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A Reluctant Capitalist Survives in Russia

Crisis and Opportunity

It was then that Markus turned for the first time to the world of socks, stockings and underwear, setting up several small stores. He found a supplier in Moscow that imported cheap Turkish goods. But business wasn't great. In 1997, Markus's partners cut him loose and he found himself liable for $10,000 in debt.

Threatening envoys arrived, demanding money. Markus had no way to pay and, as he said wryly, "they couldn't do anything except kill me, and if they killed me they wouldn't get anything."

Alexander Markus's underwear business is growing, making him cautiously optimistic about the future. (Susan B. Glasser -- The Washington Post)

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At one point, the Moscow firm sent an imposing athlete named Oleg Gavryuchenkov "to make an impression on me." Gavryuchenkov, who said he owed his formidable physique to years of water polo, declined to discuss his first encounter with Markus. Asked what business he had been in during those days, he said with a modest smile, "People who had problems trading -- we solved these problems."

At first, Markus tried to raise cash by working for a French firm that sold food supplements. But even this company, he found, cut corners. Despite the long list of ingredients advertised in the supplements, "most weren't really in the product," he said.

After three months, he gave up and went to Moscow to pay his debt by working directly for the Turkish import company. It was the spring of 1998.

"I became a slave," he said.

The Russian economy crashed that August. The business, along with tens of thousands of others, was ruined when a ruble devaluation made the cost of imported goods inaccessibly expensive. In the crisis, though, Markus saw opportunity. He had decided that Gavryuchenkov, the beefy enforcer, was a decent sort, and the two took a proposal to the firm's management. They would sell off the company's stock of products at the massive wholesale market on the grounds of Moscow's Luzhniki Stadium.

And so that fall, Markus learned what it was to rise at 4 a.m. for a hard day's labor as they unloaded the remnants of the company. Even after all he had been through, the brutal laws of the market were a revelation. "Luzhniki is a place you can make $2,000 or $3,000 a day -- and lose $5,000 or $10,000," he marveled. "It's not a very human way of life."

By late 1998, Markus had acquired just enough money and Turkish socks to return home and start a new business. The first link of what would become his modest chain was a rented corner in a food store. There was room only for one stand of socks. But Markus gave the enterprise a grand name: "European Tricotage."

After everything that had come before, selling underwear was hardly the worst thing that had happened to Markus. "It was a pleasure," he said, "to bring a bit of beauty to people."

Cautious Optimism

Markus was inspecting "Number One," his first store on Freedom Square. It was the height of the swimsuit season, and two sales assistants were occupied with customers as he glanced at the neat racks of knockoff T-shirts printed conspicuously with brand names such as Nike, Polo, Donna Karan and Dolce & Gabbana.

"Everybody knows what these are and we don't try to hide it," he said. "Real brands are completely inaccessible to the people who shop in our stores."

Each year for the last five, Markus's business has grown. "Number One" has always been his best-performing shop; turnover now is up to more than $20,000 a month. Gangsters no longer come demanding money. "The last offer from a krysha came four years ago. We refused with great pleasure," Markus said. European Tricotage is now a well-known name, and he's expanded into wholesale. He recently made his first foreign business trip to Turkey.

Pressured by clients eager to "normalize" business, Markus even decided to open a company bank account a year ago -- a huge leap after years of operating on an all-cash basis.

But Markus today is still just a member of what the head of the Russian small business association calls the "commercial proletariat." He is visibly stressed, a bearded wraith whose clothes flop off his thin frame. He rarely eats during the day, subsisting on coffee and cigarettes. He owns no car or mobile telephone. His modest apartment, where he lives with his third wife, her 10-year-old daughter and his 12-year-old, costs just $300 a month.

The dream of a capitalist model city on the Volga has long since dissipated; Nizhny Novgorod today is no longer even in the top 10 regions for foreign investment. Average purchases at Markus's stores are just $7. Markus's sales assistants, working on commission, take home as little as $100 a month during slow periods.

The smothering hand of the bureaucrats, or chinovniki in Russian, is a constant problem. "Mr. Chinovnik is like a parasite on people like me," he said. Usually, he deputizes his brother Maksim, a construction engineer by profession, to handle headaches such as the $85 fine they tried to contest for having the incorrect time on their cash register. "We got the fine and said, 'We won't pay, you sue us,' " Maksim recalled. "But the tax inspectors said, 'No, you sue us.' To sue your tax inspector, well, it is bad for the future. We understood that."

"For 1,500 years," he said, "the government has been blaming us just for living in Russia."

And yet at times Markus is cautiously optimistic, contemplating plans to open a warehouse in Moscow and expand his wholesale trade. "We're just starting the process in which people think about tomorrow," he said. "For 10 years, it was very hard to plan anything. We had such a struggle. But now, I would like to make some forecasts."

He sees his small underwear empire as a refuge from the rest of Russia, where he works surrounded by a small circle of trusted friends, such as brother Maksim, childhood playmate Dima and cousin Sergei. He has no intention of getting involved in politics, business groups or civic action of any sort.

"Like many of my generation, I separated myself from the state long ago and I'm living in the worlds I like more," he said. "Any person involved in small business builds his own state himself."

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