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Global Ruling Class:
Billionaires and How They 'Made It'
by James Petras
 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.
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.
While the number of the world's billionaires grew from 793 in
2006 to 946 this year, major mass uprisings became commonplace
occurrences in China and India. 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 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 petras.lahaine.org
And in Spanish at rebellion.org
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