Two years ago, Yassen Yordanov, like many Bulgarians in a country just emerging from communism, held a job that was safe, low-paying and utterly stupid.
His job was to hire and help train drivers on Sofia’s subway. The problem was that the Sofia subway was (and still is) an uncompleted hole in the ground, without tracks, let alone trains.
After six months, each new crop of drivers was fired, whereupon Yordanov hired a new batch and trained them for jobs that didn’t exist.
For this he was paid about $1,440 a year. At 26, he lived with his parents, had no car, no worries and no future.
What a difference a couple of years and the death of communism can make.
Meet Yassen Yordanov, vice president of Bartex Ltd., an international trading firm. A snap of the fingers summons a secretary to serve tea in his conference room. His current company car (his third) is a Jeep Cherokee. He is making about $10,000 a year-seven or eight times the average wage.
And he plans to get his own apartment soon.
“You have to take a risk,” Yordanov said, recalling his former colleagues still working on the non-existent subway. “For me, it’s a question of money-of having it.”
There are lots of Yassen Yordanovs in Bulgaria and, indeed, the rest of Eastern Europe these days. They are successful, widely resented, ambitious, mildly amoral and probably the future captains of their nations’ economies. In the cowboy capitalism of the former Communist bloc, they are riding high in the saddle.
The creation of capitalism, like the making of sausages, is a messy process seen up close. While state-owned factories collapse, trendy boutiques and cafes bloom in city centers. The new capitalists, so far, mostly trade or sell things, not make them. Flush with new wealth, they flaunt mobile phones and BMWs in countries where living standards for the majority of people are still falling.
The real debate is over the source of the money behind these new capitalists. Some countries such as Hungary-but not Bulgaria-have drawn in foreign investment by major and reputable firms. But much of the retail and trading boom that is the most visible result of Eastern Europe’s economic reforms so far is fueled by money that is shadowy, to say the least.
Whether they’re for this or against it, Bulgarians call this capital “dirty money.” It’s a term that encompasses any ill-gotten money-drug money, arms-smuggling money, especially bribes and payoffs squirreled away by the Communists who used to run the region-that is “laundered” here by being turned into a new and legitimate restaurant or store.
The debate is not about whether this “dirty money” exists. No one really knows how much there is, or how many businesses it has created. So lacking real evidence, Bulgarians assume it is financing virtually every new business here, from coffee bars to newspapers.
The real debate is about whether this should be allowed or outlawed. Bulgarians, like Russians, are natural egalitarians, and the resentment generated by this process could create a political backlash strong enough to throttle the reforms.
Defenders of the process, like Alexander Boshkov, director of the government’s Privatization Agency, admit that dirty money may control retailing here but say it is laying the foundation of a prosperous future, much as American robber barons created the great U.S. industrial empires.
“On purely economic terms, investment is good per se,” former Prime Minister Philip Dimitrov said. “We can’t decline investment only on the suspicion that it may be laundered money.”
“Just because I wear a necktie, people say I’m with the Mafia and rose only through dirty money,” Yassen Yordanov says indignantly.
“Maybe there was some Communist money before,” he said, speaking about the economy in general but carefully exempting Bartex. “But it’s clean now, it’s legal now. It’ll never be proved one way or another, and for a good reason. Both the Reds and the conservatives have an interest that people don’t find out about this.”
According to Bulgarians, there are several kinds of newly rich here.
Surprisingly, not many are the old Communist party bosses. Some of these men live in well-padded retirement. Others run the Socialist parties that succeeded the Community parties. But most were more interested in power than money. They luxuriated in state-owned country homes and limousines, but much of this vanished when the power did.
Some new fortunes are being built by smugglers or small-scale traders who began three years ago by importing Turkish whiskey or German used cars to be sold in vacant lots. These modest proceeds quickly produced enough capital to open real businesses.
Some comes through restitution of property nationalized 45 years ago. What the Communists stole, the post-Communists are giving back. The government’s restitution policy is restoring buildings and businesses to families that lost them under the Communists.
Popular wisdom says that much of the “dirty money” is coming in from Russia and other formerly communist countries. But businessmen themselves say most of this is going West, where it can be turned into deutsche marks and other hard currencies.
The real money, they say, was made by communist-era foreign trade officials, especially commercial attaches in embassies in the West, who negotiated all the contracts between Western companies and the communist governments. Invariably, these contracts went to the Western company that paid the biggest bribe, which went straight into a Swiss bank account.
It is this money, according to Bulgarian businessmen who claim to know, that is propelling Bulgaria’s renaissance today.
There may be a shortage of foreign investment, but this small-scale entrepreneurialism is transforming Sofia and other Bulgarian cities. Fully 50 percent of all retail activity is in private hands. Streets are lined with privately owned stores and currency exchanges. Hundreds of restaurants have opened up, often in unused basements.
Parliament passed Bulgaria’s first privatization law in May, long after most other East European countries did so. What’s going on here happened before the law was passed, with entrepreneurs acting while politicians dallied.
It is impossible for an outsider to prove how any company here got its first financing. But Bartex, the firm that rescued Yordanov from the subway system, was founded three years ago by Vasil Tatchev, now 52, who used to be Bulgaria’s commercial attache in Vienna, which was the main contact point for companies wanting to do business in Communist Eastern Europe.
Another captain of Bulgarian industry, Georgi Avramov, worked in the foreign trade ministry before communism collapsed. He founded Lex, which is by far the dominant stock on the Sofia Stock Exchange, a true toddler among the bourses of the world. The exchange meets for only one hour every Tuesday morning-“two hours if we’re really busy,” an official said-and Lex shares account for 92 percent of its activity.
Avramov, a jumpy, heavy-set man of 33 clad in an electric maroon suit and maroon wingtips, says his company grew from its original $4,000 capital base to control part of several banks, an insurance company, a stock brokerage, factories and the country’s only auto plant. He says his salary is only $200 a month, but claims that grateful stockholders gave him an $80,000 bonus last year.
This sort of seat-of-the-pants capitalism is vital in a country that has yet to draw significant foreign investment.
Bulgaria is stable politically and its people are well-educated and hard-working. But foreign companies that have tried to invest here complain about red tape and, especially, about company officials who want bribes and a guaranteed job before they let a deal go through.
