Global Ruling Class: Billionaires
and How They "Made It"
by James Petras
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 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 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
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,
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
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.
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
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
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 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.
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' latest book is The Power
of Israel in the United States (Clarity Press, 2006). His articles
in English can be found at the website www.petras.lahaine.org,
and in Spanish at www.rebellion.org. He can be reached at: email@example.com.