Fisher Investments on Emerging Markets

Chapter 4. FROM THE RUBBLE OF THE IRON CURTAIN TO THE LEGACY OF APARTHEID

In 1991, the ideological struggle enveloping the world for nearly a half century ended after the Soviet Union collapsed under its own weight. The turmoil that followed Russia's transition to capitalism and democracy left no corner of society untouched. A select few, the "oligarchs," capitalized from the chaotic times, acquiring untold wealth and power through political connections. Yet most Russians remained destitute and disenchanted, yearning for the powerful leaders of yesteryear.

After crisis hit again in 1998, Russians would soon get their wish—Vladimir Putin brought Russia nearly full circle with the ideologies of its Soviet past. His was a unique form of state-led, oily capitalism, and the ensuing recentralization of key energy and materials assets under his rule would alter the investment landscape. The Soviet Union's collapse and the ensuing years of reform reveal the effects of unbridled, state-concentrated political power on markets.

We'll first examine Russia, then shift south to dissect South Africa's turbulent legacy of racial relations and markets. Apartheid, a system of legal racial segregation with the minority as the dominant force, blighted one of Africa's most prosperous and promising nations. It is an unfortunate page in history, but it offers unique lessons for investors.

THE RUBBLE OF THE IRON CURTAIN

Mikhail Gorbachev came to power as the Communist Party's general Secretary in 1985 (the ...