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The March of the Oligarchs: 1979 to 2019

Peter Jukes with the historical background to a new Byline Times series on a global phenomenon that best explains Boris Johnson and Donald Trump.


Peter Jukes with the historical background to a new Byline Times series on a global phenomenon that best explains Boris Johnson and Donald Trump

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Thirty years ago, as the Berlin Wall was breached and the Soviet Union began to collapse, it wasn’t the end of history, but it was the final death knell for a powerful international historical narrative: the inevitable march to a socialist planned economy and a workers’ paradise.

The demise of the communist myth had been a long time coming. Indeed, the Berlin Wall was built in the 1960s to deter East Berliners leaving for the more prosperous consumer society next door. The disparity was visible on one stop of the S-Bahn. The top-down, state-controlled economies of eastern and central Europe just couldn’t keep up with the social democracies of Western Europe – mixed economies that combined market competition with many worker safeguards and investment in social infrastructure.

However, by the time of the fall of the Berlin Wall, another narrative was in the ascendant. For the 10 years previously, since the election of Margaret Thatcher in the UK and Ronald Reagan in the US, a more aggressive, free market and anti-interventionist model was beginning to undermine the social democratic model of consumerism and the welfare state. Emphasising financial markets, deregulation and privatisation, Reagan and Thatcher co-opted the idea of liberal democracy and their ideologues coined the term ‘neoliberalism’.

They were the beneficiaries of the collapse of communism and they claimed the credit for themselves when Francis Fukuyama prematurely proclaimed the end of history and the triumph of market economics and liberal democracy. But, they were never the same thing – and the next 20 years would prove that.

Murdoch: The Precursor Oligarch

Oligarchy – the rule of the rich – was first identified as the main threat to democracy by the philosophers of Ancient Greece. But, unlike the tycoons, moguls, and plutocrats of the past, the 21st Century oligarch lives and thrives in a uniquely globalised world moulded in his own image.

We can all recognise this shiny new world – even if only a tiny fraction of the population live in it and we can never even aspire to join it. You glimpse it in the wings at a televised event like Davos. You could catch a sneak peek of it outside the gates of some Tuscan castle or Kensington gallery opening in London. You can sense it in the vast, well-guarded but empty mansions on the Cote D’Azur or Belgravia. The oligarch likes to hide from the public behind gated compounds with a posse of PR consultants and personal minders. They are nowhere but everywhere.

Citizens of an invisible world, the oligarch class have multiple properties, passports and ‘non-domiciled’ tax status. Their chauffeur-driven cars, private jets, helicopters and super yachts speed them from Burning Man festival in the Nevada desert to the Greek Islands. But, there is one place they are firmly tied to – the offshore archipelagos of dark money and shadow banking, the shell companies of the British Virgin Islands, St Kitts and Nevis, Hong Kong, Malta, Panama: moneyland as Oliver Bullough describes it.

What is most pronounced in the 21st Century oligarch is not the hidden riches or assets, but the way they intervene in politics and media.

Rupert Murdoch is a precursor to all this. As an oligarch, he has global status: an Australian-born American citizen who built his fortune in the UK in order to expand into the US. I’ve written three books about the Murdoch empire, and the debate still rages. Is he a businessman who uses politics to increase his wealth or a politician manque who uses his media outlets to determine government policy? In a sense, the distinction doesn’t matter: he’s interested in leveraging power and, in the information age, information is both power and money.

Murdoch sets the prototype for the oligarchs of today. He claims to be ‘anti-establishment’ while every UK Prime Minister feels obliged to court him and, with Fox News, he provides the broadcasting arm of the Trump White House. But we should take him at his word: Murdoch is anti-establishment when it comes to the historic demands of liberal democracies.

Markets only flourish with tight regulation from weights and measures to anti-competition law. These are things Murdoch hates and tries to subvert on every occasion. He’s not free market – he’s a monopolist trying to build a family dynasty. And it’s no surprise this mainly sets him against the rule of law – from the lawlessness of the phone hacking scandal to his antipathy for strong regulators like the European Union.

Both Donald Trump and Brexit owe much to Murdoch for their success. But it’s the rise of the oligarch class as a whole which explains the current trajectory of both the UK and the US.

Out of the Soviet Ashes

With communism apparently defeated in 1989, the states and republics of the former Soviet Union took a disastrous turn in the 1990s and followed a chaotic path of privatisation which was already giving rise to growing inequality and lack of social mobility in the west.

Just as Russia had skipped 19th Century industrialisation, and had gone from feudalism to communism, it leapt straight into 21st century oligarchy without ever experiencing the European norms of post-war social democracy.

This leap from state capitalism to kleptocracy was rapid. Nationalised assets – previously run by apparatchiks and patrolled by state security – were sold off at ludicrously low prices and then creamed off by an even smaller number of apparatchiks, former KGB officers and members of the underworld. And this free-for-all was unsustainable. With judges bribed, bankers gunned down in the street, and police often working for the gangsters, the breakdown of the rule of law under Boris Yeltsin meant that no oligarch could safely store their assets in the motherland.

Under the leadership of Vladimir Putin, the boss of all the bosses, the chaos was stabilised by the use of more state power, and a convergence between the oligarchs, the government and the security services. But the offshoring did not stop. Most Russian wealth is now stored overseas.

They bought houses in London and the south of France. They sent their kids to English private schools and America Ivy League colleges. They invaded the soccer world, the art market and even Silicon Valley. Their names appear on the early investments of big tech companies and the walls of public museums. Like Rupert Murdoch, too, they invested heavily in media, buying TV stations, websites, PR companies and digital electioneering operations. They also invested heavily both in Britain leaving the EU and the presidency of Donald Trump.

Like the gangster capitalists of the US a century ago, most people hoped that access to western markets and the rule of law would tame the Russian and Ukrainian oligarchs. They would become philanthropists and benefactors and donors like Carnegie, Rockefeller and Getty. They would be socialised by the arts and educational system. The experience of security and social diversity in Britain could prove to them that the rule of law is for the best and that private wealth is no compensation for public squalor.

But, one big event happened before that reform which would change the narrative entirely.

2008 and Socialism for the Rich

Fukuyama rapidly acknowledged that history wasn’t over soon after the attack on the World Trade Centre on September 11 2001 led to the wars in Afghanistan and Iraq. But, in terms of the big political narrative – a collapse in the belief in the inevitable triumph of liberal democracy and market-based economies – the ‘Berlin Wall’ moment was surely the 2008 banking crisis during which a default in derivatives around US subprime mortgages brought the global banking system to the brink of meltdown.

Credit ceased to function. Cash machines were on the verge of not working as their insurers went bust. Banks would not lend to banks because they thought their debt would not be repaid. Ships were beginning to queue up outside the Port of Rotterdam. Experts and politicians thought many countries were only 48 hours away from civil disorder.

Paradoxically, the only solution to this problem was the state stepping in to bailout free market capitalism. The lenders of the last resort – the Federal Reserve and the Bank of England – started pumping in vast amounts of new money like pressurised air to lift bank assets out from underwater. Trillions of tax payers’ money was used to bail out the banks in the US. The British Government took over key sections of the UK banking system. It was socialism for the rich.

The net effect of socialising these massive losses this was to turn private debt into public debt. This, in turn, caused its own turmoil as austerity was imposed on public finances and those same taxpayers who had bailed out the banks found their own pensions and services drastically reduced.

Economically, the majority are still feeling the pinch of the reduced services and lack of social mobility and wage growth since the 2008 crash. As has been well documented, the sense of being left behind, and losing a future afforded to earlier generations, played a key part of the profoundly shocking votes of the 2016 EU Referendum and the election of Donald Trump. ‘Drain the Swamp’ and ‘Take Back Control’ were the key themes – expressions of rage against the political and commercial elites.

But, what has not been explored is the effect on the elites themselves.

What did they make of ‘socialism for the rich’ and the ‘moral hazard’ that their risky investments would be bailed out by the taxpayer?

Individually, they might have thought it was wrong. But structurally, a new incentive would emerge – an incentive that would join the high-net individuals, hedge fund owners and plutocrats of the west with the new arrivals from Russia.

If the state would always bail out capitalism, why bother with the market itself? Why go to all that stress and effort of building a business that could be taken over by rivals or undermined by more efficient competitors? Why not cut out the middle man and head straight into government, co-opting politicians through a mixture of blandishments, bribes and blackmail? Why not bankroll their campaigns and become the prime donors? Why not buy up media companies to get your message across?

Even better, invest in tech electioneering companies like Cambridge Analytica, and you can distort the public debate, win power through automating thousands of fake voices, and also find out the psychographic secrets of everyone one who votes.

This is the rational position for any oligarch who seeks to defend his wealth against the depredations of time and the clamour of the masses. Get into government. Buy it. Blackmail it. Influence it. Rupert Murdoch is getting old. Legacy media is so yesterday. The phone hacking scandal is so analogue. Kompromat, disinformation and digital surveillance worked in 2016. Why not, to secure your assets (and to prevent any deeper inquiries into what you did before) double down and co-opt the state?

And so the new oligarchy, inspired by Russia, arrived on these shores and now is at the forefront of this general election. You won’t see it expressed openly on the right – though Jeremy Corbyn made a good opening shot by talking of Rupert Murdoch and his former son-in-law Crispin Odey at his campaign launch. But it will be there, funding many of the dark ads you see on Facebook, and the faceless bots you encounter on Twitter. It is a historic moment when two narratives – one of communism, one of free market capitalism – have now both collapsed and we’re left with the logical but horrifying hybrid: a mixture of corporatism, cronyism and kleptocracy.

Oligarchy has come to the UK. It’s partly the dark revenge of Putin on liberal democracy and the rule of law. But, Putin was created by us and most of his assets are stored in our offshore waters. It’s time to recognise the march of the oligarchs, and push them back.

Byline Times will be exploring the March of the Oligarchs with more investigations into Conservative Party funding and the effect on house prices and UK schools, to the possible re-election of Donald Trump in the US.

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