the population hoped for a new leader who would pull the country out of the economic pit (Buida 1994). There was a nostalgia for the pre-Revolutionary past but also some cloaked romanticizing of the Soviet times with its predictability and familiar rules of survival. In 1993, 65 per cent of Russians believed that they could not live without state tutelage (Tselms 1993). There was a radical incomparability between the population’s archaic need of paternalism and a movement to an independent existence of market economy. Thousands of shareholders saw Mavrodi as their new caretakerCa sort of capitalist reincarnation of the propaganda image of Stalin. Personality cults remain persistent in Russian mentality (Zviglyanich 1993). Mavrodi reinforced his image by his in-jail behavior. With his hunger strike and his writings he became a "true" national hero who suffered at the hands of an unjust enemy.

The real drama of a transitional Russia was that the old meanings and symbols did not embrace new realities. In the ideologized economy of Soviet Russia, personal reward was declared as a "bourgeois" principle that does not pertain to the true proletarian work with its moral satisfaction being far more important then a monetary one (Zviglyanich 1993). In a true carnivalesque move, Mavrodi managed to shake this postulate: with old methods (paternalism) he promoted new ideas (market system). Some analysts are saying that Mavrodi was reinforcing the market behavior of millions by getting them accustomed to the words like "share" and "dividends."

The government by its nature appeals to rationality. One could explain for a thousand times that MMM was a pyramid, a scam, a fraud. But one could not reject the fact that if you put a hundred rubles into MMM AO, you would get back two hundred. There is a big difference between an unfulfilled promise and a carried out promise. The success of Sergei Mavrodi was in offering a myth, a dreamCand making it available to everybody. An MMM share was seen as a magic potion that would help anybody who use it (see Belk 1991). This device meant to recreate a paternalistic mechanism that would take care of all people’s needs. Ideological illusion is a very persistent feature of Soviet history. "When one illusion failed, it was superseded by another" (Zviglyanich 1993: 93).

The advertising revolution in Russia began with advertised products being available to everybody. The reaction to it is as negative as in any capitalist country. Numerous polls published by the Russian press show that Russians were annoyed with TV commercials because they interrupted a program; they were obnoxious and intrusive, and they ran too often. At the time of the MMM advertising heyday, there were just a few products advertised on TV. Naturally, the intense repetition became even more apparent, annoying, and penetrating.

For those few Russian-made commercials, there were certain elements in common: they were mostly made after Western standards, but had not been targeted to any particular group. The latter could be explained by the virtual absence of a societal structure. Society in transition is rather liquid: yesterday engineer tomorrow can easily become a new rich and a doctor of sciences can fall down the societal bottom (Dubnov 1994).

MMM advertising was an organic unity of Western ideas and a pure Soviet manner of execution. MMM advertising was able to reconstruct a Soviet TV-type aesthetic: bad lighting, sloppy montage, even sometimes a visible microphone in a corner of a frame (Vishnevskaya 1995). In this execution, real life and illusory imagery merged creating the example of the eclectic transitionalCpost-modernCRussian reality. In one of the first commercials, Lyonya draws a graph of "the satisfaction of material needs of population." The very scene has the attributes of Soviet times: the curve that always rises, the pointer of a lecturer, a blind belief in a plan.

Zviglyanich (1993) develops Baktin’s theory of carnivalization and writes about carnivalesque features of perestroika. Perestroika was able to free people from fear of the epic, monologic Soviet life-style into dialogic liberalized reality where people re-obtain their voices. According to Bakhtin (1990), carnival culture is a response to an official oppressive rule. The carnival is able to combine the non-combinable. MMM advertising was a manifestation of carnivalesque culture that combined new conceptsCshare, dividend, marketCand the old but changing mentality: "progressive" and "regressive" features. The peculiar ambiguity of carnival-ecstatic spirit (Zviglyanich 1993) allowed the splashes of nationalism in the MMM commercials. In one of the commercials, Lyonya Golubkov and his brother Ivan were shown in San-Francisco, watching a soccer match and drinking beer. Their general attitude was "It’s good to be in America, but Russia is better@Ca very Soviet ideological belief.

Many of those who played with MMM were predominantly people without prior experience with investments, and who were used to living on fixed income. MMM not only helped them lose their lifetime savings but also their faith in a market economy. This was a painful capitalist lesson: rewards and risks are inseparable. The good news was that the number of MMM shareholders was much less than it had been claimed: according to independent sources, it did not exceed 2 million (Sokolov 1994-II). Some of them came back to their senses relatively quickly. A poll conducted in September 1994 already showed the change in attitudes: 26 per cent of Muscovites blamed MMM’s directors for the scandal, 21 per cent blamed naive shareholders and only 13 per cent blamed the government ("Back from the Grave" 1994).

THE FALLOUT

Russian newspapers reported that representatives from a liberal-patriotic party (not Zhirinovsky’s LDPR) were going to burn a stuffed doll of Lyonya Golubkov to protest against the speculative fever of MMM AO. Consumers used the MMM advertising campaign as a source of irony and protest. In Ekaterinburg (Russia), a memorial to the victims of MMM AO was going to be built. The sculpture would depict the queue in front of the MMM office. Shareholders also wanted to write a folk musical "The Betrayal of Lyonya Golubkov," where Lyonya secretly sells his shares and leaves his wife for another commercial’s character, "Marina Sergeevna."

The famous economist Peter Garber gives a "reasonable" explanation of the speculative affairs: the perception of increased probability of large returns triggered by a convincing new economic theory or by uninformed market participants brought about the climate necessary for the affair (1994). There is also an opinion that an epoch of financial scams and short-term popular madness is a necessary step toward capitalism, and neither Protestant nor labor ethics can help here (Sokolov 1994-III). Thus, the scam was unavoidable. Hopefully, lesson was learnt by both the government and the population.

AFTERMATH

In the Fall of 1995, the Russian Parliament ousted deputy Sergei Mavrodi. In a 303-0 vote, Mavrodi became the first Russian deputy ever removed from office.

The actor who played the part of Golubkov, wrote a bestseller "How I was Lyonya Golubkov" and from the royalties bought himself an apartment.

On December 17, 1995, the Communists won a majority in the Russian State Duma.

Sergei Mavrodi never paid back any of the shareholders.

A police still has a warrant for his arrest.

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