My post on the FTC v. Phoebe Putney antitrust case is coming soon, perhaps tomorrow. Meanwhile, speaking of antitrust, I’ve been listening to the audiobook of Ilf & Petrov‘s The Golden Calf, a comedy that takes places roughly at the time of the NEP in the Soviet Union. In chapter 3, I ran across the following fascinating discussion that’s relevant to the difficulties of organizing cartels. (The translation is by Konstantin Gurevich and Helen Anderson.)
In all fields of human endeavor, the supply and demand of labor is regulated by specialized bodies. A theater actor will move to the city of Omsk only if he knows for sure that he need not worry about competition — namely, that there are no other candidates for his recurring role as the indifferent lover or the servant who announces that dinner is ready. Railroad employees are taken care of by their own unions, who helpfully put notices in the papers to the effect that unemployed baggage handlers cannot count on getting work on the Syzran–Vyazma Line or that the Central Asian Line is seeking four crossing guards. A commodities expert places an ad in the paper, and then the entire country learns that there is a commodities expert with ten years’ experiences who wishes to move from Moscow to the provinces for family reasons.
Everything is regulated, everything flows along clear channels and comes full circle in compliance with the law and under its protection.
And only one particular market was in a state of chaos — that of con artists claiming to be the children of Lieutenant Schmidt. Anarchy ravaged the ranks of the Lieutenant’s offspring. Their trade was not producing all the potential gains that should have been virtually assured by brief encounters with government officials, municipal administrators, and community activists — for the most part an extremely gullible bunch.
Fake grandchildren of Karl Marx, non-existent nephews of Friedrich Engels, brothers of the Education Commissar Lunacharsky, cousins of the revolutionary Klara Zetkin, or, in the worst case, the descendants of that famous anarchist, Prince Kropotkin, had been extorting and begging all across the country.
From Minsk to the Bering Strait and from the Turkish border to the Arctic shores, relatives of famous persons enter local councils, get off trains, and anxiously ride in cabs. They are in a hurry. They have a lot to do.
At some point, however, the supply of relatives exceeded the demand, and this peculiar market was hit by a recession. Reform was needed. Little by little, order was established among the grandchildren of Karl Marx, the Kropotkins, the Engelses, and others. The only exception was the unruly guild of Lieutenant Schmidt’s children, which, like the Polish parliament, was always torn by anarchy. For some reason, the children were all difficult, rude, greedy, and kept spoiling the fruits of each other’s labors.
Shura Balaganov, who considered himself the Lieutenant’s firstborn, grew very concerned about market conditions. More and more often he was bumping into fellow guild members who had completely ruined the bountiful fields of Ukraine and the vacation peaks of the Caucasus, places that used to be quite lucrative for him. . . .
The only solution to this tense situation was to hold a conference. Balaganov spent the whole winter organizing it. He wrote to the competitors he knew personally. Those he didn’t know received invitations through the grandsons of Karl Marx whom he bumped into on occasion. And finally, in the early spring of 1928, nearly all the known children of Lieutenant Schmidt assembled in a tavern in Moscow, near the Sukharev Tower. The gathering was impressive. Lieutenant Schmidt, as it turned out, had thirty sons, who ranged in age between eighteen and fifty-two, and four daughters, none of them smart, young, or pretty.
In a brief keynote address, Balaganov expressed hope that the brothers would at last come to an understanding and conclude a pact, the necessity of which was dictated by life itself.
According to Balaganov’s plan, the entire Soviet Union was to be divided into thirty-four operational areas, one for everyone present. Each child would be assigned a territory on a long-term basis. All guild members would be prohibited from crossing the boundaries and trespassing into someone else’s territory for the purpose of earning a living.
Nobody objected to the new work rules except Panikovsky, who declared early on that he would do perfectly well without any pacts. The division of the country was accompanied by some very ugly scenes, however. All parties to the treaty immediately started fighting and began addressing one another exclusively with rude epithets.
The bone of contention was the assignment of the territories.
Nobody wanted large cities with universities. Nobody cared for Moscow, Leningrad, and Kharkov — these cities had seen it all. To a person, they refused the Republic of the Volga Germans.
“Why, is that such a bad republic?” asked Balaganov innocently. “I think it’s a good place. As civilized people, the Germans cannot refuse to help out.”
“Oh, come on!” yelled the agitated children. “Try to get anything out of those Germans!”
Apparently, quite a few of them had been thrown into jail by distrustful German colonists.
The distant Central Asian regions, buried in the desert sand, had a very bad reputation as well. They were accused of being unfamiliar with the person of Lieutenant Schmidt.
“You think I’m stupid!” shrieked Panikovsky. “Give me Central Russia, then I’ll sign the pact.”
At the word Bobruisk, the children moaned painfully. Everyone was prepared to go to Bobruisk immediately. Bobruisk was considered a wonderful, highly civilized place.
“Fine, not the whole Center,” the greedy Panikovsky kept insisting, “give me half. After all, I am a family man, I have two families.”
But he didn’t get even half.
After much commotion, it was decided to assign the areas by drawing lots. Thirty-four slips of paper were cut up, and each had a geographical name written on it. Lucrative Kursk and questionable Kherson, barely touched Minusinsk and nearly hopefully Ashkhabad, Kiev, Petrozavodsk, Chita — all the republics and regions lay in somebody’s rabbit-fur hat waiting for their masters.
The drawing was accompanied by cheers, suppressed moans, and swearing.
Panikovsky’s unlucky star played a role in the outcome. He ended up with the barren republic of the vindictive Vogla Germans. He joined the pact, but he was mad as hell.
“I’ll go,” he yelled, “but I’m warning you: if they don’t treat me well, I’ll violate the pact, I’ll trespass!”
Balaganov, who drew the golden Arbatov territiory, became alarmed. He declared then and there that he would not tolerate any violations of the operational guidelines.
Either way, order was established, and the thirty sons and four daughters of Lieutenant Schmidt headed for their areas of operation.