Global
Ruling Class: Billionaires
And How They ‘Made It’
By James Petras
23 March, 2007
Petras.lahaine.org
In
India, which has the highest number of billionaires (36) in Asia with
total wealth of $191 billion USD, Prime Minister Singh declared that
the greatest single threat to ‘India’s security’ were
the Maoist led guerrilla armies and mass movements in the poorest parts
of the country. In China, with 20 billionaires with $29.4 billion USD
net worth, the new rulers, confronting nearly a hundred thousand reported
riots and protests, have increased the number of armed special anti-riot
militia a hundred fold, and increased spending for the rural poor by
$10 billion USD in the hopes of lessening the monstrous class inequalities
and heading off a mass upheaval.
The total wealth of this
global ruling class grew 35% year to year topping $3.5 trillion USD,
while income levels for the lower 55% of the world’s 6-billion-strong
population declined or stagnated. Put another way, one hundred millionth
of the world’s population (1/100,000,000) owns more than over
3 billion people. Over half of the current billionaires (523) came from
just 3 countries: the US (415), Germany (55) and Russia (53). The 35%
increase in wealth mostly came from speculation on equity markets, real
estate and commodity trading, rather than from technical innovations,
investments in job-creating industries or social services.
Among the newest, youngest
and fastest-growing group of billionaires, the Russian oligarchy stands
out for its most rapacious beginnings. Over two-thirds (67%) of the
current Russian billionaire oligarchs began their concentration of wealth
in their mid to early twenties. During the infamous decade of the 1990’s
under the quasi-dictatorial rule of Boris Yeltsin and his US-directed
economic advisers, Anatoly Chubais and Yegor Gaidar the entire Russian
economy was put up for sale for a ‘political price’, which
was far below its real value. Without exception, the transfers of property
were achieved through gangster tactics – assassinations, massive
theft, and seizure of state resources, illicit stock manipulation and
buyouts. The future billionaires stripped the Russian state of over
a trillion dollars worth of factories, transport, oil, gas, iron, coal
and other formerly state-owned resources.
Contrary to European and
US publicists, on the Right and Left, very few of the top former Communist
leaders are found among the current Russian billionaire oligarchy. Secondly,
contrary to the spin-masters’ claims of ‘communist inefficiencies’,
the former Soviet Union developed mines, factories, energy enterprises
were profitable and competitive, before they were taken over by the
new oligarchs. This is evident in the massive private wealth that was
accumulated in less than a decade by these gangster-businessmen.
Virtually all the billionaires’
initial sources of wealth had nothing to do with building, innovating
or developing new efficient enterprises. Wealth was not transferred
to high Communist Party Commissars (lateral transfers) but was seized
by armed private mafias run by recent university graduates who quickly
capitalized on corrupting, intimidating or assassinating senior officials
in the state and benefiting from Boris Yeltsin’s mindless contracting
of ‘free market’ Western consultants.
Forbes Magazine puts out
a yearly list of the richest individuals and families in the world.
What is most amusing about the famous Forbes Magazine’s background
biographical notes on the Russian oligarchs is the constant reference
to their source of wealth as ‘self-made’ as if stealing
state property created by and defended for over 70 years by the sweat
and blood of the Russian people was the result of the entrepreneurial
skills of thugs in their twenties. Of the top eight Russian billionaire
oligarchs, all got their start from strong-arming their rivals, setting
up ‘paper banks’ and taking over aluminum, oil, gas, nickel
and steel production and the export of bauxite, iron and other minerals.
Every sector of the former Communist economy was pillaged by the new
billionaires: Construction, telecommunications, chemicals, real estate,
agriculture, vodka, foods, land, media, automobiles, airlines etc..
With rare exceptions, following
the Yeltsin privatizations all of the oligarchs quickly rose to the
top or near the top, literally murdering or intimidating any opponents
within the former Soviet apparatus and competitors from rival predator
gangs.
The key ‘policy’
measures, which facilitated the initial pillage and takeovers by the
future billionaires, were the massive and immediate privatizations of
almost all public enterprises by the Gaidar/Chubais team. This ‘Shock
Treatment’ was encouraged by a Harvard team of economic advisers
and especially by US President Clinton in order to make the capitalist
transformation irreversible. Massive privatization led to the capitalist
gang wars and the disarticulation of the Russian economy. As a result
there was an 80% decline in living standards, a massive devaluation
of the Ruble and the sell-off of invaluable oil, gas and other strategic
resources at bargain prices to the rising class of predator billionaires
and US-European oil and gas multinational corporations. Over a hundred
billion dollars a year was laundered by the mafia oligarchs in the principle
banks of New York, London, Switzerland, Israel and elsewhere –
funds which would later be recycled in the purchase of expensive real
estate in the US, England, Spain, France as well as investments in British
football teams, Israeli banks and joint ventures in minerals.
The winners of the gang wars
during the Yeltsin reign followed up by expanding operations to a variety
of new economic sectors, investments in the expansion of existing facilities
(especially in real estate, extractive and consumer industries) and
overseas. Under President Putin, the gangster-oligarchs consolidated
and expanded – from multi-millionaires to billionaires, to multi-billionaires
and growing. From young swaggering thugs and local swindlers, they became
the ‘respectable’ partners of American and European multinational
corporations, according to their Western PR agents. The new Russian
oligarchs had ‘arrived’ on the world financial scene, according
to the financial press.
Yet as President Putin recently
pointed out, the new billionaires have failed to invest, innovate and
create competitive enterprises, despite optimal conditions. Outside
of raw material exports, benefiting from high international prices,
few of the oligarch-owned manufacturers are earning foreign exchange,
because few can compete in international markets. The reason is that
the oligarchs have ‘diversified’ into stock speculation
(Suleiman Kerimov $14.4 billion USD), prostitution (Mikhail Prokhorov
$13.5 billion USD), banking (Fridman $12.6 billion USD) and buyouts
of mines and mineral processing plants.
The Western media has focused
on the falling out between a handful of Yeltsin-era oligarchs and President
Vladimir Putin and the increase in wealth of a number of Putin-era billionaires.
However, the biographical evidence demonstrates that there is no rupture
between the rise of the billionaires under Yeltsin and their consolidation
and expansion under Putin. The decline in mutual murder and the shift
to state-regulated competition is as much a product of the consolidation
of the great fortunes as it is the ‘new rules of the game’
imposed by President Putin. In the mid 19th century, Honoré Balzac,
surveying the rise of the respectable bourgeois in France, pointed out
their dubious origins: “Behind every great fortune is a great
crime.” The swindles begetting the decades-long ascent of the
19th century French bourgeoisie pale in comparison to the massive pillage
and bloodletting that created Russia’s 21st century billionaires.
Latin America
If blood and guns were the
instruments for the rise of the Russian billionaire oligarchs, in other
regions the Market, or better still, the US-IMF-World Bank orchestrated
Washington Consensus was the driving force behind the rise of the Latin
American billionaires. The two countries with the greatest concentration
of wealth and the greatest number of billionaires in Latin America are
Mexico and Brazil (77%), which are the two countries, which privatized
the most lucrative, efficient and largest public monopolies. Of the
total $157.2 billion USD owned by the 38 Latin American billionaires,
30 are Brazilians or Mexicans with $120.3 billion USD. The wealth of
38 families and individuals exceeds that of 250 million Latin Americans;
0.000001% of the population exceeds that of the lowest 50%. In Mexico,
the income of 0.000001% of the population exceeds the combined income
of 40 million Mexicans. The rise of Latin American billionaires coincides
with the real fall in minimum wages, public expenditures in social services,
labor legislation and a rise in state repression, weakening labor and
peasant organization and collective bargaining. The implementation of
regressive taxes burdening the workers and peasants and tax exemptions
and subsidies for the agro-mineral exporters contributed to the making
of the billionaires. The result has been downward mobility for public
employees and workers, the displacement of urban labor into the informal
sector, the massive bankruptcy of small farmers, peasants and rural
labor and the out-migration from the countryside to the urban slums
and emigration abroad.
The principal cause of poverty
in Latin American is the very conditions that facilitate the growth
of billionaires. In the case of Mexico, the privatization of the telecommunication
sector at rock bottom prices, resulted in the quadrupling of wealth
for Carlos Slim Helu, the third richest man in the world (just behind
Bill Gates and Warren Buffet) with a net worth of $49 billion USD. Two
fellow Mexican billionaires, Alfredo Harp Helu and Roberto Hernandez
Ramirez benefited from the privatization of banks and their subsequent
de-nationalization, selling Banamex to Citicorp.
Privatization, financial
de-regulation and de-nationalization were the key operating principles
of US foreign economic policies implemented in Latin America by the
IMF and the World Bank. These principles dictated the fundamental conditions
shaping any loans or debt re-negotiations in Latin America.
The billionaires-in-the-making,
came from old and new money. Some began to raise their fortunes by securing
government contracts during the earlier state-led development model
(1930’s to 1970’s) and others through inherited wealth.
Half of Mexican billionaires inherited their original multi-million
dollar fortunes on their way up to the top. The other half benefited
from political ties and the subsequent big payola from buying public
enterprises cheap and then selling them off to US multi-nationals at
great profit. The great bulk of the 12 million Mexican immigrants who
crossed the border into the US have fled from the onerous conditions,
which allowed Mexico’s traditional and nouveaux riche millionaires
to join the global billionaires’ club.
Brazil has the largest number
of billionaires (20) of any country in Latin America with a net worth
of $46.2 billion USD, which is greater than the new worth of 80 million
urban and rural impoverished Brazilians. Approximately 40% of Brazilian
billionaires started with great fortunes – and simply added on
– through acquisitions and mergers. The so-called ‘self-made’
billionaires benefited from the privatization of the lucrative financial
sector (the Safra family with $8.9 billion USD) and the iron and steel
complexes.
How to Become a Billionaire
While some knowledge, technical
and ‘entrepreneurial skills’ and market savvy played a small
role in the making of the billionaires in Russia and Latin America,
far more important was the interface of politics and economics at every
stage of wealth accumulation.
In most cases there were
three stages:
1.During the early ‘statist’
model of development, the current billionaires successfully ‘lobbied’
and bribed officials for government contracts, tax exemptions, subsidies
and protection from foreign competitors. State handouts were the beachhead
or take-off point to billionaire status during the subsequent neo-liberal
phase.
2.The neo-liberal period
provided the greatest opportunity for seizing lucrative public assets
far below their market value and earning capacity. The privatization,
although described as ‘market transactions’, were in reality
political sales in four senses: in price, in selection of buyers, in
kickbacks to the sellers and in furthering an ideological agenda. Wealth
accumulation resulted from the sell-off of banks, minerals, energy resources,
telecommunications, power plants and transport and the assumption by
the state of private debt. This was the take-off phase from millionaire
toward billionaire status. This was consummated in Latin America via
corruption and in Russia via assassination and gang warfare.
3.During the third phase
(the present) the billionaires have consolidated and expanded their
empires through mergers, acquisitions, further privatizations and overseas
expansion. Private monopolies of mobile phones, telecoms and other ‘public’
utilities, plus high commodity prices have added billions to the initial
concentrations. Some millionaires became billionaires by selling their
recently acquired, lucrative privatized enterprises to foreign capital.
In both Latin America and Russia, the billionaires grabbed lucrative
state assets under the aegis of orthodox neo-liberal regimes (Salinas-Zedillo
regimes in Mexico, Collor-Cardoso in Brazil, Yeltsin in Russia) and
consolidated and expanded under the rule of supposedly ‘reformist’
regimes (Putin in Russia, Lula in Brazil and Fox in Mexico). In the
rest of Latin America (Chile, Colombia and Argentina) the making of
the billionaires resulted from the bloody military coups and regimes,
which destroyed the socio-political movements and started the privatization
process. This process was then even more energetically promoted by the
subsequent electoral regimes of the right and ‘center-left’.
What is repeatedly demonstrated
in both Russia and Latin America is that the key factor leading to the
quantum leap in wealth – from millionaires to billionaires –
was the vast privatization and subsequent de-nationalization of lucrative
public enterprises.
If we add to the concentration
of $157 billion in the hands of an infinitesimal fraction of the elite,
the $990 billion USD taken out by the foreign banks in debt payments
and the $1 trillion USD (one thousand billion) taken out by way of profits,
royalties, rents and laundered money over the past decade and a half,
we have an adequate framework for understanding why Latin America continues
to have over two-thirds of its population with inadequate living standards
and stagnant economies.
The responsibility of the
US for the growth of Latin American billionaires and mass poverty is
several-fold and involves a wide gamut of political institutions, business
elites, and academic and media moguls. First and foremost the US backed
the military dictators and neo-liberal politicians who set up the billionaire-oriented
economic models. It was ex-President Clinton, the CIA and his economic
advisers, in alliance with the Russian oligarchs, who provided the political
intelligence and material support to put Yeltsin in power and back his
destruction of the Russian Parliament (Duma) in 1993 and the rigged
elections of 1996. And it was Washington, which allowed hundreds of
billions of dollars to be laundered in US banks throughout the 1990’s
as the US Congressional Sub-Committee on Banking (1998) revealed.
It was Nixon, Kissinger and
later Carter and Brzezinski, Reagan and Bush, Clinton and Albright i
who backed the privatizations pushed by Latin American military dictators
and civilian reactionaries in the 1970’s, 1980’s and 1990’s
. Their instructions to the US representatives in the IMF and the World
Bank were writ large: Privatize, de-regulate and de-nationalize (PDD)
before any loans should be negotiated.
It was US academics and ideologues
working hand in glove with the so-called multi-lateral agencies, as
contracted economic consultants, who trained, designed and pushed the
PDD agenda among their former Ivy League students-turned-economic and
finance ministers and Central Bankers in Latin America and Russia.
It was US and EU multi-national
corporations and banks which bought out or went into joint ventures
with the emerging Latin American billionaires and who reaped the trillion
dollar payouts on the debts incurred by the corrupt military and civilian
regimes. The billionaires are as much a product and/or by-product of
US anti-nationalist, anti-communist policies as they are a product of
their own grandiose theft of public enterprises.
Conclusion
Given the enormous class
and income disparities in Russia, Latin America and China (20 Chinese
billionaires have a net worth of $29.4 billion USD in less than ten
years), it is more accurate to describe these countries as ‘surging
billionaires’ rather than ‘emerging markets’ because
it is not the ‘free market’ but the political power of the
billionaires that dictates policy.
Countries of ‘surging
billionaires’ produce burgeoning poverty, submerging living standards.
The making of billionaires means the unmaking of civil society –
the weakening of social solidarity, protective social legislation, pensions,
vacations, public health programs and education. While politics is central,
past political labels mean nothing. Ex-Marxist Brazilian ex-President
Cardoso and ex-trade union leader President Lula Da Silva privatized
public enterprises and promoted policies that spawn billionaires. Ex-Communist
Putin cultivates certain billionaire oligarchs and offers incentives
to others to shape up and invest.
The period of greatest decline
in living standards in Latin America and Russia coincide with the dismantling
of the nationalist populist and communist economies. Between 1980-2004,
Latin America – more precisely Brazil, Argentina and Mexico –
stagnated at 0% to 1% per capita growth. Russia saw a 50% decline in
GNP between 1990-1996 and living standards dropped 80% for everyone
except the predators and their gangster entourage.
Recent growth (2003-2007),
where it occurs, has more to do with the extraordinary rise in international
prices (of energy resources, metals and agro-exports) than any positive
developments from the billionaire-dominated economies. The growth of
billionaires is hardly a sign of ‘general prosperity’ resulting
from the ‘free market’ as the editors of Forbes Magazine
claim. In fact it is the product of the illicit seizure of lucrative
public resources, built up by the work and struggle of millions of workers,
in Russia and China under Communism and in Latin America during populist-nationalist
and democratic-socialist governments. Many billionaires have inherited
wealth and used their political ties to expand and extend their empires
– it has little to do with entrepreneurial skills.
The billionaires’ and
the White House’s anger and hostility toward President Hugo Chavez
of Venezuela is precisely because he is reversing the policies which
create billionaires and mass poverty: He is re-nationalizing energy
resources, public utilities and expropriating some large landed estates.
Chavez is not only challenging US hegemony in Latin America but also
the entire PDD edifice that built the economic empires of the billionaires
in Latin America, Russia, China and elsewhere.
Note: The primary data for
this essay is drawn from Forbes Magazine ‘s “List of the
World’s Billionaires” published March 8, 2007.
James Petras most recent
book is The Power of Israel in the United States.(clarity 2006 third
printing)his essays in English can be found at http://petras.lahaine.org.
And in Spanish at rebellion.org
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