But most companies in Kyrgyzstan (and much of the former Soviet Union) weren’t worth any more than a snowflake in Siberia. They were completely worthless... You see, under a planned economy, economic rationality – details like cost and price and time value of money and cost of capital – doesn’t matter. Keeping people busy for a nominal wage (“We pretend to work, and they pretend to pay,” an old Soviet joke went) was the objective. Under a planned economy, economic rationality – details like cost and price and time value of money and cost of capital – doesn’t matter. I saw this in 1996 at a brick factory not far outside of Bishkek, the country’s capital. I was doing my stock market recruitment pitch. Under a capitalist system, the factory would have to be in close proximity to a source of clay, which is the main ingredient of bricks. Its customers would also have to be nearby. Clay and bricks are heavy and expensive to transport – and you don’t have an economically viable brick business if you’re not close to your key inputs and customers. Under socialism, though, none of this mattered. In his drafty office, the head of the brick plant proudly explained to me that – until just a few years before – the clay used to make bricks was brought in from Armenia and Azerbaijan (2,300 miles away). Finished bricks were used in construction projects in
the Baltics (2,900 miles away from the plant). Meanwhile, there had been a shortage of bricks in Kyrgyzstan... even though his plant was the largest in the region. The cost of clay and sending bricks to customers across the USSR was irrelevant (and no one would think to track it anyway). To anyone with a capitalist cell in his body – for whom margins, costs, marketplace positioning, and business strategy mean something – none of it made any sense at all. And in the cold, dark light of capitalism, it all fell apart. When I visited, the brick plant’s parking lot of the sprawling factory was empty. My footsteps echoed eerily down the silent hallway of the administration building. The only other person there was the tea lady, who brought in some local cognac after the factory head and I had finished our tea. The plant completely closed for good a few months later. The company’s shares – worthless anyway – never saw the light of the stock exchange. I never heard from the general director again. That’s in-real-life socialism, which is when the government owns and operates factories and equipment that drive economic growth. THAT’S NOT WHAT THEY’RE TALKING ABOUT Some Trump supporters believe that Biden and his henchmen – or even that crazed self-described “Democratic socialist” Bernie Sanders looming in the background – have in mind public ownership of America’s
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December 2020
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