Chapter 1: The Initial Challenges of McDonald's in Moscow

In the preceding discussion, Peter Foster highlighted the numerous obstacles McDonald's encountered when attempting to establish a restaurant in Moscow after finalizing a deal in 1988, during the Soviet Union's existence. Unlike its other global locations, McDonald's in Moscow had to navigate a vastly different landscape devoid of profit-driven vendors.

Now, we will delve into how the historical and cultural backdrop of the Soviet Union posed significant challenges for this particular McDonald's outlet. The story begins with Vladimir Lenin, who adopted the anti-capitalist principles of Karl Marx. (p. 71)

While presenting himself as a champion of the working class, Lenin hailed from a privileged background. The chaos following the 1917 Russian Revolution saw many competing for power, and Lenin's rise to prominence underscored his ruthless nature. (p. 71) Although he excelled in securing power, he lacked understanding of how to effectively govern the new regime.

Lenin and his contemporaries were entirely unfamiliar with business dynamics or economic principles. They mistakenly believed that managing a business was merely a matter of maintaining records. Within four years, Soviet production had plummeted to a mere fraction of its pre-revolution levels. (p. 71)

Much like today’s critics of capitalism, he identified the system's flaws and rationalized their eradication. However, he lacked comprehension of its mechanics, preventing him from implementing a functioning alternative.

Mikhail Gorbachev, who emerged as a leader during the early 1930s amid the famine instigated by Stalin to suppress peasant rebellion, would ultimately oversee the disintegration of the Soviet empire. (p. 71) Despite recognizing that something was amiss, Gorbachev remained a staunch believer in the system, failing to question the efficacy of central planning.

He observed the inefficiencies—such as the fact that it took four times as many individuals to repair a truck than to manufacture one, or that televisions composed of cardboard sometimes caught fire spontaneously. Yet, he could not fathom that central planning was the root of the issues, as this concept was fundamental to Communist ideology. (p. 72)

This encapsulates the central dilemma faced by all anti-capitalists: central planning, while seemingly logical, often leads to chaos in resource allocation. Many prefer the assurance of a central authority orchestrating operations, but the reality is that centralized planning frequently results in a catastrophic misallocation of resources—essentially defining Communism. (p. 72)

In contrast, it is the invisible hand of decentralized market forces that can yield optimal results as individuals pursue their own interests.

Gorbachev initiated perestroika, signifying restructuring, which only skimmed the surface of the underlying problems. He subsequently introduced glasnost, meaning openness, which began to usher in democratic ideals, leading to the breakup of many Soviet satellite states.

This was the backdrop against which McDonald's secured its agreement in 1988 to open a restaurant in Moscow, as Gorbachev had started permitting joint ventures between foreign enterprises and Soviet entities. (p. 74) By February 1990, shortly after the Moscow location opened, the Soviet empire was on the brink of collapse.

Gorbachev effectively dismantled Communist rule by endorsing multi-party politics and allowing private property, a cornerstone of Marxism. (p. 73) This McDonald's franchise was unique as it was operated by the Moscow city council rather than an individual franchisee, a necessary adaptation for navigating the Moscow landscape. (p. 74) Nonetheless, significant challenges remained.

The absence of local suppliers meant that for 70 years, private ownership and initiative had been suppressed. (p. 74) McDonald's had to recruit its largest suppliers globally to train selected Soviet farmers and ranchers. Even with these extraordinary measures, they still needed to construct a food processing facility.

They enlisted a Finnish firm experienced with Soviet operations to build the 10,000 square meter processing plant, referred to as the "McComplex." (p. 75) The project leader faced substantial hurdles in working with Soviet processes.

"I have never witnessed a project completed on schedule. The problem lies in material availability. You can’t effectively plan because you can’t predict when, or if, materials will arrive. The blame game is rampant; no one takes responsibility." (p. 75)

In a free market, individuals have a financial incentive to ensure accountability; in the Soviet system, taking responsibility could have fatal consequences, leading to a culture where the priority was to avoid blame rather than achieving success.

Upon opening, the restaurant was warmly embraced by Russian patrons, boasting a multi-level structure with seating for 700. (p. 74) Within a year, it had sold 4 million Big Macs. (p. 78) However, this success further strained the fragile supply chain that McDonald's had assembled.

The restaurant also attracted a flood of job seekers, with over 25,000 applications for just 630 positions. A significant perk for those hired was the opportunity to participate in training sessions in Toronto or Oak Brook, Illinois. (p. 77)

Yet, all of this transpired within an anti-capitalist culture. The Moscow city council, McDonald's partner, was inclined to take its share of the profits and abandon the venture, reflecting the Soviet mentality. Individuals acted on the belief that if they didn’t seize opportunities quickly, others would. This irony was the inevitable outcome of a system that sought to undermine and counteract the "greed" and "selfishness" attributed to capitalism. (p. 79)

The contrasting outcomes are clear: the capitalist framework encourages collaboration and abundance, while the communist system fosters greed and selfishness.

The McDonald's endeavor and the organization behind it illustrated that the Soviet Union was built on a distorted view of capitalism, one that bore little resemblance to reality. (p. 74)

In the next chapter, Foster continues to investigate the darker aspects of anti-capitalist movements, including Marxism and other utopian ideologies.

The first video titled "Capitalism vs Socialism vs Communism" explores the fundamental differences and implications of these economic systems, shedding light on their historical context.

The second video titled "#55 How Communism Destroys a Society" features Joshua Philipp discussing the societal impacts of communism, offering insights into its historical failures and consequences.