WALTER CRONKITE: In the old days, Russian communists warned that foreign capitalists would try to undermine Soviet power. Well, some really did. Meet Bruce MacDonald, an American advertising executive, who was one of a handful of Western businessmen who opened up shop in Moscow in the late 1980s. He and others taught Russians about free markets only to find that their students learned their lessons too well. Producer Reese Erlich begins the story in Moscow.
REESE ERLICH: It's hard to imagine now, but back in 1990, the opening of the first McDonald's in Moscow was a very big deal. People lined up for hours to get Big Macs and Cokes. American advertising executive, Bruce MacDonald basked in the reflected glory.
BRUCE MACDONALD: My name is MacDonald and everybody thought I owned all those restaurants so I was amazed that nobody tried to kidnap me.
ERLICH: Bruce didn't own McDonald's of course. But he was on his way to becoming one of the most respected expatriate business leaders in Moscow. He knew everyone who was anyone in the Western business community.
[Restaurant kitchen dishes clanking, etc.]
ANDY RAFALAT: I'm Andy Rafalat. I'm the deputy director general here as the Russians call it. I work out of the Pepsi office in London developing Pizza Hut businesses all over Europe and the Middle East.
ERLICH: Let's see, is that salads over there?
RAFALAT: Exactly, we go through to the salad prep room.
ERLICH: How do you get lettuce in the Soviet Union?
RAFALAT: We don't, to be very simple. (laughter)
ERLICH: Lack of basic consumer items frustrated Western businessmen back in 1990. And nobody was making a profit. But as Bruce explains, they were on a mission.
MACDONALD: A lot of the American, in particular, business people who went to Russia in the early days, believed that they were bearing the golden chalice to this uncivilized group of people who needed to realize that capitalism was the best system in the world.
ERLICH: Turns out that wasn't so easy. Most Soviets didn't want capitalism. That became clear when Bruce set up the BBDO advertising agency in 1989.
MACDONALD: Lenin had told everybody that advertising was an evil capitalist art and the people we met almost all said if a product is advertised, there must be something wrong with it. Why? Well, in a shortage society if you put something on the shelf, people will buy it. If you have to advertise for it, there must be something wrong with the product.
ERLICH: And that's when you switched over to marketing, right?
MACDONALD: That's right. (laughs) Absolutely.
ERLICH: Very quickly, Bruce's company became BBDO Marketing.
MACDONALD: Well, the Russians all knew marketing as a little bit like sex. They didn't quite know what it was, but they knew they needed some of it.
ERLICH: Many foreign businesses were setting up joint ventures with Soviet partners. Russian politicians, party bosses, and others at the middle levels of power saw an opportunity to make a quick ruble. They were to become key proponents of dissolving the old system. Bruce was particularly enthusiastic about a joint venture between a collective farm outside Moscow and an American construction company.
MACDONALD: They're actually building a very exciting project which involves creating a brand new village of 540 low-rise condominium units oriented to the expatriate market.
ERLICH: That joint venture was called Rosinka, and 11 years later it is tremendously successful, although not in the way the American capitalists had envisioned.
Peter Startsev, the deputy general manager of Rosinka, shows off the housing development's sports center.
PETER STARTSEV: It's quite big, it's about 10,000 square meters. It includes a whole range of sports facilities like swimming pool, indoor tennis court, squash, racquetball, a gym.
[Kids singing in English]
This is our preschool kids going for a walk.
ERLICH: Rent for a Rosinka townhouse can reach $120,000 per year. So the owners earn a good profit. But it's not a joint venture anymore. Back in 1993 the Russian owners kicked out the Americans and reincorporated as a Russian business.
STARTSEV: They teach us capitalism.
ERLICH: Startsev says the Russian owners learned a lot from the Americans.
STARTSEV: The Russians wanted to work. Russians had land, for example, like us. Other Russians had workmen. What we lacked was experience.
ERLICH: Bruce has a different perspective. He says the Russians took advantage of the Americans.
MACDONALD: It fell into the normal joint venture. It's my joint and your venture. Eventually, there were lawsuits. The Americans attempted to involve the US government and the Russian government. It was eventually resolved in Russian courts to Russian favor. The Americans lost more than face and retired back to the United States, bankrupting themselves in the property investment.
ERLICH: Dozens of other joint ventures ended up the same way. The foreigners were forced out, sometimes through legal action and sometimes through violent intimidation. The Russians were following in the footsteps of American robber barons who use every legal—and illegal means to accumulate their empires. Bruce says the sophisticated American businessmen were, in essence, outsnookered.
MACDONALD: We only believed there two important things: growth and eventual profitability. Whereas the Russians had an entirely different view of the two things that were most important to them. They were power and politics. And that had to do with controlling something, with benefiting from it. It had less to do with driving a business to a successful and profitable end.
ERLICH: Today virtually all of the joint ventures from the late 1980s have dissolved. Many other American businesses remain unprofitable. A few in the extractive industries, such as oil and natural gas, might reap huge profits—if they can continue operating.
By the late 1990s, many Russian businesses were going bankrupt and foreign investment slowed. So Bruce decided that after ten years as a pioneer businessman in Moscow, it was time to leave.
[Getting into car, engine starts and runs]
MACDONALD: We've just come across the Connecticut River, about ten miles from Quechee and we're now entering New Hampshire.
ERLICH: Bruce MacDonald moved out of his apartment in Moscow and sold his homes in London, Florida, Spain, and New York to move to Quechee [kwee'-chee], Vermont. Buying property in Quechee means you must join the local country club. Dues are $2,600 a year, and for another $1,500, your family actually gets to play golf.
MACDONALD: It is a rather tony community. By those who love it, its called Quechee; by those who dislike it, its called Gucci.
ERLICH: For awhile after his return to the US, Bruce worked with an Internet start-up. But that went bankrupt in the dotcom meltdown of 2000. Russia isn't the only country facing economic crisis. Now he's a consultant with a fledgling company that takes computer security technology developed by the CIA, NSA, and other government agencies and sells it for commercial use.
But Bruce may never again feel the excitement of his years in Russia.
MACDONALD: I was personally shot at twice, threatened by a machine gun a third time. And yet, on the other hand, I feel that we managed to influence a generation of people who will be running marketing and advertising in the country for a long time in the future.
ERLICH: Bruce recognizes that over the past ten years Russian capitalism has developed serious problems. He even concedes that a significant majority of Russians oppose the new system.
MACDONALD: Nobody suggests that the system was working that well. We are in a society in which 50 percent of the people or more have been passed over. It was not like changing a nation from capitalism to communism, or to socialism where everybody in the nation could feel the impact, or thought they could feel the impact in personal, beneficial terms. This was changing the superstructure of a nation in its business, which doesn't impact upon everyone. So, I'm not at all surprised that a lot of people felt they were mishandled, abused, or even worse.
ERLICH: But Bruce sees some progress in halting corruption and normalizing business practices.
MACDONALD: I think it's going to be a successful nation and a proud nation. It needs to develop pride in itself again. It needs to clean up its act. I believe it is in the process of doing that. Russia will become an important global citizen. And I think we'd be very smart if they were our friends.
ERLICH: Bruce MacDonald went to Moscow with a mission of bringing capitalism to the Soviet Union. In retrospect, this effort to remake a vastly different society in America's image produced some rather unexpected and unwanted results.
For the Russia Project, I'm Reese Erlich, Quechee, Vermont.
© 2001 by The Stanley Foundation
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