[A-List] Global Ruling Class

[Bill Totten <shimogamo@xxxxxxxxxxxxx>]

Billionaires and How They 'Made It'

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.

by James Petras

http://petras.lahaine.org (March 18 2007)


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 twenty
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
six-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
three billion people. Over half of the current billionaires (523) came from just
three 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 1990s
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 seventy 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 et cetera.

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 eighty percent 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, Honore' 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 fifty percent. In Mexico, the income of 0.000001% of the population
exceeds the combined income of forty 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 (1930s to 1970s) 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 twelve 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 (twenty) of any country in Latin
America with a net worth of $46.2 billion USD, which is greater than the new
worth of eighty million urban and rural impoverished Brazilians. Approximately
forty percent 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 1990s 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 1970s, 1980s and 1990s .
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 (twenty 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 and 2004, Latin America - more precisely Brazil,
Argentina and Mexico - stagnated at zero to one percent per capita growth.
Russia saw a fifty percent decline in GNP between 1990 and 1996 and living
standards dropped eighty percent for everyone except the predators and their
gangster entourage.

Recent growth (2003 to 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). His essays in English can be found at http://petras.lahaine.org
and in Spanish at rebellion.org
_____

James Petras is a Bartle Professor (Emeritus) of Sociology at Binghamton
University, New York.

He is the author of more than 62 books published in 29 languages, and over 600
articles in professional journals, including the American Sociological Review,
British Journal of Sociology, Social Research, and Journal of Peasant Studies.
He has published over 2000 articles in nonprofessional journals such as the New
York Times, the Guardian, the Nation, Christian Science Monitor, Foreign Policy,
New Left Review, Partisan Review, TempsModerne, Le Monde Diplomatique, and his
commentary is widely carried on the internet.

His publishers have included Random House, John Wiley, Westview, Routledge,
Macmillan, Verso, Zed Books and Pluto Books. He is winner of the Career of
Distinguished Service Award from the American Sociological Association's Marxist
Sociology Section, the Robert Kenny Award for Best Book, 2002, and the Best
Dissertation, Western Political Science Association in 1968. His most recent
titles include Unmasking Globalization: Imperialism of the Twenty-First Century
(2001); co-author The Dynamics of Social Change in Latin America (2000), System
in Crisis (2003), co-author Social Movements and State Power (2003), co-author
Empire With Imperialism (2005), co-author) Multinationals on Trial (2006).

He has a long history of commitment to social justice, working in particular
with the Brazilian Landless Workers Movement for eleven years. In 1973 to 76 
he was a member of the Bertrand Russell Tribunal on Repression in Latin America.
He writes a monthly column for the Mexican newspaper, La Jornada, and previously,
for the Spanish daily, El Mundo. He received his BA from Boston University and
PhD from the University of California at Berkeley.

http://petras.lahaine.org/articulo.php?p=1696&more=1&c=1


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