[News] The Billionaires and How They Made It
Anti-Imperialist News
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Wed Mar 21 12:01:08 EDT 2007
http://www.counterpunch.org/
March 21, 2007
The Billionaires and How They Made It
Meet the Global Ruling Class
By JAMES PETRAS
Even as the world's billionaires grew in number
from 793 in 2006 to 946 this year, major mass
uprisings became commonplace in China and India.
In India, which has the highest number of
billionaires (36) in Asia with total wealth of
$191 billion, 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
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 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 per cent year to year topping $3.5 trillion,
while income levels for the lower 55 per cent 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 per cent
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 per cent) 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 vast 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. Privatization led to
the capitalist gang wars and the disarticulation
of the Russian economy. As a result there was an
80 per cent decline in living standards, a
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 ),
(Mikhail Prokhorov $13.5 billion ), banking
(Fridman $12.6 billion ) and buyouts of mines and mineral processing plants.
The Western media have 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 per
cent), which are the two countries, which
privatized the most lucrative, efficient and
largest public monopolies. Of the total $157.2
billion owned by the 38 Latin American
billionaires, 30 are Brazilians or Mexicans with
$120.3 billion . The wealth of 38 families and
individuals exceeds that of 250 million Latin
Americans; 0.000001 per cent of the population
exceeds that of the lowest 50 per cent. In
Mexico, the income of 0.000001 per cent 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 .
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 , which is greater than
the new worth of 80 million urban and rural
impoverished Brazilians. Approximately 40 per
cent 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 ) 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 taken out by the foreign
banks in debt payments and the $1 trillion (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 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 per cent to 1 per cent
per capita growth. Russia saw a 50 per cent
decline in GNP between 1990-1996 and living
standards dropped 80 per cent for everyone except
the predators and their gangster entourages.
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.
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
<http://www.amazon.com/exec/obidos/ASIN/0932863515/counterpunchmaga>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
The Freedom Archives
522 Valencia Street
San Francisco, CA 94110
(415) 863-9977
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