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Kakha Bendukidze. Photo: unknown

Kakha Bendukidze was born in Tbilisi in 1956 into a family of intellectuals. His father Avtandil was professor of mathematics at Tbilisi State University; his mother, Julietta Rukhadze, a historian and ethnographer. Bendukidze would later proudly describe a family with deep entrepreneurial roots:

"My grandfather was one of the first factory owners in Georgia. He came to Tbilisi before the revolution at the age of twelve. By the time he turned 18 he had already his own mechanical workshop in Tbilisi, I think, and by 1920 it had grown, there was a plant. And my grandfather's brothers helped build the first railway bridge over the River Kura, as well as the first power plant in Georgia."[40]

Bendukidze's native Georgia had been part of the Tsarist Empire since the early 19th century. In 1918, Georgia declared its independence, only to fall to the invading Soviet Army in 1921 and see all private businesses closed down.

In 1977, the 21-year-old Bendukidze went to Moscow to complete his PhD in biology. It was the time of the "Stagnation Era" (zastoy), which the then-Soviet leader Leonid Brezhnev preferred to describe as the period of "developed socialism." After graduating in 1980, Bendukidze worked at the Institute of Biochemistry of the Russian Academy of Science.[41] In 1985, he was appointed to head a laboratory specialising in molecular cell biology.[42] He was 29 at the time. In a later interview (1996), he described this environment as "unique": "When you have many smart people in the same place, it is like having a lot of money in the same place. Very exciting."[43]

Institute of Biochemistry and Physiology of Microorganism
Institute of Biochemistry and Physiology of Microorganisms in Pushchino, Moscow Region, Russia. 
Here Bendukidze started his career in biology. Photo: Russian Academy of Sciences.

1985 saw the arrival in power of a new man at the helm of the USSR Mikhail Gorbachev following the deaths in office of three septuagenarian leaders in quick succession (Brezhnev, Andropov and Chernenko). Confronted with the ever more apparent ossification of the Soviet system, Gorbachev launched the reform policies of perestroika (restructuring) and glasnost (political openness).

Time magazine cover of 4 January 1988 featuring Mikhail Gorbachev as Man of the Year
Time magazine cover of 4 January 1988 featuring Mikhail Gorbachev as Man of the Year. Photo: Time Inc.

The perestroika years brought a new sense of openness and experimentation to the Soviet Union, both politically and economically. The period from 1987 to 1989 witnessed the adoption of several pieces of legislation which paved the way for greater economic freedom. One milestone was the "Law on Cooperation in the USSR," adopted in May 1988.[44] The law nurtured a budding private sector in the Soviet Union. Cooperatives (kooperativy) were granted full property rights and a free choice in determining the modes and volumes of production. Already in 1990, their revenues amounted to 8.7 percent of the gross national income.[45]

Bendukidze, too, joined the ranks of the first kooperativy trendsetters. In a 2005 interview, his former colleague at the Institute and later business partner Mikhail Mogutov spoke about the initial reasons for their transition to business activities:

"The government financing of science and research was being rapidly slashed and people had to do something about it whether leaving or looking for other sources of financing. At that time, we did not understand what grants were, and this system was not developed in Russia anyway. So we wanted to do something that would bring profits and use the money to continue our laboratory work … and then we understood that business in itself was a creative activity and could replace science."[46]

 


[40] "Каха Бендукидзе: империя, рожденная вирусом" (Kakha Bendukidze: An Empire Born of the Virus). Kommersant Dengi, no. 37 (97), 16 October 1996.

[41] "Biography of Kakha Bendukidze" (in Russian), Grani.Ru, Jun. 1, 2004.

[42] "Kakha Bendukidze: A Biography" (in Russian), News.Ru, Nov. 3, 2005.

[43] "Каха Бендукидзе: империя, рожденная вирусом" (Kakha Bendukidze: An Empire Born of the Virus). Kommersant Dengi, no. 37 (97), 16 October 1996.

[44] Tatyana Cheremisina, "From a Soviet Enterprise to a Legal Market Enterprise" (in Russian), Mir Rossii, no. 3, 2001, p. 115.

[45] Tatyana Cheremisina, "From a Soviet Enterprise to a Legal Market Enterprise" (in Russian), Mir Rossii, no. 3, 2001, p. 115.

[46] Mikhail Mogutov, "If You Are a Member of the Society, Live according to Its Principles" (in Russian), Politcom.ru, 18 July 2005.

Suggested readings

In an extensive interview (also available in English) with Kommersant-Dengi from 1996, Bendukidze reflects on his professional transition from biologist to businessman and investor. He describes the early years of his companies, Bioprocess and investment fund NIPEK, as well as the story of the privatization of Uralmash, which would become the core of his future engineering holding OMZ.

One of the best books on the birth of Russian capitalism is David E. Hoffman's The Oligarchs Wealth and Power in the new Russia. It focuses on the careers of six of the men who rose to the pinnacle of Russian capitalism in the 1990s. Although the book does not discuss Bendukidze, many of the people and issues it raises directly touch upon his own rise to wealth and influence. Hoffman also captures the spirit of the early 1990s:

"…if they had Western models, these Russians were also unique. They inherited a country with a political and economic culture rooted in centuries of Russian obedience to authority, arbitrarily defined, from tsars to commissars. They inherited a society in which the simplest human instincts of individual initiative and entrepreneurship had been suppressed for seven decades … Russia was also unique because of a critical choice made immediately after the Soviet Union collapsed. Yeltsin deployed a band of radical young reformers, including Chubais, who, believing they had little time, set out to wreck the old system at any cost." (p. 6)

Hoffmann describes in detail the thinking that lead Yegor Gaidar and other reformers who implemented the shock therapy in Russia in the early 1990s. The chief engineers of Yeltsin's economic revolution:

"set out to accomplish nothing less than wreck the old system smash the entire complex of planning, thinking and behavior inherited from Lenin, Stalin and their successors … Another legacy of their past was their shared disdain for politics. In the 1980s, Gorbachev had unleashed freedom but lagged behind on economic change. They were determined to avoid Gorbachev's quagmire of politics endless plans that went nowhere … instead they thought of themselves as technocrats, pure economists, who would find the right thing to do and smash through the old barriers to getting it done." (p. 182)

The Gaidar team "often described themselves as kamikaze pilots, because they would certainly destroy themselves in trying to tear down so many entrenched interests." And they were real revolutionaries in spirit:

"Gaidar and Chubais believed that gradualism was akin to death; it would strengthen the vested interests and doom any real chance at reform. Chubais said it was only an illusion that change could be done 'gently, slowly and painlessly, so that everybody should be happy.'" (p. 183)

The belief in technocracy, smashing through resistance, disdain for gradualism: all of these ideas, which shaped the mindset of Russia's reformers of the 1990s, were to reappear in Bendukidze's policies in Georgia.

April 2010

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