[News] The Billionaires and How They Made It

[Anti-Imperialist News]

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


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